The ongoing problems with the global supply chain have caused investors to scramble to invest in logistics technology in the belief that digitized operations will soon become a reality.
There is an investment rush occurring as many are investing heavily in digitizing supply chain operations to ease the ongoing bottleneck problems. Companies with $1 billion valuations, such as Stord Inc., Flock Freight, and ShipBob Inc, are significant players who are offering platforms.
As investment backers pump vast amounts of money into the technology push, they are driving up the capital of startup companies to expand further and build their businesses with a strong focus on logistics and supply chains.
Currently, supply-chain technology has raised an astounding $24.3 billion in venture funding during the first three quarters of 2021. That amount is expected to continue increasing.
“Good companies are simply raising much, much more money,” said Julian Counihan, general partner at Schematic Ventures, a San Francisco-based venture-capital firm and early investor in Flock Freight. “It’s not getting easier to raise money, but if you are successful, you will raise a bigger round.”
The supply chain companies that are gaining the most significant investments focus on innovative tools used to manage warehouses, increase capacity, and create more cost-effective routes.
The Future of Technology for Supply Chains
In the last two years, shipping bottlenecks have caused severe shortages of many critical items such as semiconductors used in automobiles. Many believe that one of the vital solutions to the supply chain problems is a technology that will streamline and boost processes within the distribution networks. Automaton and software will help eCommerce and delivery services meet the demands.
With so much cash being invested, investors are at risk of the companies failing to meet their performance expectations. Not to mention that high valuation often limits the ability of early-round investors to cash out if necessary.
As the third quarter of 2021 came to an end, late-stage supply chain tech companies reached a pre-money valuation of up to $120 million, which was an increase of 41%.
In an interview with Wall Street Journal, Jake Medwell, a partner at 8VC, an Austin, Texas venture-capital firm, stated, “It’s created an enormous amount of growth capital and access to capital for the top companies. That’s not bad as long as companies are responsible and focus on improving their margins. When companies lose sight of the margin and think money will always be there, that’s when things can get dangerous.”
As the year reached a close, the leading deals included Stord’s $90 million Series D Round, which placed the company’s value at $1.1 billion, and the Series C round for Coatue backed Gorilla Technologies GmbH at $1 billion, which brought the German startup to a value of $2.1.
Clearly, there is no end in sight when it comes to the investment potential of supply chain technology.
