The COVID-19 pandemic will accelerate a decade-long trend of supply chain efficiency advancements that have already drawn large sums of venture capital (VC) and private equity into the segment, Ben Weinberg, managing director of Susquehanna Growth Equity and the head of the firm’s supply chain practice, said Wednesday during the FreightWaves FreightTech Venture Summit.
The deals most likely to be done will be the ones that offer simple solutions to a business environment that has grown more complicated since the pandemic hit the U.S. in March, Weinberg told David Dolan, managing director of DC Advisory US, in a virtual interview. For example, motor carriers are trying to balance the need for IT investment with all the issues currently coming at them from all sides. Business models that help carriers with this difficult juggling act will gain marketplace traction and potentially draw VC money, Weinberg said.
A successful plan “doesn’t need to involve voice-activated AI technology” in order to succeed in the trucking world, Weinberg said.
Weinberg and Dolan agreed that the trajectory of VC spending in transport, freight and logistics is at “the meat-and-potatoes stage,” meaning there is a long runway ahead as more solutions emerge that remove the friction caused by industry fragmentation.
Both executives urged venture capitalists to take small bites, noting that relatively narrow niches can create enormous value in proportion to the investment required. There is also a compounding effect to small investments, as a market segment initially valued at relatively low levels grows exponentially as new solutions grow from the initial investment.
For example, an IT model that facilitates a migration from spreadsheets, email and phone calls can compound value for a company as it realizes how much additional enterprise-wide functionality it can realize from such a modest start, Weinberg said.
In particular, Weinberg said that he has been “blown away” by the advancements in last-mile technologies that didn’t even exist a few years ago.