After Dave Clark's departure from Flexport as CEO, Ryan Petersen, the founder, commented that the business had been recruiting staff too rapidly and needed to reduce expenditure. At a logistics gathering a week later, Petersen stated he was "very, very blessed" that Clark was around to manage the company's biggest takeover. Now that Petersen is leading Flexport once again, they have to grapple with financial issues, faltering revenues and greater rivalry from Amazon.
At North America's premier supply chain conference in Phoenix on Sept. 13, Ryan Petersen, founder of Flexport, took the stage with his recently-ousted successor as CEO, ex-Amazon executive Dave Clark, sitting just a few feet away. A week prior, Petersen had announced his decision to retake the reins of the company, which had not been well-received, claiming Clark had taken on unnecessary leases and had secretly expanded the headcount without his or the board's knowledge. On X, formerly known as Twitter, Petersen wrote, "Strategic Plan, Day 1: Make better decisions!"
During an interview on stage, Peterson took a different tone, saying, "I think we're going to look back and go, 'Wow I'd probably do that all over again because of the progress that we've made.'" He even commended Clark for orchestrating the $1.3 billion purchase of Deliverr from Shopify and the acquisition of supply chain technology for last-mile deliveries.
This mixed messaging underscores the dysfunction that surrounded the abrupt dismissal of Clark who had spent 23 years at Amazon and had been one of Jeff Bezos' top deputies. Flexport had just been valued at $8 billion by private investors in early 2022, however the 10-year tech bull market had come to an end, which brought up the challenge of operating in Silicon Valley startup growth mode and controlling expenses to combat supply chain bottlenecks.
This account is based on conversations with people close to Clark and Petersen. Internal documents and communications reviewed by CNBC corroborated their perspectives. Though Petersen publicly claimed Clark had overspent, overhired and overpromised, documents viewed by CNBC and sources close to Clark counter those claims. They instead indicate that Clark had worked closely with the board and Petersen to make decisions that Flexport now suggests were ill-advised.
A Flexport spokesperson rejected the characterization, stating, "Ryan Petersen returned as CEO in order to restore Flexport's culture of customer engagement, and drive the growth and cost discipline required to return the company to profitability."
Last year, Clark joined a tech startup attempting to revolutionize the longtime logistics sector. He had previously constructed Amazon's logistics unit into a vigorous machine on par with the likes of UPS and FedEx.
Since 2021, Petersen had been attempting to find a replacement for Flexport's then-operating chief, Sanne Manders, to address some problems with the company's billing processes that various former employees commented on. Fixing those issues became Clark's mission. For the first half-year, Petersen and Clark co-led the company, with Petersen then transitioning to executive chairman. The co-CEO set-up enabled Petersen to carry out what two past Flexport workers referred to as "getting beers with customers." Clark, a "builder at heart," was in the driver's seat. One of Clark's objectives was to help Petersen in making Flexport ready for an IPO, something that a source familiar with the matter and records seen by CNBC stated was mentioned as happening within 2 to 3 years. Petersen told Forbes in June 2022, "There's a perfect complement of skill sets. Mine are much more creative, zero-to-one founder time, and Dave is the supreme executor and a legend in the supply chain world." Acquiring Deliverr was planned to be the initial step in converting Flexport into a more comprehensive logistics service for its customers.Shopify procured Deliverr in May 2022 for $2.1 billion. But the e-commerce software firm was facing backlash from Wall Street as its Covid-related rise diminished. By January 2023, CEO Tobias Lutke had realized he needed to dispose of Deliverr. At that point, Lutke first approached Petersen to float the prospect of a transaction, as per a person familiar with the matter.Petersen told Clark to engage with Shopify's squad, as stated by an individual with direct understanding of the negotiations. Initial talks failed, however started again when Flexport executives discovered that Shopify was about to carry out deep cost cuts and was eager to sell Deliverr.Clark and Petersen journeyed to Miami to meet with Shopify's leadership. As the deal was getting closer, Clark, known for his accomplished negotiations, persuaded Shopify, which already had investments in Flexport, to make the sale sweeter with $40 million in cash and the framework for a $260 million convertible note that could assist Flexport on its path to an IPO, based on an internal document assessing the deal.The deal was revealed concurrently with Shopify's first-quarter earnings report on May 4.Shopify stated, "We did not change the terms of a deal or rush it just to have it line up with an earnings call. With Flexport, "we are tightly mission-aligned to make sure the success of our merchants, which is why we made the decision to deepen our partnership with them earlier this year."The night before the announcement, Petersen attended a "Tech Talk" at Flexport's Bellevue, Washington, office to deliver the "Flexport vision" to hundreds of people. An attendee asked Petersen if Flexport would ever get into last-mile logistics. Petersen paused, looked at his watch, and said to keep an eye out for the morning news, as per a Flexport employee who was present and a person informed of it separately.The comment alarmed Clark and Flexport executives, who were anxious that Petersen had divulged nonpublic material information concerning a publicly traded firm, as stated by people familiar with the matter.Petersen did not answer to calls or messages from CNBC, and the company declined to make him available for an interview. A Flexport spokesperson did not respond to CNBC's query about whether Petersen was aware of worries about his comment at the event.Clark's first quarterly board meeting as a CEO was held on June 1, followed by a second meeting on August 31, just days before his removal from the position. The board was comprised mainly of investors who had placed trust in the founder of the company and included Trae Stephens of Founders Fund (a defense-tech company called Anduril Industries) and Michael Ronen, who exited SoftBank in 2020. Bob Swan, an operating partner of Andreessen Horowitz and former CEO of Intel, was also present.
For much of the summer, Clark had pressured the CFO Kenny Wagers and his financial planning and analysis team to adjust Flexport's end-of-the-year and 18-month forecasts, as reported by a source familiar with the events. This was necessary due to the sharp decline of ocean freight prices in late 2022, which were caused by the weakening global demand, and resulted in decreased profits due to Flexport's fee-based business model. Wagers and Stuart Leung, a Flexport finance executive and a close ally of Petersen, were hesitant to reduce the forecasts, causing Clark frustration.Wagers and Leung did not respond to CNBC's interview requests.Nonetheless, Clark eventually succeeded. However, the amended forecasts caused distress to Petersen. The two, along with Wagers, held a meeting in Texas in mid-August to finalize the forecasts.
A source close to Petersen informed CNBC that the meeting did not conclude well for Clark as a senior finance executive, referred to as a whistleblower, disclosed some significant information to Petersen, claiming that the figures weren't genuine.According to documents seen by CNBC and other people familiar with the board meeting, no affirmation of any whistleblower activity or financial misconduct was found.Flexport's spokesperson mentioned to CNBC: "There was no whistleblower nor was there any financial misconduct. Any allegations to the contrary are completely false."On Sept. 15, shortly after CNBC spoke with the Petersen source, legal counsel for Clark sent a cease-and-desist letter to Flexport. This letter, viewed by CNBC, asked the company to preserve and retain all communications concerning Clark's departure. It also denied the existence of a whistleblower and noted specific allegations as false and defamatory, including Petersen's statements that Clark was an unfit CEO because he overextended the company's lease obligations.Five hours after the letter was sent, the source close to Petersen contacted CNBC and requested to retract their statements and all details regarding Clark's firing or about the so-called whistleblower. CNBC declined to retract the statements.Petersen has since removed several of his posts regarding Clark.
Two documents had been presented to the board, according to the letter. The first was a pre-acquisition financial analysis of the Deliverr deal, and the second was a review of Flexport's first quarter numbers. The Deliverr analysis had been discussed by the co-CEOs in multiple prior board meetings for approval. Clark's side proposed that other factors other than the financials may have caused the abrupt firing, such as politics. Days after Clark's dismissal, Petersen sent him an email (which was seen by CNBC) that criticized a key female executive at the company for “wasting her days on far left-wing political activism”, even though she is a registered Republican. Additionally, a person familiar with the board told CNBC that Stephens, a Founders Fund partner, had voiced his disapproval of this same executive some weeks before Clark's termination. Stephens did not comment on this. Petersen, who is also a venture partner at Founders Fund, backed President Trump's 2016 campaign, and with his help, Senate candidates in Ohio and Arizona were sponsored. Many of Thiel's closest associates, both at Founders Fund and in the venture industry, advocate for conservative views. Petersen only publicly contributed to a Democratic political action committee affiliated with Sen. Joe Manchin (West Virginia) in 2023, and he does not often make any public political statements on social media or interviews. Clark, for his part, has donated to candidates from both sides of the aisle. After his departure, there were reports that Clark was thinking of running for governor of Texas, but two people well-versed in his thoughts have denied this. Flexport told CNBC that politics are irrelevant to personnel decisions. The spokesperson stated: “Ryan Petersen does not care at all about anyone’s political or personal affiliations. That is their business. It is inappropriate for any employee to spend an excessive amount of time during work hours on activities unrelated to their role”. A person familiar with the female executive commented that her non-company activities were largely related to charitable organizations. Since being forced to resign on September 5th, Clark has expressed anger privately at how Flexport treated his staff, according to close friends. Immediately after his removal, several of his allies from Amazon who had joined him at Flexport were also let go. On the 13th of September, Flexport's chief legal counsel, Chris Ferro, talked to Clark and said his resignation had not been accepted. Instead, the board had voted to fire him for cause, although it hadn't stated why yet. Ferro proposed Clark sign a separation agreement including confidentiality and non-disparagement clauses in exchange for two million shares, worth millions of dollars. However, Clark refused. Shortly afterwards, Clark spoke at a supply chain conference in Phoenix, the same event Petersen had attended earlier. Clark remarked: “The only thing I really regret from the past year was I sort of picked the wrong founder. Basically, it was a place of extending my reputational halo to a group that, in my opinion, didn’t deserve it. Largely, because about half the team was let go last week on Friday, the most brutal non-severance packages I’ve ever seen in my life. It was about as disrespectful a way as humanly possible.”
The controversy surrounding the Clark saga, any potential legal proceedings, as well as staff turnover and heightened competition from Clark's former employer, has taken its toll on Flexport. After dismissing Wagers as CFO and its human resources chief, the company laid off 20% of its staff in January.On Sept. 12, Flexport convened in Seattle to launch a full-service supply chain service, steered by EVP Parisa Sadrzadeh, who had been poached from Amazon's logistics sector. Coincidentally, Amazon had announced a similar product at their Accelerate seller conference, hosted by approximately 2,200 attendees, the same day. While Flexport had approached Amazon to secure exhibit space there, they did not meet all the requirements and the launch was not mentioned in these conversations, according to Amazon.At the Flexport event, about 50 attendees gathered to hear Sadrzadeh's launch and CEO Ryan Petersen's speech. However, the show was cut short by Petersen who chose to cancel the planned performance of rapper Nelly due to the bad optics caused by his announcement of rescinding job offers. Despite canceling the performance, Flexport still paid the artist $150,000.
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