Conversation with Rimas Kapeskas, Partner at Cambridge Capital LLC and ex-UPS Ventures. We chat about which types of corporates startups should be approaching, how consumer expectations and buying preferences are impacting various parts of supply chain, and why lights out operations will change everything.
1. Tell us about yourself, where you currently work, and your path on getting there.
Until recently, I worked as the VP of Strategy and Managing Director of UPS’ Strategic Enterprise Fund for the past nine years before transitioning late last year to Cambridge Capital.
At UPS, my career zigzagged through marketing, business development, product R&D and finally venture for 34 years; during this time, I enjoyed watching UPS expand globally, launch multiple technologies and make acquisitions. I never thought I’d stay at UPS for that long — I was on break from medical school when I decided to join UPS just to earn some extra cash!
Cambridge Capital is a private equity firm investing in the supply chain sector. Our philosophy is to invest in companies where our operating expertise and in-depth supply chain knowledge can help top management teams grow their businesses. Whether it’s in transportation, distribution, logistics, or supply chain technology, we work together with great operators to build the next generation of leading supply chain companies.
2. Tell us about your role and what your mandate is and how this specifically relates to working with startups?
My current role is to find new business models and technologies that will help shape the future of transportation, logistics, and supply chain with a focus on the shift in retail to B2C and B2B e-commerce.
Even though Cambridge Capital invests at a later stage than what I used to work on at UPS, we’re still interested to chat with startups earlier on to start building relationships.
We primarily work with growth opportunity companies ($20 to $100MM in revenue) to help them scale and grow to $1BN or more in revenue. We do this by providing capital, expertise, and key business contacts.
3. What are some of the interesting types of projects that you’re currently doing with startups?
My old role at UPS allowed me to make investments in 3D printing, AI, drones, blockchain, automation systems, autonomous vehicles, etc. I regularly stay in touch with these startups and in my new role, I pay particular attention to the startups and technologies that are really taking off.
What I find is that the best performing companies are generally a mix of new technologies and old business models. For example, digital freight brokerages are enabling a lot of efficiencies in logistics; rather than have trucks returning empty to their origin location, now these trucks can be filled for that return trip. Such business models improve the companies’ bottom line, worker productivity, and also lessen impacts on the environment.
There are also huge changes happening with e-commerce with a number of viable final mile solutions. We’ve learned to expect 2-day delivery courtesy of Amazon Prime, and expectations are now well on the way to 1-day and same day deliveries. I don’t see many startups doing last mile delivery on a fully national scale but there are some growing quite well in local and regional markets such as Postmates, Deliv, Roadie, Delivery Circle and Bringg. Some will continue growing, possibly scaling up nationally while others will remain regional and certainly there’s likely to be consolidation in this space.
Another interesting area is in heavy goods delivery. As people’s shopping habits have changed, they’re more and more willing to order mattresses and furniture online without having tested the products in person. Delivering heavy items such as furniture pieces, mattresses, exercise equipment, etc. is not easy for traditional carriers. This might sound like a subtle change but to do such deliveries flawlessly to a residence and at a profit requires thinking through all of the steps of the supply chain process. Right now, this is a real problem for most big retailers as they struggle to meet consumer expectations for larger sized items, so there’s a potential opportunity here in this space.
4. What number of these projects move into production? By what criteria? One of the challenges we see startups facing is how to move a customer from pilot to production.
Startups need to be thoughtful in approaching large companies: depending on which doors you knock on, you will get a very different response. Large companies will most likely point startups to their procurement department in order to first become an approved vendor, and only large vendors can get through that process due to the heavy burden of passing all legal, compliance, security requirements etc.
If the corporate has a VC arm though, that’s a great place for a startup to come in because they’re approaching people who have an openness to listen to new and interesting ideas. The VC arm can help find internal business units that will potentially work with the startup. Once they get the appropriate audience, they can figure out what’s important for the company, what the real problems are, what’s missing and potentially viable. Getting a corporate venture investment check is good in that it provides an on-going relationship but an even better check is a commercial check from the corporate for a first project.
Ultimately, corporates are looking for ROI. Innovation by itself is great and opens people’s minds but in order for something to get integrated and go into production, it has to provide some type of financial benefit whether it’s cost reduction, greater efficiency, opening up new categories, etc. Otherwise, without an eventual return, it’ll be hard to pass through the corporate decisioning process because it won’t be able to stack up against other internal priorities for funding.
Lastly, startups need to understand where their strengths lie, what they’re capable of especially when it comes to scaling and put the right architecture in place. If there’s any hardware components, can your manufacturers start producing what you need at mass scale? On the software side, is your architecture flexible, scalable and does it integrate well with enterprise systems?
5. What are the major challenges in your industry these days, and specifically ones that you think can be addressed by the right type of AI and or robotics application? Can you give some detailed examples?
One key problem is in allowing robotics, which traditionally have worked well in repetitive tasks (ex. case picking same sizes and shapes) to be able to handle variable inputs (ex. different sizes, shapes, weights). There’s also more improvements needed in gripper technologies, as most can lift only properly hold and lift up to a limited weight.
Another challenge is in the creation of autonomous commercial fleets — there’s a lot of ROI in reducing labor expenses here, and I think this is a much more viable market than autonomy for consumer vehicles, which have a much larger regulatory and consumer expectations burden. Starting with the business use case allows for much faster adoption because an actual ROI can be calculated.
6. What type of startup would you be most excited to see?
I think the biggest revolution will come from 24/7 operations. Automation becomes even more interesting when it’s not just about replacing a single worker that does repetitive motion work but rather putting automation in place that can work lights out 24/7.
Most of our current manufacturing and distribution networks were not designed for 24/7 operations but rather around human shift work. We will need a whole re-engineering of manufacturing and distribution processes to allow for fully leveraging scale for such technologies. The better utilization of assets that this unlocks will create better ROI and eventually, every company chasing growth and efficiency will need to go after such solutions.
7. What should startups know about your industry before going in? What nuances or details about the industry are not so apparent from someone looking in?
The part about my industry that most people grasp is based on what they see on the streets: just the final mile delivery of the whole process. But that’s just a small part of the overall supply chain.
It’s important to understand the true life-cycle of any product. Just look at everything around you — everything was moved on a truck at some point in time. Complex processes push these products from raw materials to production, to wholesale, to retail, to final consumption, to recycle, reuse and disposal. There’s still plenty of great opportunities in this chain for improvements if you look deep enough.
8. Lastly, any recommended resources / reading (ex. Industry conferences, publications, experts to follow, etc.) for startups looking to build in your space?
A lot is being written now about logistics, with over 50,000 titles on amazon.com alone. I enjoyed reading “The Lexus and the Olive Tree” by Thomas Friedman; it does a great job of explaining why more goods are being shipped every year as technology improves and regional differences decrease. Another is “The Supply Chain Revolution: Innovative Sourcing and Logistics for a Fiercely Competitive World” by Suman Sakar; which highlights why effective supply chains are more than just a cost cutting strategy and the best companies use them as a competitive advantage.
People are increasing graduating university with advanced degrees in supply chain logistics. This was not the case 15–20 years ago. This is clear evidence of the importance of logistics and how much more opportunities there are to improve and more will continue to arise in this growing and hyper-competitive space. Problems needing to be solved are abundant if you look closely enough and are willing to rethink the existing models.
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