The Supply Chain Keeps Eating Venture Capital

A few years ago, if you heard someone talking about supply chains, chances are they actually worked in the logistics space.

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

Why did new cars become so expensive and scarce? Supply chains. Why are there no parts to fix the washing machine? Supply chains. Why is there no toilet paper? Supply chains (and yeah, maybe some panic buying).

If only someone could fix that darn supply chain, the thinking goes, then these problems might go away. Can’t some genius startup founders find a way?

Obviously it’s not that simple. But to look at the vast sums of venture capital going into supply chain-focused startups, it’s clear investors see an enormous market for next-generation platforms to ease various logistics pain points. And based on recent funding numbers, they’re not backing down.

Supply chain funding isn’t really slowing

So far this year, investors have put over $7 billion in seed through growth-stage rounds globally for supply chain-focused startups. That puts funding this year on pace to roughly equal 2021’s record-setting levels, which is no small feat considering investment in most startup sectors is contracting.

Using Crunchbase data, we looked at supply chain-related investment for the past five years below, tallying total funding as well as round counts. Here’s the breakdown:

We also looked at totals for companies based in the U.S., which draw roughly half of all investment:

If you look at both the global and U.S. funding charts, one standout takeaway is that supply chain funding numbers have remained at high levels for years. While one early unicorn, construction supply chain-focused Katerra, may have bitten the dust, others have emerged and raised even more capital.

Some are eye-popping rounds. So far this year, for instance, the sector’s largest funding recipient by a long shot is supply chain software provider Flexport, which raised $935 million in a February Series E co-led by Andreessen Horowitz and MSD Partners.

Flexport, which has pulled in $2.2 billion to date, pitches its platform as a tool to simplify global trade by connecting everyone in the supply chain. Customers can use its software to track freight, monitor inventory, order from suppliers, comply with shipping regulations, and get alerted of disruptions.

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

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

Early stage is active too

Early stage supply chain startups are seeing action too. Roughly a third of global supply chain-related funding this year has gone to pre-seed through Series B rounds, per Crunchbase data.

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

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

Delivering returns

With the IPO market mostly shuttered for the past few months, it’s tough to extrapolate what kind of exit environment and ROI startup backers in the supply chain space will face in coming quarters.

Last year, when public markets were running hot, we saw a few debuts take place. Berkshire Grey, a provider of robotic automation for manual supply chain tasks such as identifying, picking, sorting, packing, and moving went public in early 2021 through a SPAC merger. Like most companies that took that route to market, shares are down steeply in recent quarters.

Meanwhile Symbotic, a provider of robotics technology and AI-enabled software for warehouse and supply chain automation that counts Walmart and SoftBank Vision Fund as backers, went public in June after wrapping up a previously announced SPAC combination. Unlike most SPAC transactions, its shares are above the $10 threshold at which most deals originally price.

For now, don’t expect many big supply chain debuts. But, hopefully, behind the scenes, all that investment in logistics startups will pay off in the form of more efficiently run supply chains. If so, perhaps us consumers can finally pivot to complaining about something else when we don’t get what we want.

Illustration: Dom Guzman

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