A Digital Fabric for Maritime Trade
Why we invested in Portchain
Today, we are delighted to announce our investment in Portchain, a Copenhagen-based company that is building a digital fabric for the global container shipping industry.
We first met Porthchain over a year ago and spent the past 14 months getting to know the team, their vision, the company, and the industry in which they operate. Our conviction level here is so high that we felt comfortable putting $5M to work here, one of our largest investments ever, and our second investment in Denmark. Despite the size of our check (and the fact that the company has already raised several million dollars from a set of very impressive and relevant angel investors), Angular is proud to be the first institutional venture investor in the company.
Portchain sells vertical enterprise software to the global maritime container industry, a massive $500B industry that underpins nearly all of global trade. Nearly everything you have purchased has at one point or another moved internationally in a container on a ship. The global container trade is measured in TEUs (twenty-foot equivalent units) each representing the movement of a standard 20-foot container (L20’ x W8’ x H8’. the kind you might see on a mid-size truck). A 40-foot container, the kind you see on a longer trailer truck, is 2 TEUs. The largest modern container ships are 24,000 TEU vessels. Global container trade is roughly 180 million TEUs, and — despite recent murmurs of deglobalization — is only expected to grow.
This industry is enormous but continues to operate in a very analog way. Phone calls, emails, and Excel files are still used to determine and coordinate the arrival and departure times of vessels in and out of ports, and the amount of containers going on and off the vessels and into the hinterland, and the ancillary services that support such a port visit (fuel, tug services, pilot services, and the like).
Portchain brings software to the world of global container shipping — moving data around seamlessly within this interconnected network of mainline carriers, feeder carriers, and container terminals. (Lest there be any doubt, there are zero blockchains or tokens of any kind in Portchain!)
Our thesis on Portchain rests on a few key pillars:
- Domain expertise. One thing that particularly excites me about any company is when there is deep specific domain knowledge that underpins a product and a business. Domain expertise is a key driver of defensibility. There isn’t enough money in the world to buy the expertise on global container shipping that gathers around the table at Portchain daily. This is about far more than software engineering and technology.
- Massive customer ROI. The savings available to customers from the deployment of Portchain’s software are massive. One (just one) of Portchains’ benefits is a significant reduction of fuel consumption by helping coordinate port arrivals by providing better data to relevant stakeholders earlier allowing the vessels to slow down and arrive just in time. The global container industry spends $40B annually on fuel alone. It is their single biggest cost item. Portchain has demonstrated that it can save up to 9% of that fuel burn on a voyage, with a theoretical maximum potential of up to 14%. This amounts to roughly $3.5–5.5B in savings from that one product for just the container industry. Similar savings exist on the terminal optimization side as well.
- Demonstrated traction. Selling software into complex established heavy industries is extremely hard, and selling software into the shipping industry is nearly impossible. The fact that Portchain has already closed large multi-year recurring contracts with several of the world’s largest container lines as well as a wide range of container terminals, is an incredibly powerful signal that Portchain is building something of remarkable value.
- Network effects. There’s nothing new about the benefits of network effects, but they are rarely spotted in the wild. Portchain is quite certainly a company with true network effects. The more carriers and terminals onboarded, the more value all the other participants can obtain from the network. There are also network effects between terminals, given that many container routes involve multiple terminals in predictable patterns. In addition, there is already strong evidence of virality: carriers are helping Portchain to onboard terminals, and terminals are even starting to help Portchain onboard new carriers.
- Stickiness. One of the key drivers of value for enterprise software companies is stickiness. In the case of Portchain, the deep integration required into customer workflows provides reason to believe that Portchain’s software will be quite sticky. So far, churn has been virtually non-existent.
- Outstanding and deeply committed team. I’ve saved the best for last. At the core of any good early-stage investment is a high-conviction decision to back an outstanding team. Since our first interaction, I’ve been deeply impressed by the founders of Portchain: Niels Kristiansen (CEO), Thor Thorup (CCO), and Anders Olivarus (CIO) are some of the most thoughtful, most committed, and most ambitious people I’ve met. They met at McKinsey where they first encountered the container shipping business and began to formulate the plan for Portchain. They are — as my partner at Angular David likes to say — “all over it” in the best possible way. They understand this industry better than anyone, they seem to know everything about it, and they are deeply passionate about transforming it.
For all these reasons and many more, I am extremely excited to be aboard Portchain for the next leg of their journey. Fair winds and following seas!
