Key Stats: LaneAxis on StartEngine
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LaneAxis has been selected as a “Deal to Watch” by KingsCrowd. This distinction is reserved for deals selected into the top 10%-20% of our due diligence funnel. If you have questions regarding our deal diligence and selection methodology, please reach out to email@example.com.
The trucking industry is well-established, having seen little innovation or changes to operations in the past decades. While technology has advanced rapidly, much of that advancement has not found its way into one of the largest industries in the US. Now, there is a company trying to change that. LaneAxis is developing an ecosystem that it claims will drastically reduce costs, improve operational efficiency, and create significant value for multiple parties in the trucking industry. Such a monumental change would usher in a new era for the space and likely generate significant value for the company and its shareholders.
The trucking industry is wrought with problems. For starters, there’s a disconnect between firms who need drivers and drivers themselves. In addition, the industry has evolved over the past several decades to be disjointed. As an example, you need only look at the brokers and 3PLs running much of the space. Each one operates in its own core areas, and in exchange for connecting drivers and companies that need them, they charge hefty fees that can range from 15% to 50%. This structure creates a lot of cost that could be circumvented with the proper technology. There’s also a slew of other issues, ranging from billions of empty truck miles to fleet and network opacity. That’s where LaneAxis plans to enter.
LaneAxis has been working on creating its signature offering: a Software as a Service (SaaS) platform. Their app, which is currently available on Google’s Play store, is targeted at truck drivers and delivery firms alike. The first core feature the system offers is the ability to connect shippers directly to drivers/carriers. The second feature is to manage the process of freight movement from “A to Z.”
When a firm connects with the platform, they are able to create a shipment. A “revenue alert” is then sent out to the applicable drivers on the platform, and they can respond to accept the company’s offer. Through the platform, LaneAxis will offer real-time tracking of freight shipments. Customers can also send a tracking link directly to the party who is expecting the delivered freight. This feature will eliminate phone calls, emails, and other messy, and sometimes expensive, correspondences. Instead, everything will be automated in near real-time.
The LaneAxis platform also offers electronic signing for freight, and it will enable users to send electronic documents to other parties. This component will automate minor but important functions like the signing of insurance contracts. Through the platform, parties can negotiate freight rates, confirm those rates, find new carriers, and more.
Instead of charging substantially for their offering, LaneAxis is making most of its features free. Only when a customer decides to enable the tracking of an order do they charge a fee, and then it’s only $0.99. The firm also charges a 5% data access fee if a company decides to use an out-of-network driver.
One interesting feature boasted by management is visibility. The platform will show where the drivers need to travel and how much capacity a truck has. The latter here is particularly useful because, according to one source, more than 20 billion miles are driven every year without a payload for the drivers. By tracking capacity in real time, the platform can give the driver the ability to pick up multiple loads along their journey.
In order to get up and running, the company launched the first incarnation of its app in the fourth quarter of last year. Today, it claims to have “several thousand” drivers on its app. This number includes more than 2,000 drivers who have signed up in the first quarter of 2020 so far. Hoverever, it’s important to keep in mind that the company is still in a very early stage. It had no revenue last year and generated a net loss of $626,712. It also saw its operating cash flow total -$435,770. All of this is due to high salaries ($100,000 for the CEO and at least $72,000 each for two other executives) as the company finishes developing its platform. It won’t be until the second quarter this year that its carrier portal will be ready. Management expects the firm’s shipper portal to be ready around three months after that.
A Large and Inefficient Industry
The industry in which LaneAxis operates is one of America’s largest. It may also be one of the country’s most inefficient. Although the space sees 35 million shipments per day and the margins are notoriously low, the trucking industry remains out of step with modern technological advances. LaneAxis, fortunately, appears to tackle several areas where the market currently falls short.
As a whole, the market as measured by gross freight revenue totaled $796.7 billion in 2018. A full 3.68 million heavy duty Class 8 truckers hauled 11.49 billion tons of product across the nation. Of these, around 0.9 million were for-hire carriers. Trucking is not just a domestic activity though. In 2018, 67.4% of the value of surface goods traded between the US and Canada, roughly $348.3 billion in all, were transported by truckers. These figures for transportation between the US and Mexico were 83.5%, or $424 billion.
Connecting truckers with firms could be a big business for LaneAxis. After all, the average cost of hiring a new trucker can range between $6,000 and $15,000. Adding to this, the churn rate amongst larger market participants (those earning more than $30 million in revenue per year) was 96% last year. For smaller companies, it was lower but still high at 73%. Part of the churn disparity was due to hiring practices. In 2019, 795 trucking companies went under, removing 24,000 trucks from the nation’s capacity. While smaller firms were hiring on a net basis, the larger ones were letting employees go.
Even for all of this volatility, the industry is slated to grow. Currently, 35 million shipments are transported by truck every day. That figure is forecasted to grow by 35% through 2027, taking total shipments to 47.25 million every day on average. Furthermore, Frost & Sullivan estimated that by 2025 the mobile app business in the trucking niche will total $35.4 billion in size. They see a key driver of value being any technology that can reduce the 20 billion empty haul miles that truckers deal with every year. The technology employed by LaneAxis looks set to do just that.
Terms of the Deal
The transaction sought by LaneAxis is as simple as they come. In exchange for capital, the company is issuing common shares of itself. These are currently being priced at $0.41 apiece, but the minimum investment per participant has been set at $299.71. Overall, the company is looking to raise between $10,000 and $1.07 million, and it is doing so at a pre-money valuation of $7.97 million. So far, it has received commitments totaling $119,461, far surpassing the minimum the company wanted.
An Eye on Management
LaneAxis has a rather extensive team as of this writing, with 13 employees listed on LinkedIn alone. At the top of the firm, though, stand three key individuals. The first of these is the company’s founder, Director, and CEO: Rick Burnett. Prior to founding LaneAxis, he served as a Director at Agilis Systems, a SaaS company. Beneath him in LaneAxis is Mason Burnett, the business’s COO. Mason had no relevant work experience before his time at LaneAxis, but he did graduate from the University of San Diego with a Bachelor’s degree in Business Administration. Also at the firm is Andrew Rivera, the firm’s CMO. He used to work as the Director of Communications at Budbo, a cannabis analytics firm. Prior to that, he was a Content Marketing Specialist at Cibola Systems Corp.
The Rating: Deal To Watch
After reviewing all of the relevant information, LaneAxis has been rated a “Deal to Watch.” The company’s technology is promising, and if it can pull off all that it aims to do, it could be a significant industry leader. So impressive is the firm’s vision that it could be worthy of being considered a “Top Deal” in due time. There are, however, some issues that prevent it from achieving that rating currently.
The first is the early stage of the business. Its platform is not yet fully developed, which leaves plenty of execution risk for investors. Another issue is the company’s top brass. Its CEO and founder does have experience at a SaaS firm, but its team as a whole looks a bit green. None of the top three executives listed have direct industry experience. Management would likely take issue with that statement, since the CEO’s biography stated that he was a former partner at a trucking company. However, that information was not corroborated in his LinkedIn profile, nor could it be substantiated from any other source. Add to this the outsized salaries for a company that has yet to generate revenue, and there are enough negatives to prevent this from being a Top Deal. Once these issues are resolved, the company could very well become worthy of a Top Deal rating, and investors would be wise to watch LaneAxis as it continues to mature.
About: Daniel jones
Daniel Jones is a graduate of Case Western University with a degree in Economics. He has spent several years as an equity analyst writer for The Motley Fool where he focuses primarily on the Consumer Goods sector but also likes to dive in on interesting topics involving energy, industrials, and macroeconomics, in addition to contributing equity research to publications such as Seeking Alpha.