How Transparency Can Disrupt a Market
CEO and Cofounder at Xeneta
Patrik Berglund has been leading disruption in the ocean and air freight market since 2012, when he cofounded his Oslo-based startup Xeneta. Originally from a small Norwegian town called Larvik, he moved to the capital to study at the Norwegian Business School. After that, he landed a job at the multinational Kuehne + Nagel, one of the world's leading logistics providers. After four years there, in 2011, he cofounded Nordilog AS, a Nordic consulting company specializing in logistics procurement. Then a year later, he cofounded Xeneta, disrupting the logistics market with a never-before-seen level of transparency. The innovative business earned him the 2016 Lloyd's List Next Generation in Shipping award.
"I really wanted to start my own business,” he says. “In Norway, you can more or less do that with a low degree of risk due to the solid welfare system here. If you start a business and you end up breaking it, there will always be a good system taking care of you. That made me want to stay in Norway and establish a business." With Xeneta, which collect proprietary data from logistics buyers, being in Oslo was also an advantage. "Norway is renowned for having a high-degree of business trust. The country's deep roots within shipping, and the fact that you can work pretty much with anyone in the world time-zone wise, also helped. It's a decent location to build an international business."
With his logistics procurement and supply-chain experience from Kuehne + Nagel, he wanted to add more transparency on the buyers' side. "The tricky thing about ocean freight and air freight in particular is that the market is very volatile. From a customer point of view – brands like Adidas, Nestle, Electrolux, Walmart – they buy services from forwarders and shipping lines or airlines, and prices change all the time. Imagine you had to send a container box from Shanghai to Hamburg. Every week, you have a new different price, not just a few dollars up or down but up to two hundred percent more or ninety percent down. An extreme degree of volatility." While working at Kuehne + Nagel, his customers would scrutinize the price and ask him if they were getting a good deal or not, as there was no available index for comparison and better decision-making. With the electricity market, customers can see the prices going up and down and understand what they should pay. “But within air and ocean freight, there was no sort of central source for transparency. Companies buy and sell air and ocean freight between three hundred and eight hundred billion dollars every year, depending on whether the market is high or low – an extreme amount of money transferred between the buyers and sellers at a high degree of volatility. And the customer always wonders whether the price is good."
Since I entered the startup scene twelve years ago, there's been an interesting development. Today, the level of diversity is incredible compared to what it was. Now we actually have founders who don't all look and talk the same.
The lack of transparency clearly favored the freight sellers, who benefit from the customers' unprocurable market price. "And this is why we ended up thinking, what can we do with this? Why isn't there anything available?" It’s not as simple as googling the price to ship a container box somewhere, as companies who have large shipping volumes, such as Ikea, pay different prices to the mom-and-pop shops. “It's hard to reach a certain degree of transparency."
With Xeneta, he realized the power of building a database with buyers' information. "In theory, we wanted a large room where you can ask these brands how much they’re paying today to ship between Shanghai and Los Angeles, and they all disclose their prices. But that wouldn't be legally allowed. What you can do, however, is to source all the data from them and put it into a platform that presents the average high and low. This way, buyers can see the spread and the volatility."
For that to happen, the startup needed patience. "Another challenge was explaining that no individual data is ever disclosed. It's all aggregates, but getting the right legal framework in place in contracts, nondisclosure agreements, and then technically within the platform, has been the key thing," he says. "I was like twenty-eight, twenty-nine when we started. I'm forty-one now, and I'm not sure I would have the stamina and determination to do that initial journey again."
Back then, the Oslo ecosystem was very young, which created additional challenges. "There was hardly any ecosystem in the early days of Xeneta,” he says. “If you go ten years back, there were few technology companies. There were hardly any individuals to lean on and learn from. We're a good example of a startup who sought support internationally." The first institutional investors were Creandum, a Swedish early stage VC, and Point Nine, a seed-stage VC based in Germany. As the ecosystem developed, however, it brought some Norwegian names in. "Now we have a more vibrant environment with more successful companies. We have good role models that we can learn from. It's possible for me to meet other founders and discuss and debate how to scale a company internationally."
For Xeneta, it was crucial to focus on an international expansion from the beginning, since the market in the Nordics could be limiting. "We're five and a half million people in Norway. For shipping, it's a small market. One of our bigger clients can move more container boxes globally than Norway does collectively as a nation. It says a little bit about how small Norway can be. There are two handfuls of customers in Norway, and there isn't a lot more to go for, to be honest.” Xeneta went on to transform the international shipping and logistics industry with data analytics and is now a leading worldwide source for buyers and sellers comparing shipping rates against the market highs, lows, and averages.
But to get there, he relied on input from the buyers. "We needed a lot of buyers on board to provide enough data to have accurate representation of that volatile market. It's a huge chicken-and-egg problem: In the beginning, you don't have anything to offer them, but you ask them to give you proprietary data. However, as it scales, it becomes very attractive, because the data grows, the accuracy grows, and the value that they get from the platform grows. You can start charging buyers for access to the outcome of that data. And from that, you get a very attractive business model, because you don't have any raw material cost."
With over 280 million short and long-term contracted rates in its database covering over 160,000 global trade routes, Xeneta enabled smarter decisions by reporting in real time on market average and low/high movements. As a founder, Patrik thinks self-development is crucial to keep the company growing. "Running a company of two hundred and fifty people is radically different to running a team of ten. You have to renew yourself constantly to figure out what your weaknesses are and how you can bridge the gap they might create. It's tricky: How do you do something you've never done before and do it well? With planning, with understanding what you're good at. And then, bring in the people who can help you where you're not as knowledgeable, preferably people who have the experience you lack. … There are so many layers of challenges: build the company, recruit the right people, get the processes and procedures in place, move with speed, stay motivated and develop yourself. The failures are thick and thin. They're everywhere. One thing we've done well is that we've been transparent. We bring transparency to the market, but I have also been transparent internally, whether that's related to performance or non-performance and sharing financial data with the company."
When times were difficult, he reminded himself that his core belief was sound. "We had periods when we were trying to fundraise and close a round to stay alive and pay the next month's salaries, but I always knew that if I could get enough pricing data from these companies, I’d be better informed and could make better decisions." Through difficult times, transparency has remained a common denominator. "You can't deceive anyone. They need to know what they're part of and that it comes with a huge risk."
Building a successful company can be brutally hard and draining, but also rewarding. “You should never be satisfied, but you also have to ensure you enjoy the wins properly before chasing the next improvement.” To recharge on his days off, Patrik goes hiking, biking or relaxes at a sauna. "On Monday, I went for a forty-five kilometer mountain bike ride with my kids. This is almost peak happiness for me. You get so much fresh air. The physical activity is so intense that you don't think work at all. Find what gets your head off work. To me, it's often some type of physical activity. If I just sit down in a couch and watch a TV series, I still think about work."
Luckily, Oslo can offer a lot of opportunities for outdoors activity. "I love Oslo because it has a calm, quiet atmosphere. It's so easy to get into the forest and go hiking or skiing. You can go down to the fjord and do some swimming. I love the mix of forest, mountains and the ocean and the quiet vibe of the city compared to what you find in New York, Shanghai or Singapore, which are cities that I enjoy visiting… but living in them would be a whole different thing."
I'm proud that I understood that if you're going to move an industry, you need to own or control demand in some way, because supply will always follow demand.
[Flash Q & A]
At what age did you found your first company?
What's your favorite book?
The Everything Store by Brad Stone and Amp It Up by Frank Slootman.
When We Were Kings by Erik Niva and Håkan Andreasson. For a more business-related choice, All-In.
Most used app?
Most used and most loved one: DocuSign.
What do you do everyday to get ready for work?
Coffee. Preferably outside, with nice scenery – when I could choose.
Favorite place to go for deep work or creative thinking in the city?
Anything from saunas to hiking, trekking, or skiing. I love going out hammocking: you pack your backpack and a hammock and go into the forests or mountains and spend a night or two outdoors.
What restaurant would you recommend?
That would be Plah, an Asian fusion place.
What's your favourite museum?
The Norwegian Museum of Science and Technology. It's also good for bringing kids because they have lots of activities.
What's the one thing you’ve always wanted to try in the city but have never done?
Run the Oslo marathon.