Flood of big money is boosting valuations of logistics startups as global bottlenecks raise profile of once-overlooked sector
Backers, including large investment funds, are increasingly pouring money into logistics technology, increasing valuations for digital-focused enterprises in freight, delivery and warehousing.
According to venture-capital executives with a focus on logistics and supply chain, the influx of cash is giving startups in an once overlooked sector access to capital to build their businesses, especially for top companies. which have already developed their core products.
Supply-chain technology startups raised $24.3 billion in venture funding in the first three quarters of 2021, up 58% from the full-year total for 2020, according to analytics firm Pitchbook Data Inc. In addition to venture-capital firms, backers include global investment managers. such as Tiger Global Management LLC and Cotu Management LLC and enterprise branches of large corporations such as shipping giants AP Moller-Maersk A/S and Koch Industries Inc.
“Good companies are just raising too much money,” said Julian Cunihan, general partner at Schematic Ventures, a San Francisco-based venture-capital firm and early investor in Flock Freight. “Raising money isn’t easy, but if you’re successful, you’ll make a big round.”
Many of the supply-chain technology companies are attracting large investments, focusing on tools for operations such as warehouse management, matching freight loads to transport efficiencies, and mapping cost-effective routes for moving goods. is done.
Shipping bottlenecks and shortages of everything from semiconductors to chicken wings are drawing more attention to technology aimed at streamlining supply chains and increasing efficiencies in distribution networks. Companies are looking to automation and software to help them reduce rising logistics costs and meet the growing demand for e-commerce and delivery services.
This has spurred the flow of venture financing to logistics technology and has attracted more funding from larger funds, reflecting developments in the wider technology sector.
If some companies that attract large funding rounds fail to meet performance expectations, they can increase risk for all-cash investors.
Higher valuations can also limit the options of early-stage investors to capitalize on their holdings by reducing the range of potential buyers. “There are more buyers for a $10 million company than there are for a $10 billion company,” Cunihan said.
In the third quarter of 2021, the average pre-money valuation for late-stage supply-chain tech companies reached $120 million, up 41% from the comparable period in 2020, according to data from Pitchbook. Pre-money valuation is the value of the company before any new external investments.
Key deals in the third quarter included a $90 million Series D round from Stored, which valued the company at $1.1 billion, and a Series C round of approximately $1 billion for Coteau-backed Gorillas Technologies GmbH, a German grocery-delivery startup. was valued at $2.1 billion.
“It created a significant amount of growth capital and access to capital for top companies,” said Jake Medwell, founding partner of Austin, Texas-based venture-capital firm 8VC, which is an early investor in technology-enabled freight forwarder Flexport Inc. “It’s not bad as long as companies are responsible and focus on improving their margins. When companies lose sight of margins and think money will always be there, that’s when things can get dangerous.”
Write Jennifer Smith at [email protected]