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Supply chain tech start-ups have thrived during Covid
VENTURE CAPITALISTS HAVE INVESTED ALMOST $7 BILLION INTO THE SUPPLY CHAIN TECHNOLOGY SECTOR SINCE 2018, ACCORDING TO DATA FROM ANALYTICS FIRM GLOBALDATA.
f that, $2.46 billion was raised by the sector in the past two years. That figure is bigger than the 24 deals worth a total of $180 million raised in 2013. However, that’s still down from the peak of 2019 when 240 deals injected $2.99 billion into the sector.
Pitchbook suggests the figure could be even higher, saying investors put $7.8 billion into the sector in the last quarter of 2021 alone. While Pitchbook included funding raised grocery delivery companies like Gorillas, GlobalData doesn't seem to have included them in its definition of supply chain start-ups. However, all of this demonstrates how the pandemic benefited these start-ups. Investors gave new enterprises the resources they needed to solve logistical bottlenecks using automation, AI and IoT solutions. Alexey Bulygin, Associate Business Analyst at Sova VC, said, “The pandemic revealed multiple inefficiencies in supply chains across all major industries. As a result, both VCs and corporate investors have turned their attention to tech start-ups aiming to solve these problems.”
The trend seems to be maintaining its momentum into 2022. In January, freight
technology start-up Loadsmart became a freshly minted unicorn after bagging $200 million in a Series D round at a $1.3 billion valuation, supply chain startup Inspectorio landed a $50 million Series B raise, and UKbased smart logistics start-up 7bridges raised $17 million in a Series A round.
Covid-19 created considerable supply chain challenges. National lockdowns and travelling restrictions led to fewer people working on factory floors, in harbours, in warehouses, and on the roads. Consequently, the flood of goods turned into a trickle. Research by consultancy Grant Thornton also blamed the UK's Home Office, saying migration restrictions imposed as part of the Brexit process resulted in fewer EU workers being available to help unload containers These tech startups saw a gap and massively benefited from the crisis, but what happens now that the ‘full-blown’ phase of the pandemic is over?
Clemente Theotokis, Co-founder of digital freight platform Zeus Labs
Clemente Theotokis, Cofounder of digital freight platform Zeus Labs, answered, “I do not think there (will) be any major impact from an operational point of view. The problems in supply chain existed well before the pandemic and will exist after the pandemic is over too. All the pandemic has been able to do is fast-track the solutions and bring supply chain excellence to the forefront of every company.”
While the underlying problems of the sector won't go anywhere, that doesn't eliminate other threats to their venture capital cash flow.
Investors and customers could, for instance, lose patience in these start-ups. Camilla Dolan, Partner at Eka Ventures, said, “Sectors that go through periods of transformation often encounter a phase where the exuberance around what is possible doesn’t keep pace with the reality. In the supply chain space, it is possible that due to the complexity of global supply chains and the fragmentation of information, it takes longer for the results of supply chain innovation to be realised, and that during this period capital without longterm conviction in the digitisation of supply chains comes out of the market.”
With one group of start-ups maximising warehouse efficiencies with robots, and a second segment helping businesses solve their environmental, social and governance (ESG) woes by enabling companies to track their carbon footprint, these companies are working towards creating transparency in supply chains. In
turn, this enables smoother crossborder transactions, helping companies find unused space in carriers or removing other inefficiencies.
But, despite the many different types of technology-focused supply chain start-ups out there, the sector is still in its early stages. Only a fraction of the venture financing deals raised over the past decade have been worth over $50 million, according to GlobalData's data. Dolan confirmed that there are still plenty of opportunities in this sector, as “the global logistics and supply chain industry is a $11 trillion industry growing at 5 per cent CAGR a year.”
Quoting figures from Bessemer Venture Partners, it is estimated that the supply chain software market will increase from $25 billion today to $50 billion in 2028, and potentially $100 billion by 2030.
