Freight Finance with Bharath Krishnamoorthy, CEO of Axle

Perfectly Boring

In this episode, we cover:

• 00:00:00 - Introduction
• 00:02:20 - “B’s” Background and the Beginning of Axle Payments
• 00:06:40 - Why Transportation and Freight
• 00:17:00 - The Details and Risks of Working with the Industry
• 00:22:45 - Client Changes from Working with Axle Payments
• 00:28:30 - Axle Payments’ Future
• 00:33:15 - How Axle Payments Makes Money
• 00:35:50 - The Supply Chain Crisis
• 00:39:00 - The Future of the Industry

Links:

• Axle Payments: https://www.axlepayments.com

Transcript

Will: Welcome to Perfectly Boring. I am Will Coffield from Riot Ventures.

Jason: And I’m Jason Black from RRE Ventures.

Will: And today on the podcast, we’ve got Bharath Krishnamoorthy, who is the founder and CEO of Axle Payments. And Bharath is joining us today to talk about the unbelievably boring and strange world of freight intermediaries and invoice factoring. Jason, this is a business you know pretty well—have known Bharath for a couple of years—but this was a really interesting discussion. You know, like, what were some of the key takeaways that you had from our discussion with [B 00:00:37]?

Jason: Yeah, I think this is another classic case of an under-digitized industry that runs the world, right? It’s a multi-trillion dollar industry that’s run on paper, fax, Excel, phone calls, and human relationships. And you’ve got these freight intermediaries that actually benefit from all those relationships, those things are actually fantastic. That’s what they want to be focusing their time on that allows them to offer great services to their customers, but we’ve got a new kind of class of tech companies coming in that are offering new financial services that allow for, kind of, QuickPay and faster payments in the industry. And that’s a benefit to everybody involved, but the incumbents have a difficult time actually meeting those new demands of the market.

And I think what B has built with Axle Payments is a way for that industry to focus on what they’re best at, which I think is what we want to see technology and financial services do. So, I thought it was a fantastic discussion. And before we get too deep into the weeds, let’s kick off the interview with B.

Will: All right everybody, we are joined today by Bharath Krishnamoorthy, who is the founder and CEO of Axle Payments. Bharath, thanks for joining us today.

Bharath: Yeah, thank you for having me, Will.

Will: So, that I don’t botch this going forward, Bharath actually goes by B. So, B, appreciate you being with us today. And I think maybe as kind of a way of kicking off the podcast, what we’ve been kind of doing throughout the first couple of episodes is having the founder give a little bit of a background just on, sort of, themselves personally, kind of your personal and professional background that ultimately led you to founding Axle Pay, and then we’ll kind of dive into the business from there.

Bharath: Sure. Sounds good. So, my personal background, I grew up in New Jersey, moved to Virginia in high school with my family, studied economics at JMU in Virginia, and then moved to New York for law school. So, graduated from Columbia Law School, practiced as an attorney here in New York, doing M&A and private equity work, which is about as fun as it sounds.

And sort of parallel with this, my co-founder, Shawn, who’s my high school best friend, had taken a slightly different path. So, you know, he went to UVA for school and then started working in the FinTech space, a couple of different FinTech startups of varying sizes. And throughout this, we’d started a bunch of small businesses together. Those have been the projects where I’d felt the most energized and the most excited to actually do work. It seems sort of obvious to me, and I think to him as well, that down the road, that’s what we ultimately wanted to do, right, was to build something really dope together, something big enough that it could be our full time jobs, right, where we could quit our jobs and just work on something awesome together.

And the obvious difficult question was, you know, what are we going to build? So, in 2017 when I was working as a lawyer and Shawn was working at this tech startup in DC, we were taking these buses back and forth to visit each other all the time. Probably you know Greyhound, Megabus, you may or may not know that there’s, like, a dozen other smaller regional operators that all kind of operate similarly in the same areas. And we realized that these companies are just, they’re kind of like airlines in terms of their business model, but just way lower tech. And so we came up with this idea to build a revenue optimization solution for them that would basically help them with their pricing and scheduling in order to maximize the money they earned.

Started working on that; we have to quit our jobs, incorporated the company. We got a few customers within, I think, about six months, we were doing about 100 grand in annualized revenue. So, it was, you know, it was working a little bit. And what we realized is it wasn’t going to work much more than that because the market in the US was just very small, right, that if we totally knocked it out of the park and did everything right, maybe we get to a million dollars a year, which sounds like a lot of money, but really isn’t that much if you’re banking on everything going perfectly.

So, that started this process of us really taking a step back and trying to find a better opportunity. And we basically just, like, pivoted over and over again over the course of two years to various opportunities in the transportation space. Eventually we came up with this framework, right, that whatever we decided to do had to meet three criteria: it should be something that we thought we had a relative advantage at given our backgrounds, it should be something that we cared about solving, right, so a problem that we would feel good about working on today, tomorrow, and in ten years; and it should be a really attractive business opportunity. And it’s pretty difficult to find something that satisfies all three of those.

Where we eventually found some traction was in the world of freight finance. And we found this problem which, at a high level, was solving cashflow problems for small logistics businesses. And it struck all three chords, right? It was at the intersection of transportation and finance. By this point, we had a lot of exposure and a lot of relationships in the transportation industry, and both of our professional backgrounds very closely tied to the financial world.

Second, it was a pain point we cared about, right? It’s not that we were coming from a long line of truckers or had some extensive background in the logistics industry, but we were small business owners, and we know that for small business owners, cashflow problems are often the most salient problems they face. And so the idea of solving that problem for thousands of companies was just very compelling for us. The first client we closed literally had his COO recording him signing the contract because it was such a life-changing experience for him. And I was like, “Man, if we can just do that again, I’m going to feel really, really happy.”

And then the third is that it was, it’s kind of a no-brainer business opportunity,...