Logistics Start-Ups are landing the cash

Every pandemic has a silver lining. For the logistics industry, it has been Visibility, and that has attracted the attention of generous investors. A recent McKinsey & Company report*** revealed that logistics start-ups received almost twice as much funding in 2021, compared to 2020, with larger amounts being paid out during roughly the same number of funding rounds.

The investment graph shows one thing very clearly: our world is changing at an incredible pace. Digitalization is here, and it is transforming the cargo industry. Many logistics household names today, such as cargo.one, sennder, Forto, or Uber freight, for example, were not founded until after 2014. They have shot to success and been through numerous funding rounds. The USD 935 million accorded to 2013-founded Flexport in February of this year, was the result of its 13th funding round, and brought its total investments to date to USD 2.2 billion. The money is there, as is the will to spend it on logistics solution providers.

See and be seeded

Visibility is a key word, here. Not only did the pandemic uncover the weak points of the air cargo industry and supply chains in general, but it also highlighted the important role this industry plays. Yet, that role can only be played well, if all stakeholders are transparent in their operations, and connected: “A McKinsey survey of senior supply-chain executives in the second quarter of 2021, showed that 77% of companies planned to prioritize investments in supply-chain visibility. This finding is confirmed by a Kenco survey in which 90% of respondents reported that supply-chain visibility is a top priority.” Hence, alongside last-mile delivery businesses, and road-freight marketplaces, it was the visibility and intelligence providers who were among those start-ups receiving the most investments last year.

Real-time and end-to-end

“It is not surprising that leading visibility startups have experienced substantial increases in demand for their solutions, for example, FourKites reported triple-digit growth in shipment volume tracked through their platform, and a 50% growth in customers in 2021. Similarly, Project44 achieved a 170% year-on-year bookings increase in 2021 and reached over $100 million in recurring revenue through its software-as-a-service (SaaS) business model,” the McKinsey report reads. Over in air cargo, the image is very much the same: booking platforms, cargo.one, WebCargo, and CargoAi, have all seen extraordinarily high growth of 100s of percent.

The call for end-to-end solutions is no surprise either, given the 25% year-on-year growth in e-commerce in 2020, and a further strong 11% development in 2021. The pandemic drove people online for all kinds of commodities, from food, to medicines, to general items – and all those orders need delivering and tracking.

Cross-over expertise

What is also happening within digital start-ups, is that they are consciously balancing out technological expertise with cargo industry experts. “For instance, the digital freight forwarder, Forto, recently hired a former CEVA Logistics C-level executive,” the report illustrates. CargoAi has done something similar – it has access to a board of established industry advisors, covering the entire spectrum of the air cargo chain. Flexport just this week rocked the industry boat, by announcing that Amazon’s Consumer Chief, Dave Clark, would soon become its CEO (on 01SEP22, when Flexport Founder, Ryan Petersen takes on an Executive Chairman role, instead.) In a Forbes interview, Peterson explained: “My big fear for Flexport is just that we’re not good enough to reach our potential. [With Dave Clark] There’s a perfect complement of skill sets. Mine are much more creative, zero-to-one founder time, and Dave is the supreme executor and a legend in the supply chain world.”

Buying out the competition

If expertise is not being employed, it is being bought. Some start-ups are seriously investing and buying competitor businesses, or complementary ones. German trucking platform, sennder, is a case in point, “having acquired the European operations of its North American competitor in 2020, a deal valued at approximately $1 billion, just after its acquisition of Everoad,” the report states. In fact, sennder has, to date, bought four companies. “In another example, the Indian startup, Shiprocket acquired Glaucus, an inventory-management analytics startup, to add to its supplychain-solutions portfolio,” the report continues.

Hackathons are a thing

And where solutions to certain logistics problems do not yet exist, one growing industry trend is providing the breeding ground for them to appear. Companies and associations alike are holding digital expert events or hackathons. For example, IATA’s ONE Record Hackathon at the Startup Village in Amsterdam towards the end of May this year, where “All teams were asked to build solutions to enhance cargo products using the ONE Record Data Sharing standard by multimodal means. The hosts asked the teams to address at least one of the related challenges by using at least one of the APIs available at the event,” winning team, CHAMP Cargosystem’s press release explained. The HEC in Liege held an AirCargo Twin event for its Business Engineering students on 23FEB22, detailing “Air transportation is without any doubt a key element in e-commerce and it becomes more and more challenging for companies to deliver clients’ orders worldwide while complying with their demanding requirements. Fortunately, digital approaches may help. In the context of this contest, we’ll focus on one of the solutions to such challenges, namely Digital Twins. The mission: design a digital twin for air cargo ground operations!”