Flexport’s Ryan Petersen: Tech's Trade Expert On Tariff Refunds, AI Agents And A Unicorn Turnaround

The current topic to jour is refunds on tariffs and we intend to be we are like the thought leaders and intend to be the process leaders for how you get your money back from the government. I want to put on my tombstone someday. I got $50 billion from the government into the hands of the American citizen.

Yeah, great. Yeah, thanks for having me on the show.

Always an upstart, I guess. I like the framing.

It's a blessing for us is like getting to be on the front lines and building a brand for Flexport, being known for a real world business that actually has kind of boots on the ground, understand what's happening out there in the world. Yeah, I think it positions us pretty well for the world that we're in right now, too. Like over the last 15 years everyone's told me to build a SaaS business at every various turns and now it's like you see why we did this real world thing. It turns out SaaS businesses are very disruptible and the real world is harder to do and now Flexport is an AI company which we will get into as well.

Yeah, I mean you said we're an AI company which is actually quite true. So I mean I think we're going to be one of the biggest beneficiaries of AI and so we are starting to talk way more about how we're using AI to automate logistics decision making. But then unlike pure AI companies, we actually translate that algorithmic decision-making coming from AI into real world execution. It's that combo that we have the best AI models, feed them the best data to make good decisions and then immediately actually go execute that. So how are we going to route containers? How are we going to load the container, route it, move the inventory around the world, get it through customs compliantly and all these things. So, kind of depends who I'm talking to, but I try, you know, if I'm talking to a customer, it's certainly like we move your stuff from A to B more efficiently and cheaper and more reliably.

Ironically, I really dislike paperwork. And so, I thought I should start a company to do the paperwork for other people because other people probably also dislike paperwork. Which is not a bad way to start a company. Although, you know, it's not something I'm uniquely good at in life. Like, I'm not a paperwork guy. There's a lot of paperwork required to ship stuff and do customs and things like that. So, that was the original idea. I used to be an importer with my older brother, David Peterson, and I got to give him a shout out. And we had a business partner named Mike, Mike Kenko. The three of us had this ecom business 25 years ago, literally like early 2000s, and we were importing motor scooters. We were the first dealer for Geely in the United States. Geely is the Chinese car company that bought Volvo.

They used to make these really crappy motor scooters. I didn't even know they made cars back then. They had terrible motor scooters that we would import. There's always problems in any business, but the logistics piece, the customs piece was just very, very frustrating.

I mean, entrepreneurs. Mike was the real entrepreneur and then he kind of he and my brother were college roommates. I was a few years younger than them. They kind of like my brother's a programmer at Intel. When he graduated college, he was like fun working at Intel and funding this thing on the side and then eventually went and did it. And it was very much I mean I think the first business that they had actually was selling fake IDs. Now this sounds bad. It's not illegal. They were Elvis Presley IDs just for fun.

Like it's like classic entrepreneurship, you know.

That's amazing.

He's types faster.

Yes. Classic. Classic. He does type faster than me though. So there you go.

I don't know. You know, I used to have Ryan Peterson as my name is spelled and then in like a fit of this is a waste of my time. I deleted my Twitter handle and by the time I came back it was taken and I don't know that day I just like I'll just choose this thing and the rest is history.

Yeah, so well we were importing business. I think the George Costanzas kind of thing is interesting actually because the reason that's funny is because logistics is this weird mysterious like industry and the idea of like George Costanza man of mystery is sort of just like a funny idea.

And what funny enough like our demo account that we would use, our sales people would use to demo Flexport was always called Vanderlay Industries. And then we had a real customer named Vanderlay Industries sign up for Flexport and people would accidentally like demo this guy's account like by mistake.

We had to change our demo account because of that guy. Yeah. So it was a you know Paul Graham has this great essay called Schlep Blindness which I recommend to a lot of entrepreneurs and it's Schlep Blindness in that essay is what he talks Schlep is an arduous journey and so Schlep Blindness is this idea that like the worst problems in your life like your conscious brain is unable to focus think about them at all like you're just completely blind that this problem exists and in his essay his example for that is Stripe that every internet entrepreneur ever including me and everybody else I knew back in the early before Stripe, which is what, like 2010, I forget when they started. If you were an entrepreneur like we were in the early days of the internet, you had to go through and get your bank. You had to fill out an application with your bank to be permitted to accept, right, credit card payments, right?

And they would take months. They didn't care about you. It's like a bank. And then you had to go through authorized.net payment gateway. It's like no API. It's the worst integration ever to set up an ecom site or any kind of SaaS or anything. So, literally 100% of internet entrepreneurs, at least those who wanted to take money, so the good ones, all went through this painful process and then were completely blind to it. Like in our case, we went on and like cool, let's go sell some motor scooters. Like there was a hundred billion dollar opportunity available to every entrepreneur. We're not all Patrick Collisons, you know, John Collison, but still it was like there. And so now Paul Graham's new favorite example of Schlep Blindness is Flexport or at least it was I haven't talked to him about that essay in a little while but he was starting to use that is like anyone who ever imported anything went through this pain saw that it's like a nightmare to fill out paperwork and no one can tell you where your stuff is when it's going to arrive and most of all they don't you can't tell you what it's going to cost until after the fact and bills are always like wrong extra fees and stuff. So that was where we experienced that firsthand and then kind of did nothing about it. I started another company with my brother and the same and Mike the same guys selling data on imports and exports. So kind of the two big problems that we found running an import export business were like sourcing as ecom entrepreneurs as tech guys like was sourcing good products and then logistics. So the first product we saw the first company we founded was it's called Import Genius and it's for sourcing. It's for letting you search bills of lading and it continued for a long time still going. It's nice business. Yeah, we've owned that for the last 15 years. We started it 15 years ago and that company lets you search public manifest data. It's a search engine for shipping manifests and then look up factories and learn about them when you're doing sourcing. And then only later I finally come back and be like I don't know let's what's the next thing what's the next thing we're going to do and I remembered how painful importing was. So we started Flexport with this idea of like TurboTax for importing or something. It was really started for small business and only in the last four or five years have become where we work with a huge percentage of the like more growing percentage of the Fortune 500 like a lot of big big enterprises are using Flexport for customs brokerage and freight.

Yeah we try to stay asset light and that's one of the nice things about the business that you don't have to own physical assets.

Yeah. So definitely like actually the YC pitch was about being a customs brokerage and we were pretty disciplined at least in the beginning that that's all we did was customs and that's still our best the like the crown jewels of Flexport and where we're most differentiated especially last year and last week.

Yeah, we help you figure out your paperwork to clear customs and in particular where that's obviously where that's hard is in the tariff United States with the tariff environment. And so we've been the best in the world. I can say that unequivocally at helping companies manage tariffs.

We started in customs. But we did include in the pitch. Hey, that's all we do now. But we had aspirations to add freight forwarding, fulfillment, trucking, the whole financing. It's in the original slide deck. I sometimes share it with our team because like we've now launched all of those things and more and the team's often like hey we're getting distracted like the dogma of business is just do one thing and I'm like hey it's still in the vision guys look here I pull up the old slide deck like we were always going to do this like so. But yeah so that was the first thing was we wanted to sell more and more things. We also wanted to move up market like in the beginning we just really worked with kind of like these a lot of hardware startups and there was like that whole Kickstarter era and ecom was venture-backed back then. Now it's more bootstrapped, but like back when we were like probably had 80 or 90% market share in the DTC ecom venture-backed ecom space.

And that was actually headwinds for our growth because that space ran into some trouble over the years. But we knew we would move up market didn't know how exactly like I had been an ecom entrepreneur and I didn't know the problems and complexities of the enterprise. So it probably took us longer to build the right products to go up market. And I always tell entrepreneurs like your biggest customer is almost always going to be a function of your second biggest customer. Like you can't go after Walmart on day one. Like you have probably not like you have to work your way up to that. So that's taken us a better part of a decade to where we're like truly ready for Fortune 500s and have the right products.

I think lesson for founders out there and I assume you have a lot of founders in your audience is like you have to remember that no one cares about your startup like I'm blessed that you're asking me questions about my startup and you know you seem to be interested in it but in general nobody cares about your startup they care about things that are happening that are relevant in their world and they're only going to care about you to the extent that you either provide perspective on that other thing or are a good example of the thing or directly make their life easier. Yeah, of course. Make their life easier from a customer standpoint, but like from the broader world of like how do you make your company well known and remarkable and you know, it's like you have to you're just talking about yourself and self-promoting like nobody cares. Like it's free these days to you can go on LinkedIn and say I'm the best at this and like literally it's free and nobody cares. So you have to figure out okay what's the thing that we can provide unique insight into. And of all the companies in the world that I've seen, like I think Flexport is the most has the most opportunity to do that where you just like we're literally this circulatory system, the connective tissue for the economy. How are these goods being moved? What's happening? Where are the blockages? Where are the how are what's which businesses are doing well or not doing well? At least for the physical world, it's hard to imagine a company that could have more access to data than Flexport about what's happening.

Yeah. And then I managed to build up. I mean, it started with the Long Beach Port when stuff was stuck offshore there. I think at that day I had about 30,000 Twitter followers, which is a decent number, but it wasn't like that big. And then I sent a taco truck to the port and with the idea that we're trying to figure out why is there a 100 ships stuck offshore and we're trying to get a sense for it and I figured that the union workers would know. And how do I get the union workers to talk to us? I know. will just like rent a taco truck and we'll give free tacos and then they'll come to eat tacos and then tell us what's going on that no one really picked up on that story. I thought it was a fun story that people would write about or like retweet or something. No one really cared. But the insights we learned from the union workers where they were saying the truck drivers were the problem. So then I took the CEO of a trucking company on a boat. And this is a great way actually you can use this if you're trying to get information from a source. If you get them on a boat, they can't leave. they're trapped. Hostage audience. Okay. And I So I wrote and I learned so much about the port and the operations and why the ships were stuck there and that on that boat trip that I tweeted about it and people I don't know the visuals of like the guy renting a boat to go to the port and see what's happening went pretty viral and I think my Twitter following since then it's 10x but the next day it like tripled and then this thing kind of compound on itself that the more people that are interested in what you have to say then they share it and you get more people.