The Supply Chain Keeps Eating Venture Capital

If you heard someone talk about supply chains a few years ago, chances are they actually worked in the logistics industry.

No longer. Ever since the pandemic first disrupted global trade in early 2020, everyone seems to have been complaining about supply chains.

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Why were new cars so expensive and scarce? supply chains. Why are there no parts to repair the washing machine? supply chains. Why is there no toilet paper? supply chains (and yes, maybe panic buying).

If only someone could fix this damn supply chain, the thinking goes, these problems could go away. Can’t Some Genius Startup Founders Find A Way?

Obviously it’s not that simple. But when you look at the huge amounts of venture capital flowing into supply chain-focused startups, it’s clear that investors see a huge market for next-gen platforms to solve various logistical problems. And based on the latest funding numbers, they’re not bouncing.

Supply chain funding isn’t really slowing down

So far this year, investors have provided over $7 billion in seed through growth rounds globally for supply chain-focused startups. That puts funding this year roughly at record levels seen in 2021, which is no small feat considering investment is declining in most startup sectors.

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Using Crunchbase data, we’ve looked at supply chain-related investments over the past five years below, counting total funding and round counts. Here’s the breakdown:

We also looked at the totals for US-based companies, which attract about half of all investments:

When you look at both the global and US funding charts, a standout takeaway is that supply chain funding numbers have remained at elevated levels for years. While an early unicorn, Katerra, which focuses on the construction supply chain, may have died in the dust, others have emerged and raised even more capital.

Some are breathtaking rounds. For example, by far the sector’s largest recipient of funding this year is supply chain software provider Flexport, which raised $935 million in a Series E co-led by Andreessen Horowitz and MSD Partners in February.

Flexport, which has raised $2.2 billion to date, is pitching its platform as a tool to facilitate global commerce by connecting everyone in the supply chain. Customers can use the software to track cargo, monitor inventory, order from suppliers, comply with shipping regulations, and be notified of disruptions.

Another big round went to Seattle-based Convoy, a digital freight network for shipping truckloads, which raised $260 million in a Series E in April at a value of $3.8 billion. (More recently, its growth trajectory shows signs of stalling, as the company cut 7% of its workforce in June, citing expectations of deteriorating economic conditions.)

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In Europe, meanwhile, Berlin-based Forto, a digital freight management platform focused on European and Asian markets, landed $250 million in a Series D in March, bringing total funding to nearly $600 million.

Early stage is also active

Early-stage supply chain startups are also seeing action. According to Crunchbase data, about a third of global supply chain-related funding this year went to the pre-seed stage of Series B.

There are some big rounds in the mix too. Standout is Kenya-based Wasoko, a platform local shopkeepers in several African cities can use to order supplies for delivery. The company raised $125 million in a Series B in March with Tiger Global as the lead investor.

Another big deal was Afresh, a provider of grocery store software for tracking fresh produce, which raked in $115 million in a Series B in August with Spark Capital as the lead investor. That’s the same amount that went to an April Series B for Choco, a Berlin-based app that allows restaurants to order from their suppliers.

deliver returns

With the IPO market largely closed for the past few months, it’s difficult to extrapolate what exit environment and ROI supply chain startup supporters will face in the coming quarters.

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Last year, when the public markets were heating up, we saw some debuts. Berkshire Grey, a provider of robotic automation for manual supply chain tasks like identifying, picking, sorting, packing and moving, went public through a SPAC merger in early 2021. Like most companies that have gone this route, shares have fallen sharply in recent quarters.

Meanwhile, Symbotic, a provider of robotic technology and AI-enabled software for warehouse and supply chain automation that counts Walmart and SoftBank Vision Fund among its backers, went public in June after completing a previously announced SPAC combination. Unlike most SPAC deals, its shares trade above the $10 threshold at which most deals initially trade.

For now, don’t expect many big supply chain debuts. But behind the scenes, all of this investment in logistics startups will hopefully pay off in the form of more efficiently managed supply chains. If so, maybe we consumers can finally move on to complaining about something else when we’re not getting what we want.

Figure: Dom Guzman

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