Lessons from Raising a Softbank Megaround

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Friends,

If you were the CEO of a buzzy company in the late 2010s, there was a good chance you would get a call from the lieutenants of Softbank’s Masayoshi Son. If you passed the first screening, you might find yourself invited to Tokyo for an in-person summit. It is a matter of startup lore that halfway through an immaculate sushi dinner, an entrepreneur might receive something close to an ultimatum from the Softbank impresario: accept our gargantuan offer or we’ll fund your competitor. Only those in attendance will know how closely the rumor hews to reality, but it makes for a compelling scene.

Whether Ryan Petersen enjoyed the high-brow mafioso stylings of Masayoshi Son is unknown. Flexport has not really had the kind of close startup competitors that facilitate such a dynamic. What is certain though is that his company was the recipient of one of Son’s gifts, his singular form of gavage-capitalism.

Unlike others, Flexport survived to tell the tale. And, in Ryan Petersen, it has the kind of forthright founder willing to review the episode bluntly. With that in mind, I was excited to cover Flexport’s $1 billion raise from Softbank in this edition of “Letters to a Young Founder.” What changed after a raise that large? How did it impact the decisions Ryan made? Taken together, was it worth it?

Beyond that particular round, Ryan and I discuss fundraising more broadly, his hiring lessons, and M&A exploits. That final subject gave us a chance to discuss some recent news: late last month, Flexport announced it was selling Convoy, the trucking startup it had purchased less than two years earlier.

To access the full correspondence, join our premium newsletter, Generalist+. For $22 per month or $220 per year, you’ll get full access to my conversation with Ryan and unlock our library of case studies, tactical guides, and interviews. Get an MBA’s worth of insight for the price of a business lunch.

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Mario’s letter

Subject: 100 year storm
From: Mario Gabriele
To: Ryan Petersen
Date: Wednesday July 30 2025 at 11:24 AM BST

Hi Ryan,

I was surprised and intrigued by the metaphors you used in your (excellent) last letter.

You repeatedly connected ideas from physics and biology to business building, referencing the equation for kinetic energy, cosmic radiation, and evolution. Not only did I find it illuminating, but it made me curious to ask a meta-question: Do you frequently find yourself borrowing from science when thinking through managerial problems? Where do you get your best ideas from? Are there any other frameworks from these fields that you rely upon?

Your letter also nicely set up some of the topics I’d love to delve into today. You briefly referenced how you’d been too slow to hire people with deep domain experience, preferring more classic technical Silicon Valley types. I’d love to discover what other talent lessons you’ve picked up over the years. What makes for an exceptional hire? What about a disastrous one? What unusual signals do you look for that other executives might miss? I know that Bezos liked to give candidates brain teasers as tests of basic cognitive ability – do you rely on any similar heuristics? How have you changed your practices as Flexport has grown?

I’d be particularly keen to hear any thoughts you might have on recruiting senior executives. I find that many promising startup founders succeed in nabbing their first 10, 20, or 50 employees but discover they need a new playbook to recruit the elite VPs that tend to arrive after this phase. Even gifted founders have a relatively low success rate with these hires, as far as I’ve heard – about a 50% hit rate seems common. (This suggests that many are batting much lower.) Given how expensive these more senior hires are – both in terms of time and capital – getting them right is all the more important. Are there any hard-earned lessons you’ve learned from over a decade of hiring?

This may be a bit ambitious for a single letter, but the other topic I’d love to discuss is capital. As part of my research into Founders Fund, you shared that several of Flexport’s raises had been challenging. What made them so hard? Were there any raises that stand out in particular in this respect?

On the other hand, you’ve also succeeded in raising nearly $3 billion in venture and debt capital, including a $1 billion Series D from Softbank in 2019.

I’ve seen many startup CEOs face the following challenge: Their startup is growing so quickly that shortly after raising one round, they receive interest to preempt the next one. Though their company does not need money, there’s a natural temptation to bring in more capital at a higher valuation. Founders are smart enough to recognize that their business may be being overvalued, and that, in theory, that could create problems down the line, but many seem to feel it’s worth the risk. They know intellectually that having too much money can cause a startup to lack discipline, but they always seem confident that it will not happen to them.

For the latter half of the 2010s, Softbank was the temptress-in-chief, convincing many promising startups to take on board much more capital than they required at lofty valuations. To put it mildly, that seems to have been a damaging strategy for both the investor and its portfolio companies. High profile bets like Wag and WeWork flamed out, while firms like Rappi and Oyo had to restructure themselves and rewire their cultures. Not all of Softbank’s investments struggled, of course, but with the benefit of hindsight, it mostly looks like a failed experiment.

What was it like from the inside? Were you able to maintain discipline after raising so much capital? In the past, you’ve noted that you raised capital to protect Flexport against “100 year storms.” Did Softbank’s warchest give you a different sense of security or resilience as an organization?

On the subject of warchests, I’d be interested to hear how you think about M&A as a CEO. You’ve made a number of acquisitions, including some quite high-profile ones. As I’m sure you know much better than I, reportedly 70-90% of acquisitions fail. Now that you’ve worked through a few of them, have you discovered any good rules of thumb?

I’d be particularly keen to hear about Convoy. You acquired that business in the wake of its collapse in late 2023…and announced you were selling to DAT Freight & Analytics just a couple of days ago! It’s not often you see an asset go full circle in this way. I’d love to hear why that was the right decision for both companies.

Best,
Mario

Ryan’s letter

Subject: 100 year storm
From: Ryan Petersen
To: Mario Gabriele
Date: Sunday August 10 2025 at 3:52 PM PST

Hi Mario,

Arrogance, complacency, and bureaucracy are the three things that kill companies. At a very fundamental level, these are the anti-values that we’re looking to avoid when we’re hiring. You have to learn how to detect these in people because otherwise, you’ll end up with a dysfunctional culture.

Half the challenge of hiring strong senior execs is avoiding those three traits – arrogance, in particular. If someone’s successful, they usually know a lot about something. But they have to have the humility to realize that they’re coming into a new business and approach it with a beginner’s mind. Most executives can’t do that well. Complacency is also common. Execs might have worked hard in the past but now they don’t want to put in the work. They like their beach house and don’t want to make the effort of coming into the office. We test for these things.

We’re looking for what I call “insecure overachievers,” which is a BCG framework, I think. These are people who are ready to grind, have a chip on their shoulder and want to prove it to the world. We obviously want very, very smart people and we test for that, too. Our industry is especially tricky because there’s a ton of complexity that can’t be deduced from first principles. Global logistics doesn’t operate by the laws of physics – it’s the product of lots of prior art that’s been built up over decades. It’s a bit like law in that respect.

You need a lot of experience to understand the nuances of how it works. An 18 year old couldn’t have started Flexport – not because they’re not smart enough, but because they wouldn’t have had the time to learn it all. I started Flexport when I was quite young, it took me a long time to grasp, and I’m still learning every day.

The other side of this is that people who do have a lot of experience can appear deceptively smart. They’ve spent twenty years in the industry, so they understand how things work, but they might not actually be that sharp. I call this “chaffeur knowledge,” which is a Charlie Munger framework...