Dave Clark (L) and Ryan Petersen (R)
Getty Pictures
On Sept. 13, Flexport founder Ryan Petersen took the stage at North America’s premier provide chain convention in Phoenix. It was precisely every week after he’d compelled out his hand-picked successor as CEO, ex-Amazon government Dave Clark, so Petersen might as soon as once more run the present.
Sitting within the first few rows of attendees was Clark, the person he’d ousted only a yr into the job. Petersen was shocked that he confirmed up, in accordance with folks with information of the matter. Days earlier, Petersen had excoriated Clark, alleging he’d secretly expanded the corporate’s headcount and brought on pointless leases with out Petersen or the board’s information. On X, previously generally known as Twitter, Petersen wrote, “Strategic Plan, Day 1: Make higher selections!”
With Clark sitting just a few ft away, Petersen struck a distinct tone.
“I feel we will look again and go, ‘Wow I might in all probability do this over again due to the progress that we have made,'” Petersen mentioned, in an interview on stage.
Doing it over once more would appear to recommend hiring Clark wasn’t a foul resolution. Petersen went even additional, personally commending Clark for orchestrating the $1.3 billion buy of Deliverr from Shopify, choosing up provide chain know-how for last-mile deliveries. That deal was introduced in Might.
“I am very, very fortunate as a result of I would not have had the braveness to go and do this acquisition, however I give all of the credit score on the planet to Dave Clark,” Petersen mentioned. “There is no one in all probability on the planet who could be higher at operating that final mile e-com success community. Personally, I haven’t got any expertise and I’d’ve been fairly intimidated to attempt to go pull that off.”
The blended messaging from the 43-year-old Flexport founder underscores the dysfunction surrounding the sudden firing of Clark, who beforehand spent 23 years at Amazon and constructed its mammoth logistics community on the way in which to turning into one in every of Jeff Bezos’ prime deputies. It is also indicative of a much bigger problem going through Flexport, whose software program is designed to simplify the method of transporting items. The corporate was valued at $8 billion by non-public traders in early 2022, simply because the financial system was turning and the 10-year tech bull market was coming to an finish.
As a high-valued firm backed by highly effective VCs, Flexport has been attempting to concurrently function in Silicon Valley startup development mode whereas additionally restraining bills to replicate the brand new financial realities and to deal with provide chain bottlenecks.
This account relies on conversations with folks near Clark and Petersen. They requested anonymity to debate confidential interactions. Their views have been corroborated by inner paperwork and communications reviewed by CNBC.
Petersen has publicly mentioned Clark overspent, overhired and overpromised, one thing his allies echoed to CNBC. He burned by means of money and stored Petersen at midnight about key financials and an bold enlargement into offering end-to-end provide chain instruments for small and medium-sized companies. Individuals near Petersen pointed to quite a few beforehand unreported incidents that eroded his confidence in Clark.
However paperwork seen by CNBC and sources near Clark undermine these claims. They present that Clark, who arrived when the corporate was struggling to invoice prospects and observe containers, labored carefully with the board and Petersen to implement selections that Flexport now suggests have been ill-advised.
Proof to help Flexport’s claims of economic mismanagement is missing, elevating questions on whether or not that narrative was put ahead to justify Clark’s exit.
A Flexport spokesperson rejected that characterization.
“Ryan Petersen returned as CEO with a purpose to restore Flexport’s tradition of buyer engagement, and drive the expansion and value self-discipline required to return the corporate to profitability,” the spokesperson mentioned in an announcement.
Get IPO prepared
Ryan Petersen, chief executive officer of Flexport, participates in a panel discussion during the Milken Institute Global Conference in Beverly Hills, California, U.S., on Wednesday, May 4, 2022.
Bloomberg | Bloomberg | Getty Images
Since 2021, Petersen had been seeking a replacement for Flexport’s then-operating chief Sanne Manders, in part to address what several ex-employees described as lingering issues with the company’s troubled billing processes. Fixing that was Clark’s job.
Petersen and Clark worked together as co-CEOs for the first six months. In March, Petersen transitioned to executive chairman.
The co-CEO arrangement would free Petersen up to do what he loved – “getting beers with customers,” in the words of two former Flexport employees. Clark, a self-described “builder at heart,” was on the wheel.
Amongst Clark’s targets was to assist Petersen put together Flexport for an IPO, one thing the corporate had mentioned doing inside a two- to three-year window, in accordance with an individual conversant in the matter and paperwork seen by CNBC.
“There’s an ideal complement of talent units,” Petersen informed Forbes in June 2022. “Mine are rather more inventive, zero-to-one founder time, and Dave is the supreme executor and a legend within the provide chain world.”
Shopping for Deliverr was meant to be step one in turning Flexport right into a extra full-scale logistics service for its prospects.
Shopify had acquired Deliverr in Might 2022 for $2.1 billion. However the e-commerce software program firm was getting hammered by Wall Avenue as its pandemic pop light. By January 2023, CEO Tobias Lutke knew he wanted to do away with Deliverr. Round that point, Lutke first approached Petersen to drift the opportunity of a deal, in accordance with an individual conversant in the matter.
Petersen informed Clark he ought to have interaction with Shopify’s group, in accordance with an individual with direct information of the negotiations. Preliminary talks fell aside, however resumed when Flexport executives discovered that Shopify was about to execute deep price cuts and was desperate to promote Deliverr.
Clark and Petersen flew to Miami to fulfill with Shopify’s management. As a transaction was nearing, Clark, who had a repute as a deft negotiator, received Shopify, which was already an investor in Flexport, to sweeten it with $40 million in money and the framework for a $260 million convertible observe that might assist Flexport on its path to an IPO, in accordance with an inner doc analyzing the deal.
The sale could be introduced alongside Shopify’s first-quarter earnings report on Might 4.
“We didn’t change the phrases of a deal or rush it simply to have it line up with an earnings name,” Shopify mentioned in an announcement. With Flexport, “we’re tightly mission-aligned to make sure the success of our retailers, which is why we selected to deepen our partnership with them earlier this yr.”
The evening earlier than the announcement, Petersen appeared at a “Tech Speak” at Flexport’s Bellevue, Washington workplace to pitch the “Flexport imaginative and prescient” to tons of of individuals. An attendee requested Petersen whether or not Flexport would ever get into last-mile logistics.
Petersen paused, glanced at his watch, and mentioned to keep watch over the morning information, in accordance with a Flexport worker who witnessed the change and by an individual who was informed independently.
The remark alarmed Clark and Flexport executives, who have been involved that Petersen had disclosed materials personal details about a publicly traded firm, in accordance with folks conversant in the matter.
Petersen did not reply to calls or messages from CNBC, and the corporate declined to make him out there for an interview. A Flexport spokesperson did not reply to CNBC’s query about whether or not Petersen was conscious of issues about his assertion on the occasion.
The ‘whistleblower’
Clark’s first quarterly board assembly as sole CEO was June 1. His second was Aug. 31, days earlier than he was compelled out.
The board was made up largely of traders who have been betting on the founder. It included Founders Fund’s Trae Stephens, who had helped begin defense-tech agency Anduril Industries, and Michael Ronen, who left SoftBank in 2020. Andreessen Horowitz was represented by Bob Swan, an working companion on the agency and former CEO of Intel.
Bob Swan, then-interim chief government officer and chief monetary officer of Intel Corp., reacts through the inauguration of the corporate’s analysis and improvement facility in Bengaluru, India, on November 15, 2018.
Samyukta Lakshmi | Bloomberg | Getty Pictures
For a lot of the summer time, Clark had pushed then-CFO Kenny Wagers and his monetary planning and evaluation group to realign Flexport’s year-end and 18-month forecasts, in accordance with an individual near the state of affairs.
The explanations have been apparent. At first of 2022, it price round $14,500 to maneuver a single container throughout the Pacific. By late 2022, costs of ocean freight from Asia to the U.S. West Coast have been down 90% from a yr earlier, due largely to weakening world demand. As a result of Flexport makes cash by charging charges for the transportation of products, the corporate’s enterprise was getting hammered.
However Wagers and Stuart Leung, a Flexport finance government and a detailed Petersen ally, have been reluctant to pare again forecasts, irritating Clark, who felt these projections have been overly optimistic.
Wagers and Leung didn’t reply to CNBC’s interview requests.
Clark in the end prevailed, however the revised forecasts distressed Petersen. Clark, Petersen and Wagers met in Texas in mid-August to fine-tune the forecasts.
A supply near Petersen informed CNBC that the assembly went poorly for Clark as a result of a so-called “whistleblower” — recognized as a senior finance government — stepped ahead shortly earlier than it started and informed Petersen that the numbers being introduced have been “not actual.”
The supply referred to the senior finance government as a whistleblower due to the knowledge he disclosed to Petersen about Clark.
Paperwork seen by CNBC and conversations with folks with direct information of the board assembly make it clear that there have been no substantiated whistleblower actions or allegations of economic impropriety.
Flexport’s spokesperson informed CNBC in an announcement: “There was no whistleblower nor was there any monetary misconduct. Any allegations on the contrary are fully false.”
On Sept. 15, shortly after CNBC spoke with the Petersen supply, authorized counsel for Clark despatched a cease-and-desist letter to Flexport. The letter, seen by CNBC, instructed the corporate to protect and retain all communications involving Clark’s departure. The letter disputes the existence of a whistleblower and lists particular allegations as false and defamatory, together with Petersen’s claims that Clark was an unfit CEO as a result of he overextended the corporate’s lease obligations.
5 hours after the letter was despatched, the supply near Petersen contacted CNBC and requested to retract their statements and all particulars associated to Clark’s firing or in regards to the so-called whistleblower. CNBC declined to retract his statements.
Petersen has since deleted a number of of his posts criticizing Clark.
Dave Clark, Amazon’s former senior vice chairman of worldwide operations.
Lindsey Wasson | Reuters
The letter cited two paperwork that had been introduced to the board. Each have been seen by CNBC. The primary was a pre-acquisition monetary evaluation of the Deliverr deal, and the second was a overview of Flexport’s first-quarter numbers. The Deliverr evaluation was introduced by the co-CEOs to the board for his or her approval and was formed by a number of prior board conferences.
Clark’s camp instructed that different elements could have led to the abrupt firing.
For instance, politics.
Days after Clark was ousted, Petersen despatched him a message — seen by CNBC — blasting one in every of his key feminine executives for losing her days on the firm on “far left-wing political activism.” The manager is a registered Republican.
Stephens, the Founders Fund companion, additionally shared his contempt for that government weeks previous to Clark’s departure, an individual conversant in the board informed CNBC. Stephens didn’t reply to CNBC’s request for remark.
Petersen can also be a enterprise companion at Founders Fund, the agency began by Peter Thiel, who was a outstanding supporter of President Trump’s 2016 marketing campaign and extra lately bankrolled Senate candidates in Ohio and Arizona. A lot of Thiel’s closest confidantes at Founders Fund and elsewhere within the enterprise trade are outspoken conservatives.
Petersen’s sole public political contribution in 2023 was to a Democratic political motion committee related to Senator Joe Manchin of West Virginia. He does not speak a lot about politics on social media or in interviews.
Clark has donated to candidates on each side of the aisle. Upon his departure, The Wall Avenue Journal reported that he was contemplating operating for governor of Texas, however two folks conversant in his pondering say it is not occurring anytime quickly.
Flexport informed CNBC that an worker’s politics aren’t related in personnel selections.
“Ryan Petersen doesn’t care in any respect about anybody’s political or private affiliations. That’s their enterprise,” the spokesperson mentioned. “It’s inappropriate for any worker to spend an extreme period of time throughout work hours on actions unrelated to their function.”
An individual conversant in the feminine government mentioned her non-corporate endeavors have been largely associated to charitable organizations.
Clark has largely remained silent since he was compelled to resign on Sept. 5, although in non-public he is expressed frustration at how his former group was being handled by Flexport, in accordance with folks near him. A lot of his allies at Amazon who joined him at Flexport have been summarily fired by Petersen shortly after his departure.
On Sept. 13, Flexport’s chief authorized counsel Chris Ferro contacted Clark. Ferro informed him that his resignation every week prior had not been accepted, in accordance with an individual conversant in the dialog.
As an alternative, Ferro informed Clark that Flexport’s board met the day after Clark resigned and voted to fireside him for trigger, the particular person acquainted mentioned. Ferro mentioned the board minutes did not but replicate why Clark had been fired, the particular person mentioned.
Ferro allegedly informed Clark that Flexport could be prepared to present him a block of two million shares — value tens of millions of {dollars} — if he signed a separation settlement that included non-disclosure and non-disparagement clauses.
Clark declined, the particular person mentioned. Shortly after Flexport reached out with the supply, Clark took the stage on the identical provide chain convention in Phoenix that Petersen spoke at earlier within the day.
He did not maintain again.
“The one factor I actually remorse from the previous yr was I form of picked the incorrect founder,” Clark mentioned. “Principally, it was a spot of extending my reputational halo to a bunch that, for my part, did not deserve it. Largely, as a result of about half the group was let go final week on Friday, probably the most brutal non-severance packages I’ve ever seen in my life. It was about as disrespectful a method as humanly doable.”
Amazon showdown
On prime of the general public relations fallout from the Clark saga and any authorized wrangling which will observe, Flexport faces staffing turnover and a rising risk from Clark’s former employer.
On Sept. 12, nearly every week after Clark was fired, Flexport executives convened in Seattle to launch an end-to-end provide chain service that might permit sellers to maneuver their merchandise from factories to prospects’ doorsteps by means of integrations with main on-line marketplaces.
The mission was spearheaded by Parisa Sadrzadeh, an government vice chairman at Flexport who Clark had poached from Amazon’s logistics unit.
Earlier within the day, and simply up the road from Flexport’s occasion, Amazon had unveiled a strikingly comparable service in entrance of roughly 2,200 attendees at its annual Speed up vendor convention. Flexport had deliberate to have a sales space onsite however was informed it could not be an exhibitor, which some staffers suspected was because of the competing provide chain merchandise, in accordance with an individual conversant in the matter.
Flexport mentioned securing exhibit house at Speed up months earlier however did not meet all the necessities to take part, and its launch wasn’t talked about in these conversations, Amazon mentioned.
Flexport’s occasion was underwhelming. In a convention room, about 50 folks regarded on as Sadrzadeh debuted Flexport’s service after which launched Petersen, who spoke for roughly 20 minutes, in accordance with Burak Yolga, co-founder of a digital freight forwarding firm who was in attendance.
“Flexport introduced just about the identical factor that Amazon introduced,” Yolga mentioned in an interview. He mentioned he left after a couple of half hour.
The corporate paid rapper Nelly $150,000 to carry out on the occasion. However within the days main as much as the launch, Petersen opted to squash the efficiency as a result of the optics have been dangerous after his put up about rescinding job affords, an individual conversant in the matter mentioned. Regardless of canceling the occasion, Flexport nonetheless paid the artist.
WATCH: Flexport CEO Ryan Petersen on reinvesting earnings
