When evaluating freight forwarding software, most attention often goes to feature comparisons and integration. And to be honest, that is a good strategy. Demos and pricing tiers also get a lot of attention. But in far too many cases, the long-term ownership structure of the software a vendor provides is overlooked, even though it matters more than almost anything else a freight forwarder might consider before purchase.
A venture-capital-backed vendor typically has a plan to sell the company, either through acquisition or by taking it public. This model makes sense for investors because they are getting a return on their investment quickly. However, many freight forwarders don’t stop to ask how that will affect their business a few years down the line because an acquisition brings changes that may not suit freight forwarding operations well. Ultimately, this is the one question most buyers don’t even know to ask until the answer has changed.
“The most important factor in a technology partnership is whether the partner will still be operating the same way in 10 years. That question almost never makes the evaluation shortlist.”
Fundamentally, any venture-capital-backed software business is expected to grow rapidly, raise its next round of capital, and ultimately exit (either through sale or public offering). At each point along this growth curve, there will be pressures that shape the product’s direction, for better or worse. Early-stage funding in a venture-backed business lets it move quickly to ship new features, which is great. But the downside is that minimal support (if any) lets the business make changes that leave early adopters on versions of the product the company no longer supports.
During the growth phase, businesses face tremendous pressure to cut costs and increase revenue per user (account) across the customer base. Again, this is fair, but from the freight forwarder’s POV, that means price restructuring, mandatory upgrades, and aggressive upselling that didn’t exist when the contract was executed.
Finally, late-stage companies are positioned for either acquisition or going public, which means that all future roadmap decisions begin to focus on how to present themselves so their exit valuation looks as strong as possible, rather than on what would provide value to their end-users. For example, a fund that invests at Series A expects a return on investment within seven to 10 years. This is how it should be, and it would not be a problem except when the freight forwarder assumes the vendor’s priorities will remain aligned with those of the freight forwarder throughout the entire life of the relationship.
Acquisitions often happen because stakeholders need money. But that also means the buyer has to make the most of that purchase, and in many cases, the end user takes the biggest hit.
What began as a platform developed specifically for freight forwarding could become just one module within a super app or a much larger package of applications. Resources used to develop the original application are redirected to support the acquiring party’s broader strategic goals. And as a result, updates to the specific features the freight forwarder uses stop while new features are added based on what appeals to other customer segments.
It is obvious that the new owner of the technology platform wants to profit from the existing client base after their takeover. In the M&A space, installed bases with high switching costs are among the few areas where an acquirer can realize a premium over market price. If they know it is expensive for you to switch, they want to take advantage.
“Installed bases with switching costs are one of the main reasons acquirers pay a premium. The thing that makes a forwarder vulnerable after an acquisition is the same thing that made the acquisition attractive.”
Often, the team that developed the purchased software leaves once they’ve received all their vested equity. For many companies, especially mid-sized freight forwarders, integrating the product into the parent company’s offerings takes priority over maintaining third-party integrations critical to daily operations. That means third-party integrations vital to operational success at the time of purchase often take second priority behind integrating the acquired product into the parent company’s product suite.
An independently owned technology company is solely accountable to its clients. No investor is looking for a return on investment, and there’s no risk of a new corporate owner changing the product’s direction to suit their needs.
This means the roadmap (i.e., how the software will be developed) is driven by what freight forwarders want rather than what would make the next fundraising event attractive. It also means pricing will remain predictable because there is no pressure to inflate annual recurring revenue (ARR) to trigger a valuation event sooner, and the same people who created the original platform continue to develop it today.
Take NewageNXT, for example. Erstwhile known as eFS, it traces its roots to a family-owned business, Freight Systems, which David Phillips established in Dubai in 1988. The solution became a standalone company, Newage Global, in November 2005 to commercialize the platform Freight Systems had been running internally. Jonathan Phillips, David’s son, became CEO of Newage in January 2024. A generational transfer of ownership is the strongest demonstration of a technology company’s long-term commitment, as it shows ownership strategizing across decades, not funding rounds.
A vendor that builds for the “next exit” and a vendor that builds for the “next decade of freight forwarding” will provide many of the same capabilities in the first year. By year three, one vendor’s roadmap will align with your operations, while another’s will align with their new owners’ goals. By then, you will have incurred multiple times the cost of switching vendors than you would have if you had asked about ownership during the evaluation phase.
NewageNXT is owned by a family-run company with more than 20 years of experience in freight forwarder technology. We are a privately held company, which is great for you because there is no investor or “exit date,” so if you value long-term relationships as much as we do, book a demo today to start.
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