Nuvocargo Bumps Valuation To $250 Million, Snags New Funds To Expand U.S.-Mexico Shipping Efforts

With the exception of the AI sector, venture capital funding remains in short supply across the startup ecosystem. “It’s been frosty everywhere, but especially in fintech,” said Lauren Morton, a partner at QED Investors, which focuses on the sector. Financial services companies are facing a reckoning often driven by unsustainable business models.

For Nuvocargo, one of Morton’s investments, that meant cutting ties with some customers. “To every company that came to us, we said, ‘We’ll work with you,’” founder and CEO Deepak Chhugani told Forbes. “That’s the dream, right? We wanted to work with everyone.” But as the economic downturn worsened, that became untenable; Nuvocargo, which makes logistics software to manage freight shipments across the U.S.-Mexico border, found that its smaller shipping clients were costly to maintain.

QED liked what it saw. It led a $36.5 million Series B funding round into Nuvocargo, which values the company at $250 million. That’s a healthy bump from the $180 million valuation that Tiger Global assessed to the New York City-based startup amid froth of the late 2021 fundraising environment.

In a market where startups are scrambling to find sources of revenue in the absence of VC dollars, slashing paying customers may sound counterintuitive. But, Chhugani explained, the cost for Nuvocargo to bring on a small business as a customer was essentially the same as signing a large enterprise. So, he decided to focus efforts on the biggest customers, betting that Nuvocargo’s products were enterprise-ready enough to handle them.

The move has paid off so far. Nuvocargo is on track to make “tens of millions” in revenue this year on 200% year-over-year growth, Chhugani told Forbes. At the same time, he said, it has cut its burn rate in half. The company had about 500 customers when Chhugani was recognized on Forbes’ 30 Under 30 list late last year and still has “hundreds” (he declined to provide an exact count) including big names Kimberly-Clark, Nestlé and Grupo Bimbo. The business performance helped convince QED to double down on its investment. The firm first backed Nuvocargo in early 2021 at a $70 million valuation.

“It’s definitely in the very top decile of what we’re seeing in terms of how easily rounds are coming together and the ability to raise as much capital at this stage in the business,” Morton said.

Part of the ease of the fundraise comes because Morton’s firm committed to providing the largest chunk of money as lead investor in the round. Another reason: a timely opportunity to capitalize on a boom in supply chain nearshoring — Mexican exports to the U.S. increased by 26% from 2019 to 2022, according to federal data. Chhugani said Nuvocargo’s services were used to move about 1 in every 1,000 trucks that crossed the border last year.

The new funds are meant to allow Nuvocargo to better address its enterprise-level demands. It is now expanding its services to all U.S.-Mexico border crossing locations (it previously only served Laredo, Texas, the largest shipping hotspot on the border) and recently added a customs brokerage offering. Morton said the company had a big immediate opportunity to hire more U.S.-based salespeople to focus on American companies — currently, the company has largely targeted Mexican exporters and two-thirds of its 150 employees are based in Mexico City. And Chhugani is beginning to think about where Nuvocargo could be years from now: in Canada, in Latin America or expanding other modes of transportation, like trains. It’s a luxurious position to be in given fintech’s contraction and a downturn in the freight industry.

“I think everyone had to revise some of their [financial] projections downwards. But all in all, we feel quite happy with the business results,” Chhugani told Forbes. “We’re full steam ahead.”