AI Gazebos raised $200 million in Series C funding last week, becoming one of the newest unicorns.
A well-funded startup reaching a $1 billion valuation is nothing latest nowadays. But it was notable that a supply chain management startup raised big money at such a valuation after the industry has seen a stunning decline in enterprise capital funding since its 2021 heyday.
Cumulative enterprise capital funding for supply chain startups has not even reached $2 billion this 12 months — a pace that, if continued, would result in a staggering 79% drop from the record high of $14.7 billion reached in 2021, in response to Crunchbase. data.
In fact, at the current rate, it won’t even match the $3.3 billion raised last 12 months.
Deal flow in the sector has also fallen almost as dramatically. The sector is on track to shut just over 300 deals this 12 months — down 55% from 711 in 2021 and down over 150 rounds from last 12 months.
Decreasing offers
Just 4 years ago, no startup sector—apart from distant work tools—was more popular than supply chain management.
The industry has seen phenomenal growth as supply chain and logistics challenges have disrupted each retail and manufacturing needs throughout the pandemic. The chaos has prompted investors to pour thousands and thousands of dollars into latest technologies, promising firms greater visibility and insight into managing their global supply chains whilst the world descends into a health crisis.
But at the same time that enterprise capitalists have reduce on investing in things like work tools and food delivery, supply chain management startups have seen a stall in enterprise capital flows — much like the problem they were trying to unravel.
Big raises have been few and far between this 12 months so far, with the biggest going to perhaps the poster child of the industry’s pandemic-fueled boom just a few years ago.
Logistics giant Flexport — which peaked at $8 billion just two and a half years ago — has raised $260 million from partner and e-commerce giant Online shop in January. This supposedly was made after the company burned through lots of of thousands and thousands of dollars last 12 months. It also got here after then-CEO Dave Clark suddenly left the company after only a 12 months, and the founder Ryan Petersen returned to take the helm as the company grappled with a decline in shipping volume following the pandemic boom.
At the end of last 12 months Wall Street Journal reported Flexport took over assets of closed company Jeff Bezos-supported network of digital transportation startups Convoy — one other company from the boom period, once valued at $3.8 billion, which ceased operations at the end of last 12 months.
Buyer should exercise caution
It’s possible that the Flexport and Convoy stories have made investors more wary of the industry.
Apart from Altana and Flexport, only those based in Germany CargoBeamer — which transports trailers by rail — and an Indian startup focused on an on-demand logistics network Shadow Fax We raised a nine-figure sum this 12 months.
It is essential to notice that enterprise capital funding has declined in almost every sector since 2021, when all-time records for enterprise capital spending were set.
Yet enterprise capital funding for most industries has not fallen nearly 80% from 2021, and some sectors — akin to cybersecurity — are rebounding. The supply chain sector is also headed for a decline of a staggering 76% from 2022 and lower than $3.3 billion last 12 months.
That doesn’t mean there can’t be a rebound. Gazebo is a good example. The startup’s embrace of AI technology has undoubtedly made it interesting to investors — including its lead investor, US Innovative Technology Fundwhich has invested money in several artificial intelligence startups.
AI is not only an investor frenzy, but also a useful technology, perhaps especially in relation to produce chain operations. Its value in logistics, contracting, and regulation is easy to see.
However, significant neglect in the industry over the past few years, in addition to fading memories of pandemic-related supply chain issues (toilet paper is back on shelves), will likely have a long-lasting chilling effect on investment in the sector.
At least until the next global health crisis.