Welcome to the 37th edition of The LogTech Letter, a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, I explored the idea that individual optimizations fall short when they run into one another. This week, I’m dissecting how and why startups and logistics seem to go from curiosities to household names.
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@ihsmarkit.com or on Twitter at @LogTechEric.
If there’s one company over the last decade that serves as the poster child for the perils of software hype trumping substance, it has to be Elementum. Around eight years ago, Elementum spent gobs on marketing, fancy booths at key supply chain events, and blanketed the industry’s consciousness with cool visuals and branding.
But it didn’t really work. The company, a well-capitalized spinoff of Flextronics, didn’t really fulfill the promise it was making, at least in the eyes of users. Looking back, Elementum, in a sense, was successful in that it ushered in a new era of user experience in supply chain and logistics software. Much of the venture capital-backed development that came after it was imbued with a UX-focus that was sorely lacking. That focus would have come, one way or another, as the ease of consumer apps started bleeding into enterprise apps, but Elementum does deserve some credit for helping logisticians reimagine what was possible from a visual perspective.
I bring up Elementum not to bash the company, but rather to point out that it is actually the anomaly, or perhaps the company that was just far too early. Because over the last few years, it is clear that with the right backing, the right marketing and the right customer segments, founding a logistics startup can almost become a self-fulfilling prophecy. Don’t misunderstand me: founding a company is insanely hard work and making it successful requires a degree of skill, of bloodymindedness, and of luck. But there are ways to manipulate the metrics to increase the odds of success.
Think of it like playing craps at a casino. At certain points of a craps game, when a specific number has been rolled, the odds tilt slightly in the player’s favor and away from the casino. Those are the times to double down and press an advantage. Startups have similar points in their development, a moment when they win a key customer, get the ear of a big name investor, or even get written about in a key industry periodical.
At those moments, it’s about leveraging a slight increase in the odds of eventual success into a sustainable business that becomes almost impervious to setbacks. It might be creating a new sales channel partnership that legitimizes the startup in the eyes of a new customer base. Conversely, it might be ending such a partnership when demand for the product grows and the commission on the sales channel partnership doesn’t make financial sense anymore.
It might be landing a lead investor at a top tier fund for an early stage round, the type of investor that almost ensures interest from new investors in further rounds. It might be buying a key competitor or complimentary piece that tips a product past the inflection point. The move to be made at those high leverage scenarios will be different for each company - in a sense, a startup can’t really game plan for them, except to be adaptable enough in their thinking to grab the opportunity when it arises.
These make-or-break moments in the self-fulfilling prophecy of startups actually do matter, because they change the psychology of the industry around that emergent company. A $1 billion funding round for Flexport instantly made it a more legitimate prospect in the eyes of the industry. Same with Convoy and its $400 million round. Flexport’s Series A in 2015 was $20 million. Convoy’s Series A in 2016 was $16 million. Founder Fund led Flexport’s A round, Greylock led Convoy’s A round.
Why do I bring that up? Because you should start to scrutinize which companies right now are getting similar series A rounds from top tier funds. That’s a signal that the company is one of those self-fulfilling prophecy types, that through hard work, skill, and the right amount of fortune, everything has aligned.
🚨 LogTech Market Map Project
So I’ve been involved the past few weeks with some of the brightest minds in the LogTech space to develop something that I think has long eluded the industry: a map that categorizes startups in the logistics technology arean in a way that makes sense for practitioners and potential software buyers. Most maps I see struggle to properly contextualize early stage providers in the space. It’s because the landscape is inherently confusing (everybody says they do more than they do, everybody says their strengths are more numerous than they are).
So Nick Chubb of Thetius, Brian Laung Aoaeh of Refashiond VC, Ben Gordon of Cambridge Capital, Radu Palamariu of Alcott Global and I have set out to build the defining LogTech Market Map, one that highlights companies along a number of key buying categories, one that prioritizes significance based on customer traction, funding, and size, and one that properly contextualizes startups in a highly fragmented space.
We are collecting submissions for companies that want to be considered for the map here, and thanks for your support in helping us build something that we believe will benefit the entire industry. Early stage, mid-stage, or mature, we want to hear from all of you. Get your submissions in now to be considered for the map.
Here’s a roundup of pieces on JOC.com the past week from my colleagues and myself (note: there is a paywall):
Ocean freight procurement is clearly a hairy task these days for shippers, which is why it was notable that Drewry, a consultant that has long aided shippers with their procurement strategies, said this week it has switched technology providers, from Keelvar to Freightender, to underpin the services it provides.
Incumbent forwarders need customer engagement tools to win business from shippers with increasing demands, a key factor in Logixboard snagging a sizable series A from Redpoint Ventures. Always interesting to catch up with Logixboard CEO Julian Alvarez.
Are we actually at the point where electronic bills of lading (eBLs) are becoming a thing? Maybe so, when the world’s second largest carrier rolls out a global product. Makes sense - MSC’s chief digital and innovation officer is also chairman of the DCSA, a carrier consortium that is building eBL interoperability standards, among other initiatives.
I first spoke to FlavorCloud CEO Rathna Sharad in 2018 about how her platform could empower small retailers to become cross-border e-commerce sellers through APIs that quickly calculate landed costs and allow them to price it into online shopping carts effectively. 2020 was obviously a landmark year for that development, and FlavorCloud this week announced a funding round to support its growth.
Bill Cassidy talked to a range of 3PLs about how they are using technology to help customers meet decarbonization goals.
A chat with Blue Yonder CEO Girish Rishi after the long-rumored acquisition by Panasonic was announced last week.
Cathy Roberson digs into the difficulty in building the scale required to serve last-mile requirements in rural areas.
And here are some recent discussions, reports, and analysis I found interesting:
A notable discussion of how Orange helped Maersk navigate the remote work switch in 2020.
Transportation optimization svengali Warren Powell with a great presentation for Microsoft here.
The startup ecosystem is in good shape, according to this analysis.
Gartner digs into the rising tide of TMS, including some interesting stats on how many companies are looking to buy a new TMS or upgrade their existing one.
Redpoint’s Annie Kadavy, an alum of Uber Freight, blogs about her fund’s investment into Logixboard.
An interesting podcast with Freightender CEO Pieter Kinds.
You’ll want to tune into this webinar with some of my IHS Markit colleagues to hear about the Container Port Performance Index they’ve assembled along with the World Bank.
Did not attend Miami Tech Week.
Guest VC of the week: David Sacks makes a return appearance.
Some upcoming events I’ll be involved in:
Joining a rockstar cast on a panel about the impact of VC on logistics technology at Alcott Global’s Makers and Movers event May 12.
I’ll be moderating a panel about sustainability technology at reCONNECT21 May 14.
I’ll be chatting with Guilherme Luz about forwarding technology at Parnity’s Forwarders Online Conference May 19-20.
The JOC Breakbulk and Project Cargo Conference is happening May 25-26. Check the agenda here. I’ll be moderating a session on project logistics digitization.
Registration is open for the IAPH World Ports Conference June 21-25. I’ll be involved in various technology-related elements of the program. The CEOs of MSC, CMA CGM and Hapag-Lloyd are scheduled to speak, among a huge range of influential ports and experts in the maritime sector. Don’t miss out!
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or IHS Markit, and any opinions are mine only.
Eric, fascinating comments on the life cycle of logistics tech start ups. I would add two more key fundamentals - persistence and profitability. This market is adapting slowly to a revolution in technology and having to weigh out holding the course with internally developed investments in technology vs outsourcing and jumping into Saas and Cloud. Profitability = Longevity and that opens the door for persistence. Still here after 23 years and still private. Bryn at Trade Tech
Eric, you'd make a great CEO with knowledge like this. 90% of freight tech startups should ditch their current CEO and hire you instead!!!
Tim at AscendTMS