Nuvocargo is a Mexican startup founded in 2019. The firm is a digital-first freight forwarder and customs broker that operates as a platform by consolidating demand for cargo transport and supply of truckers. The company has raised $38 million to date from renowned venture capital investors and was last valued at $180 million.
Nuvocargo focuses on the Mexico – US trade corridor, which is the largest in the world: $726 billion worth of goods moved between the two countries in 2021. Between $30 and $50 billion is spent annually just on the transportation of these goods. 15,000 to 20,000 trucks cross the border daily, accounting for 80% of the total movement in goods between the two countries. The volume of trade that moves within this corridor is expected to grow as near-shoring becomes more popular given the latest COVID-induced supply chain constraints and geopolitical tensions between the US and other trading partners.
Nuvocargo creates and captures value by disintermediating the large number of unsophisticated partners that are involved in a typical export – import transaction. The typical export – import transaction involves 7 to 8 stakeholders, regulations, and multi-currency payments. For example, if a Mexican company (Company A) wishes to send a truckload of tequila to a shop in San Francisco, it must go through the following steps:
- Company A contacts Mexican trucking company directly or through a freight broker
- Mexican trucking company picks up the tequila and takes it to a centralized facility prior to shipment to the US, while export documentation is drafted and confirmed by custody broker (lawyers specialized in export – import)
- Mexican shipping company takes the tequila shipment to the border
- Transloading entity takes possession of the shipment for the purpose of crossing the border, given not all Mexican shipping companies are authorized for export operations
- Transloading entity transfers possession to US trucking company on the other side of the border
- US trucking company delivers shipment of tequila to shop in San Francisco
As evident by the larger number of entities and steps required in this simple example, there is significant room to cut middlemen, verticalize across the value chain and use software to provide visibility to the companies sending the shipment and expecting the goods.
Nuvocargo’s solution involves verticalizing across the export – import value chain and leveraging software and decentralized labor to create value for both ends of the platform: shippers and transport companies. By centralizing all support functions under one tech-enabled roof, and consolidating a large supply of smaller and independent trucking companies, Nuvocargo aims to become the one-stop shop for cross-country shipping solutions across the US, Mexico, and eventually Canada.
However, as is common in two-sided platforms, Nuvocargo faces a chicken-and-egg problem. Who should they attract first: shippers, hence making trucking companies interested in joining the platform, or trucking companies, hence making it a seamless one-stop-shop for shippers? Nuvocargo is approaching this problem by first encouraging trucking companies to sign up, in the hopes that this will drive shipping volume. They are building an ecosystem that is centered around providing value-added solutions for truckers including:
- All-in-one platform to streamline operations, including shipment-by-shipment tracking and earnings assessment
- QuickPay: cash advance product that allows truckers to get paid before completing a shipment, easing their working capital constrains. Typical payment terms for truckers are 30 days post delivery
- Smart load matching based on preferred routes
- Compliance services for export – import regulation
However, shippers can also benefit from unique value-added services, in addition to the transparency and seamlessness that is inherent in Nuvocargo’s platform. This includes:
- Shipment tracking
- Cargo insurance
- Customs brokerage
- FX services
Given the staggering size of the US – Mexico trading corridor and lack of tech-enabled integrated competitors, Nuvocargo has significant room to scale in a sustainable fashion. In addition, the fact that they eliminate so many middlemen from the process and integrate their services in a tech-enabled way means they can charge below-market rates, which bodes well for the sustainability of the platform. Their focus on providing value-added services for both truckers and shippers makes platform disintermediation unlikely.
The two following videos show the company’s founder, Deepak Chhugani, describing his entrepreneurial journey: