Q&A with the CEO of a Flexport-backed logistics startup, unlocking supply chains across the Caucasus and Central Asia
Hear from the Co-Founder and CEO who has raised $1.7m to make supply chains across the ex-Soviet Union more efficient.
Welcome to the third installment of our new series, "Founders at the Frontier," brought to you by Sturgeon Capital. As we celebrate the successful first close of our latest venture fund and the onboarding of institutional investors such as the International Finance Corporation (IFC) and SBI Holdings, we wanted to take this opportunity to learn from and spotlight the visionary entrepreneurs behind our portfolio companies. These founders are tackling fundamental challenges and driving innovation across frontier and emerging markets, from Uzbekistan and Pakistan to Bangladesh, Georgia, and beyond. In keeping with the logistics theme, our previous interview was with the founder building the digital operating system for Pakistan’s $15B+ trucking market. You can read that here.
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Meet Vano Chaladze – He is one of the founders of Cargon, a company that is building the future of logistics across the Caucasus and Central Asia. Sturgeon Capital recently led their $1.7m seed round, with participation from Hustle Fund, Reflect Ventures, Flexport and regional VCs including Caucasus Ventures and Aloqa Venture. Logistics in these regions is a $40B+ market. Vano and his team have built a solution that connects shipping companies with truck drivers. Their solution produces 15% cost savings and 90% time savings for their 400+ corporate clients; whilst also creating growing revenue opportunities for 4500+ drivers. Their broader vision includes unlocking data driven trade financing, simplifying the insurance market, and more. This is a company tackling an immense opportunity, with a stellar team, and first-grade traction.
In this interview, we cover:
The founding story behind Cargon and the problem space surrounding logistics in Central Asia and the Caucasus.
Lessons from Flexport, Jamie Dimon, and studying at LSE.
Broader opportunities in the logistics space and for Georgia’s entrepreneurial ecosystem.
Founding Story
Krish: Firstly, I just want to say that I read the deck for my research, and I think it was probably objectively the cleanest deck I've seen compared to everyone else's. I don't know if it's a logistics thing, because the second cleanest deck was from a trucking company, and it was also straight to the point.
Vano: We've been told a couple of times that our deck is clean and straight to the point. It makes a difference.
Krish: It definitely makes a difference. So, my first question is a classic one regarding the origin story of Cargon and what it's doing right now. Can you give an overview of the company's timeline, inception points, and the broader product suite?
Vano: Sure. Cargon has three co-founders, and we were roommates and flatmates when we started in the UK. We all studied in high school and graduated from universities there. When we got back to Georgia, we were coming from different backgrounds. I was into investment banking and finance, while the other two co-founders were in the consulting business. One of the founders, Shako, was also involved in logistics, as his family owned a trucking company.
When we were in the UK, companies like Netflix and Uber were just coming out, using the sharing economy principle. We loved these technologies and thought about how they could be beneficial in logistics. We understood the inefficiencies and fragmentation of the market in Georgia and the region. There are thousands of companies, and the industry hasn't seen much innovation or technological advancement in decades.
We started thinking about this problem and applied for a grant program called GITA in 2018, which was one of the first startup programs in Georgia. We launched in 2019, and since then, the journey has been incredible. In 2020, we went through the 500 Startups acceleration program and expanded into different markets, including Russia, before the war broke out. By that time, we had raised around $700,000.
After the war started in Ukraine, we decided to exit the Russian market and concentrate on Georgia and neighboring countries like Armenia. We recently closed a seed round with participants from the US, Azerbaijan and Uzbekistan. Our main goal is to connect all the logistical hubs within the CIS region, focusing on the route known as the Silk Road, which is the trading route between China and Europe. We support trade between Asia and Europe with the logistical services we provide to our customers.
Unlocking Compounding Efficiencies in Logistics and Future Visions
Krish: What are the main things that are traded between Georgia, Kazakhstan, and Uzbekistan? What do you normally move from one place to another?
Vano: So basically, our main route is from Europe to Kazakhstan or to Georgia. In terms of what Georgia has to export, it's generally wine and some minerals as well. But mostly what we do is wine and similar products. We import a lot, and because of that, we are mostly entering the import market rather than export.
Krish: You mentioned inefficiencies in the logistics industry. What are some of the most glaring ones you've seen, and do you have any case studies or anecdotes to share?
Vano: Transportation services are very expensive in our region due to the many middlemen involved between the shipper and the driver. Our technology aims to directly connect shippers with drivers or carrier companies, cutting out the middlemen and offering more competitive prices.
Transparency is also a significant issue, as the involvement of multiple parties often leads to hidden information, making the process a "black box." Our technology brings transparency to the supply chain and enables drivers and carrier companies to earn more than they would in the traditional industry. By cutting out the middlemen, they receive more money, and we help them maximize their truck capacity by matching loads with the right carriers and trucks based on the information provided by the shipper.
Krish: Could you walk me through an example? Let's say I want to ship something from Georgia to Armenia. What are the issues, and how does Cargon address them?
Vano: In the traditional logistics process, there are many parties involved, such as insurance companies, freight forwarding companies, and brokers. It could involve three to four people. Our technology directly connects the shipper with the driver, eliminating the need for other parties. We take responsibility for the shipment, and all shipments through Cargon are automatically insured, making it cost-effective.
In terms of efficiency, if you want to ship from A to B, you typically have to call multiple companies and wait up to three days to get the right price and truck. With Cargon, the process is much faster. We distribute the information through mobile applications that drivers have downloaded, allowing us to provide upfront pricing and a truck within four hours.
Krish: What are some features, capabilities, or innovations that you would be excited to introduce and enable for your customers in the longer term?
Vano: With the recent funding round, we have certain goals for the coming months. We want to introduce sea freight to our platform because the regions we are entering, such as Central Asia and Armenia, Azerbaijan don't have direct access to the sea and rely on Georgia for that access. This feature is crucial for us to provide a comprehensive solution for our shippers.
Another feature we are already working on is a financing solution, a kind of embedded finance that allows us to finance transportation costs for shippers. Many large companies we work with face cash crunch problems due to the need to pay for supplies and logistical costs upfront, while they only receive payment after three to six months. Our financing solution addresses this issue.
On the other hand, we are also able to pay drivers upfront, which enables us to earn extra commission. Drivers usually get paid after delivery or even a month later, so if they want to receive money immediately, we offer them a discounted price and can earn around 4.5% on that transaction.
In the future, we are considering expanding into trade financing, but at the moment, we are concentrating on these two new products.
Educational Influences:
Krish: Flexport is an investor in your company. What lessons do you take away from how Flexport has built their business, and how does their recent fall-off impact you?
Vano: Flexport and Cargon have similar business models, as we both target and concentrate on international freight. Some startups focus only on domestic transportation, but we believe that connecting different regions and supporting trade between countries makes more sense in terms of efficiency, as it allows us to utilize the network effects created by technology.
Having a diversified pool of drivers from different nationalities means we can always offer competitive prices in the specific regions we operate in. This is similar to Flexport's approach of connecting not just regions but continents, which is very efficient.
Krish: One criticism of Flexport has been the cyclical nature of the logistics business, with freight prices being subject to fluctuations. How do you factor that into your model and design?
Vano: During the COVID-19 pandemic, logistical costs significantly increased, and margins were much bigger than in a normal environment. Then, prices suddenly crashed, and margins became smaller for everyone. The US also faced a logistics crisis, which affected not only Flexport but every player in the industry.
In our case, the market has been stable, and the ongoing war in Ukraine has had a somewhat positive impact on the region. Transit routes that previously went through Russia are now being avoided, and everything goes through Central Asia and Georgia, increasing the demand for logistics in these areas.
Even when the war ends, the Silk Road will remain a significant route for trading, as many investments are being made in infrastructure. Once everything returns to normal, this route will still be efficient.
Krish: Outside of logistics, what are some topics, authors, or influences that impact your way of operating and thinking?
Vano: Geographical situation and geopolitical factors, such as the war, have dramatically changed the situation and impact the economies of the countries we operate in, consequently affecting logistics as well.
Logistics is the backbone of every industry, and it's impossible to operate without it. While logistics can be impacted by various factors, it remains relatively stable because trade still needs to continue. Small factors can influence logistics, but they cannot fully damage the industry, as it is essential for businesses to function.
Krish: You went to LSE, right? How did that impact your intellectual journey as you became a founder?
Vano: Graduating from LSE and living independently in another country gave me a different, more global perspective. When I returned to Georgia, I knew I wanted to create something that would impact not only Georgia but the entire region.
The networking and friendships I formed at LSE helped me in many ways, including support and expansion to new regions, as I knew people in neighboring countries. Studying at LSE and in the UK gave me the confidence to create something that could improve people's lives, which is what we're trying to do in logistics by positively impacting the economy, shippers, and drivers.
Krish: In terms of the Georgian startup ecosystem, what companies or founders do you find interesting or inspiring?
Vano: There are definitely startups disrupting the economies of Georgia and the region. Georgian startups are encouraged to go beyond Georgia because the market is small. Everyone building a startup is willing to expand their product to neighboring countries, Europe, or elsewhere, which makes us more energized and dedicated.
One of the best startups in Georgia is Payze, which is going beyond Georgia and disrupting markets in other emerging countries. Many other startups are dedicated and motivated to lead the ecosystem in Georgia.
Krish: What opportunities do you see in the logistics sector outside of your company that you would work on if you weren't working on your current project?
Vano: In logistics, warehousing is an area that could be more efficient, both in Georgia and globally. Technology could help improve the efficiency of the warehousing system, which is crucial for Georgia's infrastructure, as we play a logistical hub role between Europe and Asia.
Krish: Who are some entrepreneurs or business people that you find interesting, even outside of Georgia?
Vano: I was into investment banking before, and I found the CEOs of different companies like Goldman Sachs or Jamie Dimon from JP Morgan very interesting in terms of the way they manage and stay so efficient and focused throughout their careers. It's very inspiring how they maintain their level of focus on everything they do. Those are probably the characters that have been most inspiring for me.
Krish: Any final notes, questions, prompts, or resources you'd recommend for people who read this?
Vano: I'm quite curious and always try to stay updated on what's going on, especially in technology. It's inspiring to see the advancements, and you can adapt those solutions to what you're creating. Keeping yourself informed about technological developments is something everyone should do.
Closing Note:
As a final note, this interview was conducted during Sturgeon’s Annual General Meeting in Tbilisi, Georgia. It was on the same day that we hosted a ‘Startup Day’ dedicated to the growing startup ecosystem in the country. If you want to learn more about the Georgian Startup Ecosystem, feel free to stick around for future interviews with founders we’ve backed in the region, such as:
Giorgi Tsurtsumia, the founder of YC and Sturgeon-backed Payze; who is building Stripe for former Soviet Union Countries.
Givi Beridze, a serial founder who is building KLIPY, which aims to unlock GIFs as a new means of marketing for companies.
Until then, take care!