The Backbone of the Economy: Who Are the Game Changers in the Logistics and Supply Chain Sector?
How European start-ups are developing new solutions to disrupt this crucial sector in 2021.
🌍 The 10% of the world
Many consider the logistic & supply chain sector — responsible for moving goods from their point of origin to their point of consumption — as the backbone of the global economy. It is a massive industry, with size estimates ranging from $8 tn. to $12 tn. annually — representing usually 10% of a country’s GDP. It has historically been an extremely fragmented industry with limited innovation and digitisation.
If 2020 was a taxing year for most of the industries, the last three years have certainly been a rollercoaster for logistics professionals. First, in 2018 and 2019, the eruption of the trade war between the US and China created pressures in the global supply chain. Concepts like supply chain diversification and shift to local/national sourcing became popular topics. In 2020, the Covid-19 outbreak put the brakes on China’s export and, as the disease expanded, it affected trade in the rest of the world economies. This trend quickly reversed itself in the second half of 2020. Now, in 2021, the prospect of a commodities super cycle continues to put pressure on supply chains, demanding resilience and flexibility whilst, at the same time, reducing costs.
💶 European funding
All these demands call for innovation to disrupt this colossal sector. A myriad of technological advancements can create value and new business models, such as Artificial Intelligence (AI) & Machine Learning (ML), robotics, Internet of Things (IoT), and autonomous vehicles. So, it is no surprise that, among the global B2B Product & Services venture capital investments, logistics has been the third largest sector in value in the last two years according to PitchBook data.
For a good overview of technological trends impacting the logistics sector, I recommend you review How.Fm’s article and UpsilonIT’s article.
In fact, venture capital funding in Q1–2021 reached new heights in this sector, rising to $7.09 bn. globally and $1.08 bn. in Europe. The evolution of funding in Europe-based start-ups has grown exponentially since 2015, increasing c60% pa in the period of 2015–2020. The median deal size has also increased dramatically (6x), from $1.1m. in 2015 to $6.6m in 2021 so far. Although the latter figure is clearly influenced by the large rounds of Glovo (ES) and Oda (NO), with $500+m. and $250m. raised respectively. This evolution signals how the European market has been catching up, both in terms of maturity and valuation, with the US and Asia.
📍 Mapping the VC-backed players in Europe
I have decided to categorise the players in the European logistics & supply chain space into seven distinct segments. In scope, I considered only companies that have received some venture backing in the last three years according to PitchBook data.
Disclaimer: The map is not exhaustive and there is clearly some overlap between certain categories (e.g. Last-mile and Drones), but I have decided to use these categories with the aim to inform on the main trends and sectors receiving venture capital. For simplicity, I have chosen only one category for each start-up. Please feel free to contact me if you would like your company to be added to the map or be categorised differently.
📦 Last-mile delivery
The segment that has raised most of the funding (as well as the hype given its high cost and complexity) in the last few years is the last-mile sector, with players such as Glovo and Bolt (EE) raising $1.3 bn. and over $500 m. respectively. Glovo, that mainly provides on-demand delivery in its B2C platform, launched last year a new business unit called Q-Commerce to offer B2B logistics solutions. This space continues to be massive with companies providing grocery delivery solutions, such as Oda (NO) and Zapp (UK). It is important to mention, that while Glovo mainly specializes in last-mile, on-demand delivery, Bolt also acts as a company in the ride-hailing space (a sector with completely different dynamics). The main drivers behind the proliferation of start-ups in this segment are the rise in e-commerce, as well as the mobility restrictions imposed by governments globally.
Interesting trends in this category are crowdsourcing services and package storage solutions driven as well by the increase in e-commerce. For instance, Trunkrs (NL) uses a community of drivers that are already on route to fulfil same-day deliveries. The Denmark-based company, SwipBox, on the other hand, offers self-service package lockers for last-mile deliveries.
🛒 E-commerce fulfilment
These start-ups deserve a category on their own, even though there is some overlap with freight solutions, last-mile delivery, and inventory management. I have bundled them together given their unique focus to enable and serve online brands, a rapidly growing sector. For example, Seven Senders (DE) enables e-tailers to optimise international deliveries, allowing them to track all parcels, communicate with customers, and use data to improve their processes.
Going forward: According to Statista, e-commerce penetration in global retail sales reached only 18% in 2020 (from 14% in 2019). So, there is still a lot of grow space for last-mile delivery and e-commerce fulfillment solutions as online DTC brands and big digital players, such as Amazon and eBay, continue to eat the lunch of brick-and-mortar stores.
☑Storage & inventory management
This segment includes solutions to stock and hold goods in an efficient way as well as moving products inside a warehouse. On the B2B side, some start-ups have entered the inventory management space offering SaaS solutions. For instance, Monstock (FR) has developed a platform to simplify inventory management and monitor all products in a warehouse. We also find warehouse storage platforms, such as SpaceFill (FR), leading this overall category with c$10m in capital raised currently, that helps merchandisers to find and book warehouse storage in France. On the B2C side, companies like LoveSpace (UK) offer users on-demand storage space, arranging collections and re-deliveries.
🤖 Robotics, drones and autonomous vehicles
In this category we find start-ups like Einride (SE), a manufacturer of autonomous, electric vehicles, recently raising a $110 m. Series B round from Ericsson Ventures, Maersk Growth, and Northzone Ventures. Their freight transport vehicles, called Pods, can be controlled remotely by drivers and optimise energy consumption and delivery times. On the other hand, we also find automated robots for handling, picking, and moving goods inside warehouses and across the supply chain. For example, Exotec (FR), a producer of automated Skypod robot fleets, improves warehouse performance by offering an automatic, adaptable order picking solution.
Lastly, drones have shone the past, delivering test kits and medicines to remote locations. In Europe, solutions like Manna (IE) intend to make three-minute air delivery a reality for food, medicine, and other items in local communities, with the vision of ending road-based delivery.
Going forward: It is expected that companies will accelerate investment in robotics with the aim to automate their processes after experiencing first-hand the dependency on human labour during 2020. For example, by 2024, experts estimate that 60% of warehousing activities will be conducted by robots.
🚨 Freight platforms, freight forwarders and fleet management
This category is the largest one after last-mile delivery with c$800 m. of funding in the last three years. These companies aim to digitise the supply chain and freight-forwarding processes as well as providing new business models. The Berlin-based company, Sennder, leads this category with a post-money valuation of c$1.23 bn. as of January 2021, after acquiring Uber’s European freight division and Everoad. By digitising the freight-forwarding process for road-based transport, Sennder provides pricing visibility, tracking, and automated alerts.
In the air-based transport space, Cargo.one (DE) connects freight-forwarders and airlines to book air freight capacity, increasing the transparency and efficiency of transactions in this market. The company recently raised a Series B round of $42 m. in December 2020 led by Bessemer Venture Partners. Lastly, companies like Pulpomatic (ES) uses AI and ML for better fleet management, with use cases that reduce c30% operational costs.
🔍 Asset tracking, sensors and packaging
This is another interesting area — although with a lower number of VC-backed companies given their asset-heavy nature. Start-ups in this sector primarily aim to increase transparency and control in the supply chain. SkyCell (CH), for instance, uses IoT to develop controlled containers as well as a tracking software to prevent damage to temperature-sensitive medicines. Other players improve indoor access tracking by providing software and devices (e.g. RFID) to support goods movement inside warehouses, such as Retail Reload (FR).
⛓ Supply chain management
As mentioned earlier, one of the main issues in modern, globalised supply chains is the need of resilience and flexibility. Start-ups in this category aim to provide visibility and data analytics so companies can make better decisions. For example, Shippeo is a Paris-based company uses ML to predict ETAs (estimated times of arrival) to rapidly anticipate problems and manage customers’ expectations. Other companies, such as Riskmethods (DE) and Everstream Analytics (DE), provide risk management software to manage supply chain interruptions using real-time information and AI. Certainly, solutions that would have been useful for many using the Suez Canal this past March.
Going forward: The instability brought by the commodities supercycle, and oil price volatility, will push companies to invest more in solutions that aim to reduce logistics costs (e.g. saving on freight prices via marketplaces) and increase supply chain visibility and flexibility (e.g. IoT sensors and risk management solutions).
💭 Final thoughts…
This huge sector of the economy will continue to attract more capital, aiming to improve its flexibility, visibility, and cost-effectiveness. European start-ups will continue to mature and aim to consolidate, increasing their average deal size, reaching a new peak in 2021. The costly, challenging last-mile portion of the chain will continue to get most of the funding creating and scaling start-ups in e-commerce fulfilment as well as parcel and grocery delivery, with the persistence of e-commerce penetration. At the same time, first & middle-mile players will thrive as businesses hunt for more efficiency in these (hopefully) post-pandemic years.
