Torch Logistics closes $3.5 million seed round

Chicago-based Torch Logistics, a provider of short-haul freight network services, announced earlier this month that it has closed a $3.5 million seed round.

The round was led by Maersk Growth, coupled with participation from Schematic Ventures, Bluestein Ventures, Anorak Ventures, Supply Chain Ventures, and SaaS Ventures.

This follows Torch’s closing of an $850,000 pre-seed funding round in October 2020.

Torch positions itself at the lone network to specifically focus on a commitment to the short-haul sector with technology built for short-haul freight. And the company highlighted how as e-commerce continues to stretch supply chain networks (due, in large part, to the ongoing COVID-19 pandemic), coupled with increasing consumer expectations, that has subsequently increased the need for short-haul freight to be moved by a short-haul network, as opposed to long-haul-focused brokers.

And the company highlighted various benefits of using a short-haul network, including: more efficient load placement, higher service levels with trusted carriers and better pricing for shippers; consistent, high volume of loads from quality shippers that maximize carrier asset utilization within serviced regions; and for shippers and carriers it explained Torch’s technology platform is specifically geared towards to the specific needs of shipments less than 550 miles. 

“The pandemic has accelerated the already growing demand for reliable short-haul capacity, and stretched the boundaries of supply chain networks,” said Torch CEO and Founder Abtin Hamidi, in a statement. “Over the past decade, the average length of haul has decreased by more than 30% due to e-commerce and the dynamics of retail, CPG and other shippers. The majority of the truckload transactions are now considered short-haul, yet there are very few reliable, consistent options for shippers that are founded in digital principles.” “Rising consumer expectations require faster deliveries and inventory positioned closer to consumers. This complicated short-haul freight is now too important to trust to long-haul brokers,” Hamidi said. “Torch is the first network to launch with both a commitment to the short-haul category, and technology purpose-built for the short-haul industry.”

Torch Logistics was established in 2019, and the company noted that the market for its short-haul focus and services has subsequently grown over that time, with this round of investment geared towards enabling its network and analytics capabilities along with customer service efforts, too.

CEO and Founder Hamidi has held executive roles at various logistics-focused companies, including Cargomatic, Cargo Chief, and XPO Logistics, and Echo Global Logistics, among others. 

In a previous interview, Hamidi told LM that his experience at these companies helped him to get the ball rolling in focusing on the short-haul market. 

“One thing we have noticed is that the number of short-haul loads has gone way up, with some data showing that 65%-75% of all loads now are less than 700 miles, with 550 being the actual number of miles a driver can actually move in one day. If the whole world is moving towards a shorter model and brokers are not fans of shorter loads, but are taking most of these loads, that is a big problem. That means shippers don’t have access to a pool of short-haul capacity options.”

Other factors that came into play were the myriad steps needed to complete a transaction, ranging from a customer win to getting paid, as well as procurement and shared services, he added. 

“If we can cut down on the costs of doing those things, then these [short-haul] moves make a lot of sense, and when a load makes a lot of sense, now you can begin that whole liquidity cycle and develop a network of carriers and shippers and develop a traditional brokerage,” said Hamidi. “The answer here is not to revolutionize everything. Technology is part of it but not the whole answer.”

Instead, he noted that it was more of a three-pronged approach, including: being to innovate the business model; creating the shipper and the carrier network; and injecting the technology to create the efficiencies. 

Hamidi said that Torch Logistics was launched prior to the COVID-19 pandemic and its customer base is comprised of the top 2,000 shippers.

“Every time we make a call, we get a seat at the table instantaneously,” he said. “When we tell people we want their short-haul loads, they say nobody has ever said that before. Carriers really like short-haul loads, because they want to be home at night. And long-haul carriers use us to move short-haul to reposition themselves into better paying markets. They are not driving back empty or dead hauling 100-200 miles. It works really well that way and theoretically it reduces the available carrier pool. We also have found that there is a massive network of these short-haul type of carriers that are not on DAT, ITS, or the spot market. They typically only go directly to one or two customers. And it turns out that most carriers have some type of subset of short-haul carriers. What you see on the spot market is for long-haul capacity, but they also have trucks positioned for regional moves.”