Entrepreneurship in eCommerce Logistics & Supply Chain Technology: Investments & Funding
Fulfillment IQ Team
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Entrepreneurship in eCommerce logistics and supply chain technology has been an exciting and rapidly growing field in recent years. The industry is driven by the increasing demand for fast and efficient delivery, as well as the need to optimize supply chain operations for eCommerce businesses. In addition, the industry is also seeing a rise in investment and funding opportunities, as investors look to capitalize on the potential of this space.
According to the State of Retail Tech Report published by CB Insights, eCommerce saw the highest number of deals (372) and total funding at $4.6 billion, followed by supply chain and logistics tech at 142 deals and $2 billion respectively. Additionally, the report highlights the trend of investors being more cautious about which companies they invest in and how much, with the overall retail tech funding dropping 33% quarter-over-quarter in Q3 2022.
Despite this, eCommerce logistics and supply chain technology is still a promising field for entrepreneurship and investment. Supply chain leaders and entrepreneurs have an opportunity to stay ahead of the competition by developing innovative solutions that cater to the evolving needs of the industry. Companies like Bringg, Grand Junction, and Reverse Logix are already doing well in this field and potential unicorns like Shiprocket and LINE MAN Wongnai are coming up.
In this report, it’s also worth noting that Asian companies received more funding than American Companies and the median deal size for supply chain and logistics tech companies remained constant at $10 million YTD. The early stage deals continue to dominate at 54% and the global top 5 equity deals are LINE MAN Wongnai, Afresh, Geek+, TruKKer, and Kitchen United.
As such, there is a great opportunity for supply chain leaders and entrepreneurs to capitalize on the potential of eCommerce logistics and supply chain technology. By staying informed about the latest trends in funding and investment, entrepreneurs can identify the best opportunities for growth and success in this rapidly-evolving industry.
Latest Trends in the Industry
As supply chain leaders look to stay ahead of the competition, it’s important to stay informed on the latest trends in the industry, including funding and investment. According to the State of Retail Tech Report published by CB Insights, the retail tech funding dropped 33% quarter-over-quarter (QoQ) in Q3 2022, from $12.7 billion to $8.5 billion. However, the number of deals went up, from 739 to 776. This shows that investors are becoming increasingly cautious about which companies they invest in and how much, which is a stark contrast to the funding landscape in 2021.
One of the key findings of the report is that eCommerce saw the highest number of deals (372) and total funding ($4.6 billion), followed by supply chain and logistics tech at 142 deals and $2 billion, respectively. It is important to note that, although supply chain tech funding and deals rank second in the overall retail tech landscape, the number of deals has declined from 162 to 142, and the total funding has halved QoQ from $4.7 billion to $2 billion.
In terms of geographic distribution, Asia sees the highest funding at $838 million and 51 deals, while the US saw more deals (54) but less funding ($787 million). Together, US and Asia account for 75% of the deal share. Additionally, The median deal size for supply chain and logistics tech companies remains constant at $10 million YTD. Early-stage deals continue to dominate at 54%.
It’s also worth noting that in Q3 2022, the number of unicorn births has plummeted by 77% QoQ, with only 3 new unicorns – Shiprocket (India), LINE MAN Wongai (Thailand), and Satispay (Italy). Of these three unicorns, two were supply chain tech companies, which highlights the potential of this sector for future investment.
The retail tech funding landscape has become increasingly cautious in Q3 2022, but the supply chain and logistics tech sector remains an area of interest for investors. Companies in this space should pay close attention to the trends in funding and investment, especially as the industry continues to evolve and adapt to the changing market conditions. Companies like LINE MAN Wongnai, Afresh, Geek+, TruKKer, and Kitchen United are currently among the top equity deals in this space, and the trend suggests that the supply chain technology will continue to be an important and promising area for investment.
Last Mile Delivery: Crucial Aspect
Last mile delivery is a crucial aspect of the direct-to-consumer supply chain, accounting for around 40% of the total cost. The final mile is also a challenging space for many companies, making it a big opportunity for innovation and optimization.
Last mile delivery has a significant impact on supply chain costs, and as e-commerce continues to grow, the need for efficient and cost-effective last mile delivery solutions becomes even more pressing. One of the main challenges is the high cost of delivering small quantities of goods to a large number of dispersed customers. This is why companies are looking for innovative solutions to optimize last mile delivery, such as consolidation and bundling of deliveries, technology-enabled logistics, and optimization of delivery routes.
Investment in technology is a critical factor for last mile delivery optimization, as companies look for ways to reduce costs and improve customer service. The use of technology in last mile delivery has been key in driving down the costs and improving the customer service and by streamlining the final mile with these technologies, companies are able to better serve their customers while also reducing costs. Companies that are able to effectively leverage these technologies and innovate in the space will be well-positioned for growth and investment in the coming years.
Last mile delivery plays a critical role in the direct-to-consumer supply chain, and it is also a challenging space that requires innovation and optimization. Companies are investing in technology-enabled logistics and optimization of delivery routes to reduce costs and improve customer service. As a result of this companies like Bringg, Grand Junction and Delivery Circle are gaining the attention of investors, and this is a trend that will continue to be a hotbed of activity in supply chain and logistics technology.
Reverse Logistics: An Opportunity
Investing in supply chain technology is becoming increasingly important as businesses look to optimize their operations and stay competitive in today’s fast-paced global market. One area of supply chain technology that is particularly important is reverse logistics.
Reverse logistics refers to the process of managing the return and disposal of products and materials that are no longer needed or wanted by consumers. This can include everything from returning defective or unwanted items to retailers, to managing the disposal of hazardous waste materials. The importance of reverse logistics lies in its ability to optimize the flow of goods and materials throughout the supply chain. By effectively managing the return and disposal of products, businesses can reduce costs, improve efficiency, and improve customer satisfaction.
The impact of reverse logistics on costs is significant. By reducing the amount of waste and inefficiency in the supply chain, businesses can avoid the costs associated with excess inventory, unnecessary transportation, and wasted resources. Additionally, by effectively managing the return and disposal of hazardous materials, businesses can avoid costly penalties and legal liabilities associated with improper disposal.
With the rapid growth of eCommerce, businesses are facing an unprecedented level of returns and disposals. Consumers are increasingly comfortable making purchases online and expect a seamless returns process. The rise of eCommerce has created a new challenge for businesses: how to effectively manage the reverse logistics of their supply chain while keeping costs low, customers happy, and the environment safe. This is where investments in supply chain technology are critical.
By investing in cutting-edge software and hardware, businesses can streamline their reverse logistics processes, improve their return-to-inventory ratios, and reduce their environmental footprint. This not only benefits the business but also enables them to keep pace with the ever-changing consumer expectations.
Furthermore, investing in advanced technology for cold chain logistics can allow for better tracking and monitoring of goods, reducing spoilage and saving money. By embracing the latest supply chain technologies, businesses can stay competitive in the eCommerce landscape, and ensure that the products they sell are handled in the most efficient, cost-effective, and environmentally friendly way possible.
Key Points for Founders: To Raise Money
Benjamin Gordon, Managing Partner and CEO, Cambridge Capital.
“The leaders weren’t at one of those companies that made this transformation from a traditional wholesale model to a more, a newer direct consumer.”
Some vital key points to consider are:
- It is important to have a clear and compelling pitch when raising money for a start-up.
- It is vital to be able to clearly state the problem, the solution, the customer case study, and the results.
- Also, be direct about financials, and show a willingness to listen and potentially learn from investors. Some investors want to be viewed as smart money and may have valuable suggestions for the startup. It is vital to avoid having an arrogant and hubris attitude when raising money as it may hinder the process and not make the best use of the opportunity to learn from investors.
- Additionally, the story must be able to be told in 30 seconds to keep the audience’s attention. While raising money is a short-term dopamine hit, it is more important to focus on growing the business and scaling up.
- When evaluating potential investments, first look for areas with strong tailwinds, such as growth in eCommerce, subsequent areas of logistics, eCommerce fulfillment, last mile, and returns. These areas are driven by macro trends, such as the growth in food, which is recession resistant.
- The second factor to consider is businesses that have real traction and a compelling solution. A great example is BOA. BOA pioneered LTL consolidation in the food arena and has since grown to serve a broader mix of restaurants, retailers, and more. Additionally, they have a proven track record of success with revenue, margin, and growth.
- It is important to work with entrepreneurs and founders, as they prefer to have a direct relationship with the management team and see a rapport and ability to help as key to understanding the journey and making an impact. Finally, they look for a deal that makes sense, paying a fair price for a great business in partnership with management, where management still owns a large equity stake in the company.
In conclusion, the field of ecommerce supply chain and logistics is a rapidly growing one, filled with opportunities for entrepreneurs to innovate and disrupt traditional business models. The key to success in this space is to understand the macro trends driving growth, identify a compelling solution to a real problem, and demonstrate proof of success through revenue and margin growth. The recent investment in cold storage and reverse logistics by venture capitalist Ben Horowitz highlights the potential of these segments, in particular the growth of ecommerce, demand for last mile delivery and a numbers game of returns. As more and more consumers shift to online shopping, the need for efficient and reliable logistics and delivery services becomes more urgent. Entrepreneurs who can meet this need stand to reap significant rewards, both in terms of financial gain and in the satisfaction of building a successful business. With a clear pitch, a compelling solution, and a willingness to listen, entrepreneurs can position themselves to take advantage of the opportunities in this exciting and rapidly growing field.
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Contributor: Benjamin Gordon, Managing Partner and CEO, Cambridge Capital.
Fulfillment IQ Team
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