Over the years, numerous supply chain startups have attracted billions in funding from venture capitalists. However, the latest data from Crunchbase hints at a change in the funding landscape with a shift in investor sentiment. From 2018 until the close of 2022, investors worldwide invested over USD 50 billion in seed through growth financing into supply chain-related companies, with notable startups from across the world like Lineage Logistics, Flexport, and Lalamove raising substantial amounts.
The recent announcement by Seattle-based trucking logistics startup Convoy said that they were shutting shop due to a ‘massive freight recession’. Despite raising over USD 800 million in venture funding and USD 250 million in debt financing, Convoy succumbed to the challenging market conditions marked by a freight market collapse, rising interest rates, and investors’ hesitation to back unprofitable late-stage private companies. And this is when Convoy was once a highly valued startup.
The Crunchbase data confirms that 2023 marks a stark decline in investors’ interest in supply chain startups. For instance, in the U.S., the current year funding for supply chain startups barely exceeds a billion dollars, a fraction of the previous year’s total. And not just in the U.S., this decline is mirrored globally, creating the most sluggish environment for supply chain startups in recent years.
Several other highly valued supply chain startups have also faced tough times. Although not shutting shop, the San Francisco-based Flexport, which once reached a valuation of around USD 8 billion, has announced layoffs to return to profitability. Similarly, Uber Freight has reportedly carried out layoffs, and Deliverr, acquired by Shopify for USD 2 billion, was sold at a fraction of its acquisition price. There’s also Katerra, the one-time unicorn that set out to disrupt construction supply chains. After raising close to USD 2 billion, the company famously imploded, filing for bankruptcy protection in 2021.
If not all, a majority of the blame can be put on COVID-19 which created a trend of decreasing container freight rates, and trucking volumes & revenue. While some startups continue to operate with previously raised capital, many will require fresh funding. However, in the current constrained funding environment, securing additional capital might prove challenging.
In contrast and despite the challenges, one still comes across news about notable funding deals happening in the supply chain sector, although the rounds are not as substantial as those seen in 2021 and 2022. This further substantiates that investors are cautious and more discerning in allocating funds, reflecting a changing investment landscape in this sector.
As the supply chain industry navigates these shifts, it will be interesting to see which startups can adapt and thrive in the evolving investment climate.
Source: Crunchbase
