Why We Invested: LiftIt
For those of you short on time, here are the quick stats on this investment:
Location: Bogota, Colombia
Year Founded: 2016
SVF Impact Areas: Last-Mile Distribution
SVF Investment: Seed Round — Undisclosed
More on LiftIt: Medium | Facebook | Twitter | Website
For those of you who love the story behind the investment….
LiftIt. Our fund’s first pure logistics investment. Anyone who’s lived or worked in a developing country can appreciate the chaos and increased cost caused by non-functioning or nonexistent supply chains connecting urban cities and rural communities. You may have even had to buy your own fleet of vehicles to solve the problem. But, what would the result be if rural producers had easy access to markets and beneficial product companies could easily reach rural consumers? We think it’s a key factor in development, especially in Colombia — especially right now.
Let’s start from the beginning.
The ultimate result of high logistics costs is higher prices or the unavailability of goods all together. But, there are plenty of other impacts like: lower prices or lack of market access for rural producers; potentially uncompetitive prices for export-driven products (e.g., coffee & cacao) and thus, lower demand or disincentives to export; and uncertain or inconsistent supply chains, which hamper business growth and disincentivize new businesses from starting.
Our own investees, for example, have struggled to distribute solar lanterns to last-mile communities at a reasonable price or deliver inputs to smallholder farmers on-time due to the lack of efficient, secure and reasonably priced logistics options. Indeed, one Social Venture Fund portfolio company has found that between 5–8 transportation middlemen add between 30–100% to the final price of staple produce. Not only does this limit the pricing power of farmers, but leads to increased food wastage (estimated at up to 30% in SS Africa).
Rural development and investment are critical factors at this stage in the Colombian Peace Process: thousands of newly-demobilized FARC soldiers are now seeking new livelihoods; the government is encouraging farmers to reduce coca cultivation on a massive scale; and, rural communities long mired by conflict and poverty seek to improve their well-being (45 percent of Colombians in rural areas are still living in poverty, with the extreme poverty rate in rural areas nearly four times that of urban areas).
Improving the existing inefficient logistics system has a huge potential upside. An 2013 IDB report entitled “Too Far to Export” argued: “Colombia emerges as the country with the most to gain from improvements in transport infrastructure and services: a 1 percent reduction in ad valorem transport costs can increase exports by as much as 7.9 percent in agriculture, 7.8 percent in manufacturing, and 5.9 percent in mining.” The IDB estimates that investments in infrastructure and more efficient domestic logistics services can significantly impact some of the most marginalized and conflict-ridden states: “Among the most to gain are in the Southeast, the Center and some of the states of the Pacific region with average foreign sales increases between 10 and 45 percent.”
Enter LiftIt. LiftIt is a platform that makes it simple to schedule cargo shipments of all sizes throughout Colombia. LiftIt provides quick and transparent quotations, real-time tracking of shipments, full-value insurance, and guaranteed same-day delivery. Leveraging Colombia’s existing network of 500,000+ registered, independent truck drivers, LiftIt endeavors to both increase the incomes of drivers and improve logistics services for companies.
“Rural transport is expensive in Colombia for smallholder farmers and low-income households to provide goods and services to market,” said Provash Budden (Country Director, Mercy Corps Colombia). “By investing in companies like LiftIt, Mercy Corps aims to connect rural communities with more affordable and available logistics services. It’s one key area of the value chain that requires rethinking and is often overlooked.”
At the Social Venture Fund, we have reviewed a few dozen logistics and distribution startups in East Africa and Indonesia. What impressed us most about LiftIt was the team: serial entrepreneur Brian York, operations ninja Felipe Betancourt Celis, and seasoned technologist Angel Celis Botto. In less than a year, they have built a solid technology platform; sourced, vetted and deployed a network of thousands of truck drivers; and have gained the trust and business of dozens of small, medium and large businesses across Colombia.
In contrast to other logistics startups we have reviewed, LiftIt has developed their core technology fully in-house. This has allowed them to rapidly iterate and continually add features based on customer feedback. More importantly, they are quickly amassing a valuable dataset that will lay the foundation for streamlining backfill and optimizing truck drivers’ routes. Not only will this drive up utilization (and, therefore, income) for truck drivers, but it will also decrease prices and increase availability of logistics services in rural areas.
“We’re on a mission to provide technology driven and affordable last-mile cargo transportation throughout all of Colombia,” said Brian York, co-founder and CEO of LiftIt. “With Mercy Corps’ experience in rural logistics they greatly help us with our strategy and obtaining customers with rural farms, coops and associations.”
This is our fund’s first pure logistics investment, and we are excited at the possibility to learn about the tangible impact of a model like LiftIt on the types of marginalized rural communities that Mercy Corps Colombia focuses on. As part of our due diligence, we conducted interviews with numerous agricultural processors, coops / associations, and social enterprises that use LiftIt’s services. Based on our own observations and research, we have come to the conclusion that streamlining logistics for these communities could be a hinge factor for development. However, defining causality and ascertaining actual impact are elusive.
Over the lifecycle of this investment, the Social Venture Fund will be conducting in-depth research on how LiftIt’s services in rural areas affect these markets. In particular, we’re excited at the possibility to connect LiftIt with key agribusiness, cooperative and association partners in the Mercy Corps Colombia network. Because we already work closely with these organizations and communities, we will be in a unique position to better understand the current baseline and trends over time. Moreover, we hope to be a valuable partner to LiftIt as it strives to understand, expand and deepen its services in rural areas of Colombia.