Denim Gets $63M to Turn Freight Brokers Into ‘Smart’ Brokers Using Payments

Denim, Bharath Krishnamoorthy, freight, factoring

For Bharath Krishnamoorthy, co-founder and CEO of Denim, transforming the freight industry — and specifically how brokers get paid — was not on the roadmap.

A decade ago, when he was in law school, he told Karen Webster, “I didn’t know what factoring was. Trucks were just things I got stuck behind in traffic.”

After finding that a career in law was not for him, Krishnamoorthy pivoted to startups, finding success with a passenger transportation software solution that optimized pricing for intercity bus companies.

But the relatively small market provided a ceiling to revenue growth, and Krishnamoorthy decided that the principle of fixing pricing via tech could find wide berth in a larger market. The experience in transportation led him to look at what was, and has been broken in the complex web of getting goods to and fro, as the freight industry keeps the economy running.

There’s been plenty to fix. Freight brokers sit in the middle of the ecosystem, linking shippers and carriers. The shipper has the goods, and the carriers are where the rubber meets the road, so to speak. If the brokers are not operating efficiently, the loads are delayed, and supply chains get snarled.

Serving as the operating system for freight brokerages, he said, is built — as so many businesses are — on what’s gone before. Uber’s essentially a twist on the taxi business. Airbnb is, boiled down its essence, a platform-driven way to couch surf.

In terms of factoring, it’s an age old practice. Factoring means selling an invoice for cash on hand. The traditional model has been one where the factoring firms take a charge of as much of 10% of the total value of the invoice.

New Approach to Factoring

“It’s been primarily used for trucking companies,” Krishnamoorthy said, “and what we’ve done is built a platform that allows us to safely offer this product to freight brokers.”

The specific target audience, he said, is the “long tail” of smaller brokers that may be cash constrained, lacking access to credit or bank loans that might be more readily available to larger firms.

It can take weeks for a freight broker to get paid for an order.

That waiting period is becoming less and less palatable. In the current environment, he said there’s too much supply and not enough demand for freight, and so freight rates are relatively low. The shakeout’s been such that the freight market collapse sank firms like Convoy (which relaunched this year).

“If you’re a $10 million or $50 million brokerage,” he said, “what you really care about is streamlining your operations.” As such, he said, selling software and technology to help improve invoicing and fund disbursements makes freight brokers … into smart brokers. Much of the industry is mired in spreadsheets and in cutting paper checks.

“The state of the art’s been pretty low,” he told Webster. Denim’s offerings integrate with brokerages’ tech stack to sync payments and collections and offer actionable insight to client firms.

“As we get more data, we can manage the risk better, and that directly translates into cost savings and time savings for the client,” he said.

The Platform and a Better Invoicing Process

Denim’s five-year-old platform model offers a range of financing and payment processes to the brokers, while many factoring companies have an “all or nothing” invoice model. Denim’s freight brokers choose which invoices they want to factor — and when the carrier’s advance is going to go out, right down to the day.

“That level of control is very valuable,” Krishnamoorthy said, and winds up being a more efficient way to access capital than would be seen with other factoring companies.

The Denim Wallet is a carrier payments solution for freight brokers and shippers who want to distribute payments using their own funds. Denim pays directly to the trucking company (not the drivers), and users can also self-fund their wallets.

“We’ve built a full payments network,” he said, “because we’re interacting with everyone in the ecosystem.” Future payments initiatives may include working with partners to expand other offerings to brokers and carriers, such as fuel cards and insurance products.

Denim’s position in the market and 30% in top line growth has attracted $63 million in financing via a warehouse facility from Silicon Valley Bank and lending partner Trinity Capital.

As he told Webster, with the continued trend of simplifying freight brokers’ back offices, “if freight rates start going back up and interest rates come back down, no one is going to be happier than us — it will be a massive tailwind to the business.”