Bill 54, On the horizon

On October 9, 2023, the state of California (in the US) passed Bill 54, which will inevitably have reverberations across both the American and global Venture Capital industry.  

In a nutshell, the legislation mandates that California VC firms gather and report publicly, the diversity statistics and data on the founders that make up their portfolio companies (more on that later). The demographics within this mandate will include both gender and race — in addition a host of other diversity information (think gender identity, race, ethnicity, disability status, and veteran status). This legislation is a big deal — in California, in the United States and once the legislation goes into effect on March 1st, 2025, it will be a big deal here in Australia as well.  

All of this is to say that change is on the horizon for the startups and venture world; that much is clear. But what does this mean both today and tomorrow for the current and future founders from diverse backgrounds? Specifically, for female founders who fight for a minuscule amount of capital — that remains to be seen. One hope is that the new legislation will be a spark; the perfect forcing function to see more investment into underrepresented founders and the rare solo female founder.

One such solo female founder, Cate Hull, CEO and founder of FreightExchange, which automates freight for businesses with complex supply chains using AI, is a big fan of this legislation making its way across the Pacific Ocean. ​​The FreightExchange platform simplifies and automates domestic shipping for over 10,000 small and mid-tier businesses throughout Australia. It partners with dozens of transport companies, including airlines, trucking companies, and couriers. We sat down with Hull, to hear her take on raising capital in a male dominated industry, hear about her support for and thoughts on how Bill 54 will help to change Australia.

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Bill 54, California and beyond

If you’re interested in reading about Bill 54 in depth, we highly recommend Elizabeth Edwards piece in Forbes—  Nothing To Hide: California's New VC Diversity Reporting Law. It does a fantastic job of breaking down the law, particularly within the context of the US congressional system. 

Why is one piece of legislation in one of the United States 50 such a big deal? The implications of this bill are much more than meets the eye. It serves as a  of a trojan horse, that will apply to most American VCs in that the scope of venture firms that have to report on their diversity data once Bill 54 comes into effect include:

• Any venture firm that operates in the state of California
• Any venture firm whose portfolio companies are based in California
• Any venture firm whose portfolio companies that have significant operations in the state of California
• Any venture firm who include California residents that their pitch or or make up their LPs
• solicit or receive fund commitments from California residents

The above, coupled with the fact that the US state of California accounts for almost half (yep, that's 50%) of the world’s venture capital. It’s safe to say we should all be paying attention here. 

Some other key kernels of Bill 54 knowledge to chew on/consider are: 

• The bill states that the collected information must be made public in a searchable database 
• Founders surveyed do have the option to not disclose their diversity information 
• These reports only cover diversity information on companies that already have or have been selected to receive capital from these firms (meaning not 100’s of other founders who have pitched to them over the years) 
• Skipping out on surveying portfolio company founders could leave the VC firms open to be fined and potentially more serious legal action 

Bill 54 hasn’t even gone to market (by way of going into effect) — but it does serve as a brilliant example and first step for hopefully the rest of the world to follow. 

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Finding the gap in the ugly commodities market

Cate Hull was introduced to us as an Australian female founder and large supporter of Bill 54. It’s safe to say that Hull has built her career in traditionally considered “male-dominated” industries. 

Hull was originally a data scientist, who then moved into consulting in financial services and supply chain before starting FreightExchange in 2014. She is well-spoken, sharp and has an air of self-assuredness that makes you want to pay extra attention to what she says. 

Hull’s company, FreightExchange, is a software-enabled marketplace for businesses that trade in “ugly commodities” or “ugly goods”. Following this author's poor attempt to hide her chuckle at the terminology, Hull assured me — and by extension you —that it is not a term that she coined. 

Double-clicking into this delightful turn of phrase, “ugly commodities' represents anything that doesn’t fit neatly or comfortably in a FedEx box, for example. Ugly commodities stretch from items that need cold storage to coffins and even live eels. These ugly commodities are described as such because the shipper needs specialised equipment to ship them — not just because eels are ugly. 

Hull operates in this trillion dollar industry and understands that it has a large contribution to global carbon emissions Trains, trucks and planes moving freight is 12% of all global emissions. Now take into account that 30% of every train, truck and plane is empty. This wastage is a big opportunity. 

Hull started the FreightExchange as a response to an existing gap and large opportunity in the market —  trading companies in Australia weren’t effectively utilising the incredible technologies and data that are available to them to compete on a global stage. A lot of businesses in the supply chain sector were operating very manually. The industry hadn’t evolved with the times, and there was a significant opportunity to leverage technology to manage operations and optimise the transportation of ugly goods. Hull started building FreightExchange with a focus on data and technology and a key focus on customer service. 

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Navigating the funding world

FreightExchange is no stranger to raising capital, albeit, in a different time. Today, they’ve tripled the business year on year for three years and are starting to see real shoots of growth in the Australian market. When Hull first founded FreightExchange, they were accepted into an accelerator operated by the national Telecom, Telstra. 

Hull notes how fortunate they were to be part of that accelerator.

“They really helped guide us in terms of how to navigate the funding world.”

Through that initial accelerator, they received a small amount of capital. They also received angel funding in 2016, mostly through introductions fostered in the Telstra accelerator. Hull and team’s most recent seed round came about in 2019, as they were starting to see real shoots of growth in the Australian market and shifted their eyes to the global horizon. 

At the time they were toying with the idea of opening up ocean and sea trading lanes between Australia and Southeast Asia. That idea didn’t come to fruition, and at least for today —they remain focused on domestic transport, revenue growth and remaining cash positive. 

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Solving for education challenges 

A big challenge for any company raising capital is education. Why is your business and by extension, the founder, the right person to solve this a problem? Is this actually a problem? And how does a founder explain their business and business model?  Particularly if they’re playing in a space not traditionally tackled by the VC industry. As opposed to the consumer products or software driven tools, Hull shared that especially back in 2015 and 2016, she had to do a lot of education about her industry and problem space, in addition to the education of why FreightExchange was a smart and solid bet.

A second challenge —and one which exists to some extent in all industries— but especially in the supply chain, logistics is that there aren't many female leaders. 

“When you have a very homogenous group of people dishing out the money, you tend to get a homogenous group of people getting the money.”

Hull focused in those early years of raising capital to partner with investors who deeply understood the problem FreightExchange was solving.  

Today, FreightExchange is on a path to profitability while exploring new markets. 

Raising capital will be required to take on these new markets. One market particularly in the sights is North America.

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What does Bill 54 mean to a solo female founder? 

“It's up to all of us to move the dial in terms of allowing more capital to flow to a broader range of demographics or people …  I'm a big fan.”

Double clicking into her support, Hull points out that it is not a question of IF the passing of Bill 54 in the United States influences the Australian market, but WHEN. Largely because  roughly 50% of the world’s venture capital flows through the state of California in one way or another. 

The reality is that this will come to Australia because our startup ecosystem is deeply linked with California. For example, Limited partners, the investors that supply the capital for Australian VCs may be based in California. We’re also seeing the growth of Australian funds investing internationally. 

Hull believes this legislation will be a forcing function for good. She believes this legislation in California is a positive thing, because it will really open our collective eyes as to who exactly is getting the capital and by extension, who has the power in the industry. The possibility that the bill influences Australian legislation, Hull is excited about that possibility as well. 

“VCs are creating the jobs of the future and they're creating the products of the future. And they're investing in the companies of the future. I want to see a future where we're solving problems that equally affect all types of people.” 

The prospect of this legislation creating tailwinds of more female and diverse founders in the ecosystem, Hull views this as “actually sunlight” on the horizon. And while she sees this as a brilliant first step, Hull would love to see super funds of Australia report on how diverse their investments are as well. Hull notes that if we don’t start putting these legislations in place, we’re going to be here in 100 years and may not have reached equality. 

“I think it's really important that we start to find ways of speeding up a lot of these processes and this is definitely a big one. We’re creating the jobs of the future and the businesses of the future. We want it to be equitable, right?”

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On the horizon

For Hull, this legislation and the part it will inevitably play in the opportunity for female founders solving problems that may not have been considered in the past is absolutely positive. Looking forward, Hull sees a future filled with more companies in the female health, family management and caring spaces. 

As for her company, FreightExchange, Hull is thrilled by the recent adoption and advancements of AI, and also the ability to actually really drive huge transformational improvements in the way we trade. 

“I'm excited by being able to lift not just our business, but Australian businesses onto the global stage and helping us compete with this incredible technology.”

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If you’d like to know more about FreightExchange, please reach out here.