Is Winter Coming for LogTech?
Welcome to the 87th edition of The LogTech Letter. TLL is a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, guest commenter Peter Creeden further explores my reporting on Hapag-Lloyd’s commitment to equip its containers with trackable devices. This week, I’m looking at whether carnage in public markets, and rationalized valuations in the tech sector, are likely to bleed significantly into the logistics technology world.
As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.
For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@spglobal.com or on Twitter at @LogTechEric.
I had filed away the idea that software vendors selling into the logistics industry were somehow more insulated from what’s going on in the venture capital world and public markets as something to explore down the road. It felt too soon. Then, Emma Cosgrove at Insider dropped this piece this morning about Stord. The same company I (and others) had just written about in relation to a recent funding round. That story saw Stord CEO Sean Henry explaining that the round was designed to help the company protect itself against any coming winter.
Emma’s story touches on that element, and the confusion some unnamed laid off employees felt about the company raising money to not be exposed to a cold winter but letting people go anyway. There’s a broader story here: an 8 percent reduction in force for a fast-growing company that may have over-hired, or hired the wrong people, is not news in and of itself. But the canaries in the coals mines have been tweeting for a while. An investor told me May 25 “no public layoffs yet but they're definitely happening.” This newsletter isn’t about about “who’s next?” but rather about whether the logistics tech sector as a whole is decently insulated from layoffs. Remember, just three newsletter ago, I included this tweet about something Sean Henry told me (the same one who just laid off 8 percent of his staff):
The implication here is that logistics is not just another high-flying, overvalued industry waiting for a correction. Rather, it’s the opposite. It’s a undervalued industry where more investment, not less, needs to be made. It’s also an industry that deals in the tangible. Demand for software that other software makers use - like workflow or communication or data analytics tools - might cool if those software vendor consumers start to feel the heat. But if you’re selling into logistics providers, or shippers, or ports, or carriers, those entities are shipping or managing real-life stuff. We still need food, and PPE, and industrial products, and even those two-hour deliveries to get our shopping dopamine hits.
As such, logistics represents an industry that’s more stable on the high and the low end. It’s why founders in the industry find sales cycles long and taxing even in the best of times. And why the down cycles won’t be as dramatically low as in other industries - ahem, crypto.
There will be some pain. Layoffs are bad news, even if the industry is largely still more in need of talent than in excess of it. Companies will rationalize. Investors will demand unit economics improve. They’ll want to see revenue grow in tandem with margin, not instead of it. But because logistics is a physical industry that is utterly pivotal for society, the bottom won’t drop out. At least not unless there’s a massive drop in freight demand (and I’m not going there this week).
What’s more, the logistics industry could ultimately stand to benefit from carnage in the broader market. A lot of talent is looking for jobs simply because software providers in other markets got too far over their skis. That pool of talent is in play, and offering them a home in a market with big upside, but more relative stability, could be attractive in this environment.
Sometimes it pays to be in an unsexy industry.
Here’s a roundup of recent pieces on JOC.com from my colleagues and myself (note: there is a paywall):
If there was one thing I heard over and over from founders, and especially investors, in and around LogTech, it’s that someone needed to IPO. There were some prime candidates that didn’t materialize in ‘22, largely due to the aforementioned market downturn. But this week Freightos announced it’s going public, not via a traditional IPO, but via the SPAC route. I wrote about some of the progress in revenue, bookings and connectivity that led to the decision, but more broadly, this is the first public reference point for companies founded in 2012 or later (roughly the period when VC started to take a keen interest in logistics). The industry will be watching.
Also of significance, Turvo, an early riser in the VC fundraising table four years ago, was acquired by Lineage Logistics. At one point, it felt like Turvo was creating a legitimately new type of logistics technology company, one that could become a unicorn not just in terms of valuation, but in terms of model. Maybe they still are, but the exit is not indicative of something that has yet changed the game. Time will tell.
I’ve written a bunch on new drayage tools to emerge in the past few years (believe me, I’d have been shocked 10 years ago if you told me I’d be writing about a dozen different providers catering to that industry). This week, KlearNow, primarily a customs compliance automation provider, launched an attached drayage marketplace, something it alluded to when I interviewed them in December for a story on their $50 million funding round.
Wrote about the recently released Gartner visibility magic quadrant, including some of the drama that surrounded it this year.
And here are some recent discussions, reports, and analysis I found interesting:
If you missed my chat with Miles Varghese, CEO of CargoLogik, on LogTech Live this morning, fear not. It’s worth a watch. Miles doesn’t pull punches - he’s fair, and real, but don’t look for diplomacy here.
Kept meaning to post this a while back and kept forgetting. Things have changed, but this from Vishnu is still worth a read.
A ray of sunshine on the horizon at US ports?
This is obviously a bit promotional, but a good explanation of the need for better container visibility here in this white paper by Vizion. Incidentally, CEO Kyle Henderson has presented at two events I’ve been at recently and he’s great at conveying this stuff in person too.
Some upcoming events I’ll be involved in:
The agenda for our Inland Distribution Conference in Chicago Sept. 26-28 is taking shape. I’ll be doing a one-on-one with Emerge CEO Andrew Leto and then leading four tech-oriented discussions on LTL, freight procurement, small carrier tech, and venture’s future role in trucking. Don’t miss this - it’s the most substantive surface transportation conference in the market.
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or S&P Global, and any opinions are mine only.