The VC tourists have left the building

Supply chain investments are continuing, but firms without experience in the space are far fewer

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Free cash used to flow as easily into the supply chain as water does from a spigot. But the days of seemingly unlimited venture capital investment is now gone, replaced by a more strategic investment strategy according to a pair of venture capital investors that spoke with Supply Chain Management Review at the Manifest conference in Las Vegas earlier this year.

Ben Hemani, founding partner of Bison Ventures, points to a number of factors, including low interest rates, that drove VC investment in supply chain and other industries in recent years.

“Double the normal dollars was flowing into the industry,” he says. “And what that resulted in was a large number of companies that raised very large rounds at very high valuations, and then the dollars have moved out of the space.”

Hemani says that limited partners are now deploying less money in the venture funds, so there is less money to hand out, especially in a high-interest environment.

“You also have this digestion problem where all of these very expensive deals got done a couple of years ago, and those companies now need to grow into those valuations in a very different environment,” Hemani adds.

“Double the normal dollars was flowing into the industry. And what that resulted in was a large number of companies that raised very large rounds at very high valuations, and then the dollars have moved out of the space.”

Complicating the problem is several high-profile companies struggling. The biggest one, Convoy abruptly shut down last year. Founded in 2015 with plans to create an “Uber for Freight,” Convoy raised nearly $1 billion, yet ran out of money in 2023. In recent weeks, another freight VC darling, Flexport, once valued at $8 billion, announced it was laying off 20% of its staff, or about 500 employees. That follows a 20% staff cut in October.

There are also countless examples in the automation and robotics space where competition is fierce.

“Investors have really pulled back from new investments as they focus on growing and protecting their portfolios,” Hemani says, adding that companies that are able to control their burn and “drive to profitability and really control your destiny.”

Money is still available

Burak Cendek, a partner with Autotech Ventures, says money is still available, though.

“I think on average or in aggregate, things have slowed down, but good companies, successful companies, and good teams were still able to fundraise successfully at high valuations,” he says. “I think on average, things have slowed down, but companies that we work with or … were great companies, great funders, I think still were able to raise successfully.”

Cendek described 2023’s funding environment more like a “tourist leaving the space.”

“I think the COVID and supply chain issues attracted a lot of investors who are more generalists,” Cendek notes. “Maybe supply chain is not their bread and butter, but they saw the opportunity and they didn't want to miss the boat. They came, invested, and then when things kind of slowed down, they maybe cooled off. I think that group is not with us anymore or is being more careful.”

Both men said technology-related investment is still strong. Robotics, automation and large language models are changing the space, and there is plenty of excitement about the future.

“There’s a lack of technology adoption in logistics,” Cendek says. “And I don’t think it’s because of a lack of technology solutions in this space.  … You look, there are hundreds of companies building technology solutions for this space, but yet this space is having difficult adapting and it’s a behavioral change issue.”

Cendek says solutions that “build on top of tech” are of interest as they “reduce the barrier for technology adoption tremendously.

Hemani points to companies that can solve big problems, not narrow problems. This gives them the chance to grow into their valuations.

“I think in the very big picture, there’s a really interesting set of macro challenges happening with the fissuring of the east and west supply chains,” he says. “The need to decarbonize, the need to address labor shortages. Bison [is looking at] really innovative software and hardware companies that have meaningful and novel technology. I think they are well suited to address those types of physical challenges.”

For Cendek, though, the founder behind the company remains a critical component of any deal. Can they identify a market, have they figured out distribution channels, can they scale the business?  And importantly, can they build a great team?

Ultimately, Cendek and Hemani both believe the venture capital market is still strong in 2024, and for the right businesses, money will still be available.

“We are interested in how you deal with decarbonizing supply chains, nearshoring and onshoring, of technologies addressing labor and labor challenges through increased automation,” Hemani says. “Those are some big macro opportunities, but the specific investments I think will have to be driven by, again, an entrepreneur really surprising us with a very non-incremental answer to a big problem. So I think we're spending a lot of time looking at electrification and trying to deal with driving down the carbon intensity of shipping. I continue to think that more flexible manufacturing automation is important and general-purpose robots I think are coming.”



The Covid pandemic drove interest in supply chain investment, but many of the firms that invested didn’t have much expertise in the space, and those outside investors have slowly left the industry.
(Photo: Pexels)
The Covid pandemic drove interest in supply chain investment, but many of the firms that invested didn’t have much expertise in the space, and those outside investors have slowly left the industry.

About the Author

Brian Straight, SCMR Editor in Chief
Brian Straight's Bio Photo

Brian Straight is the Editor in Chief of Supply Chain Management Review. He has covered trucking, logistics and the broader supply chain for more than 15 years. He lives in Connecticut with his wife and two children. He can be reached at [email protected], @TruckingTalk, on LinkedIn, or by phone at 774-440-3870.

View Brian's author profile.


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