Driven in large part by a fervor for companies supporting ecommerce fulfillment and so-called “last mile logistics,” billions of dollars of investment money from private equity investors and others have recently flowed into the once sleepy logistics arena.

Supply Chain Digest Says...   According to Crunchbase, so far in 2023, US funding for supply chain startups barely surpassed a billion dollars — less than one-fifth the total raised in the same period last year.     What do you say?   Click here to send us your comments       Click here to see reader feedback

That in turn led to soaring valuations for many logistics technology and service providers.

But the good times may be coming to an end.

For example, as SCDigest reported earlier this week, digital freight broker Convoy, once viewed as a major disruptor in the logistics market, announced it was closing its doors and laying off almost all of its remaining 500 employees, down from a peak of around 1500 a couple of years ago. (See Digital Freight Broker Convoy ran Out of Options and Money, Shutters Doors.)

While founder and CEO Dan Lewis in part blamed what he called a “massive freight recession” for the company’s demise and touted the fundamental value of Convoy’s technology, the reality is Lewis also said he was unable to find a new financial partner to keep the ship afloat until market conditions turned around.

Maybe that’s because they saw what happened to Convoy’s previous investors.
In 2022, Convoy secured a $260 million round of new capital from investors, led by UK-based Baillie Gifford and Hercules Capital, while JPMorgan extended a $150 million line of credit to Convoy, valuing it at $3.8 billion just 18 months ago.

All told, Convoy had raised more than $1 billion from investors, according to data from research firm PitchBook. That included some celebrity investors, including Microsoft founder Bill Gates and Amazon founder Jeff Bezos.

But the changing investment landscape is hardly limited to Convoy. According to an article on the Crunchbase.com web site, from 2018 till the end of 2022, investors across the globe provided more than $50 billion in financing to supply chain and logistics-related companies.

That includes several startups raised billions, including cold chain logistics company Lineage Logistics, freight-forwarding platform provider Flexport, and Hong Kong-based Lalamove.

When a company such as Lineage, in third-party logistics sector that is known for modest growth and low margins, can raise more than a billion dollars of investment, it could be a sign the market was getting a bit frothy. Lineage Logistics provides refrigerated and frozen warehouse space and related shipping serves.

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According to Crunchbase, so far in 2023, US funding for supply chain startups barely surpassed a billion dollars — less than one-fifth the total raised in the same period last year. (See graphic below).

Source: Crunchbase

San Francisco-based Flexport announced this month that it is laying off approximately 30% of its workers in what it described as part of a strategy to “get back to profitability.” It had previously raised over $2 billion in venture funding from SoftBank Vision Fund and others, hitting a peak valuation of around an incredible $8 billion.

“That figure, like many peak-era valuations, has reportedly come down considerably,” Crunchbase says.

High interest rates are clearly a factor in all this, as many deals that looked good in a near zero rate environment are not so attractive when money costs a lot more.
Beyond some of the high-profile challenges of companies that have received massive funding are scores of startups still quietly chugging along that last raised capital during the much more upbeat funding climate of 2021, Crunchbase notes.

It adds that “While those startups may still have capital to operate, eventually most will need fresh funding. If the current constrained funding environment persists, many won’t be able to secure it.”

some deals in supply chain and logistics are still getting done, “What we’re not seeing are the kinds of rounds in the hundreds of millions that we saw in 2021 and 2022,” Crunchbase notes.

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