$28bn invested in freight tech start-ups since 2015 – most in last-mile and B2C

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Venture capital funding into the logistics industry has amounted to nearly $28bn since 2015, research from McKinsey shows.

And although US digital freight forwarder Flexport has taken many of the headlines during this period, it is actually the last-mile and B2C logistics sectors that have received the overwhelming proportion of that finance.

Ocean and air freight platforms – in which McKinsey classes Flexport – follow far behind.

And, somewhat surprisingly, given the focus of much of the industry on software, it is start-ups developing new hardware that have proved most attractive to venture capital investors.

Since 2015, start-ups focused on last-mile delivery solutions have seen $11.1bn injected into the industry, with $9.9bn of that going into firms developing “unconventional delivery modes, such as crowdsourced delivery, drones, autonomous vehicles and shipments to parcel lockers.

“This trend suggests investors see an opportunity for unconventional last-mile services to complement companies with traditional delivery fleets, as they anticipate the next normal in last-mile parcel delivery,” the report says.

For example, US-based delivery robot and driverless car manufacturer Nuro raised $940m in a B series led by SoftBank, while Chinese parcel locker developer Hive has raised around $700m in successive funding rounds since it was founded in 2015.

And in the B2B sector, it is booking platforms in the road freight sector that have attracted the most interest from investors, having collectively raised $6bn since 2015 – and although most of this came from venture capitalists, it has also been the sector that has seen the most investment from established logistics players, with DB Schenker’s $25m investment into uShip a leading example.

“While road-freight marketplaces and solutions have yet to capture large volumes, they have challenged asset-light brokers and freight forwarders by matching shippers, loads and carriers directly, thus threatening to replace traditional intermediaries.

“Some incumbent players have already reacted to the emergence of road freight start-ups. For instance, DHL Freight launched online marketplace Saloodo in 2016 and Kuehne + Nagel launched FreightNet, a road-freight booking platform, in 2014,” the report says.

Meanwhile, ocean and air start-ups have raised $1.6bn in the same period, but the bulk of that – around $1.3bn – has gone to Flexport, as The Loadstar reported earlier this year.

The report argues that the best way that established logistics operators can respond to the challenge of start-ups is through partnerships, echoing the central point of recent Transport Intelligence research into the rise of ‘cyber 4PLs’ – while many start-ups do not have the network or assets to currently disrupt developed markets, they have captured growth in markets where incumbents’ offerings are perceived as weak.

The McKinsey report says: “Overarching partnerships will be increasingly important to succeed in the future, especially since processes in the industry are so intertwined. Connecting start-ups with incumbents can unlock substantial opportunities for all stakeholders.

“Incumbents have the opportunity to learn from young companies and deploy digital capabilities to link their physical network with customers; start-ups get to improve their credibility and brand awareness, as well as gain access to customers.

“Incumbents can benefit by learning how to become more agile, getting new ideas, and helping their brand be perceived as dynamic and digital.”


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