Investors Are Piling Into Supply-Chain Technology

Supply-chain technology startups raised $24.3 billion in venture funding in the first three quarters of 2021, 58% more than the full-year total for 2020, according to analytics firm PitchBook Data Inc. Besides venture-capital firms, backers included global investment managers like Tiger Global Management LLC and Coatue Management LLC and the venture arms of large corporations such as shipping giant A.P. Moller-Maersk A/S and Koch Industries Inc.

“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.”

Many of the supply-chain technology companies drawing big investments are focused on tools for operations such as managing warehouses, matching freight loads to transportation capacity and mapping out cost-effective routes to move goods.

Shipping bottlenecks and shortages of everything from semiconductors to chicken wings are drawing more attention to technology aimed at streamlining supply chains and boosting efficiency in distribution networks. Companies are also looking to automation and software to help tamp down rising logistics costs and meet growing demand for e-commerce and delivery services.

That has boosted the flow of venture financing for logistics technology and attracted more money from larger funds, mirroring developments across the broader technology sector.

All that cash could heighten risk for investors if some of the companies attracting big funding rounds fail to meet performance expectations.

High valuations can also limit the options of early-round investors to cash out of their holdings by narrowing the range of potential buyers. “There are more buyers for a $10 million company than a $10 billion company,” Mr. Counihan said.

In the third quarter of 2021, the median pre-money valuation for late-stage supply-chain tech companies reached $120 million, up 41% from the comparable period of 2020, according to PitchBook data. Pre-money valuation is the value of a company before any new outside investment.

Prominent deals in the third quarter included Stord’s $90 million Series D round, which valued the company at $1.1 billion, and a nearly $1 billion Series C round for Coatue-backed Gorillas Technologies GmbH, valuing the German grocery-delivery startup at $2.1 billion.

“It’s created an enormous amount of growth capital and access to capital for the top companies,” said Jake Medwell, a founding partner at Austin, Texas-based venture-capital firm 8VC, an early investor in technology-enabled freight forwarder Flexport Inc. “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.”

Source: Wall Street Journal