Smartlane, an F-LOG Ventures’ portfolio company since early 2021, has secured blueworld.group as a new investor on their way to developing the number one transport intelligence software. Additionally, they secured grants from the European Innovation Council. Their transport optimization and analytics engine with fully-automated transport planning and industry-specific process mining capabilities improves logistics companies' efficiency, reliability, and transparency.

Munich, 11 January 2022 - Our portfolio company Smartlane recently secured 6 million euros in funding. Following an intense competition, they won a total of 1.7 million euros in support funds from the European Innovation Council (EIC). In addition, they successfully closed a Series A financing of more than 4.5 million euros, backed by F-LOG Ventures and other investors like Freigeist and the new investor JOVA Direkt Invest GmbH, an investment vehicle of the blueworld.group.

Smartlane offers an AI-based SaaS solution that optimizes and automates the dispatching and transportation planning for road haulage. Their software analyzes over 250 planning parameters, thereby saving up to 90% of the time spent on dispatching which at the same time reduces the CO2 footprint of freight forwarders and logistics companies. Since 2015, the team has achieved outstanding progress both in terms of product maturity and business development. In addition to refining their AI, they have achieved €360,000 in savings per customer location per year.

Smartlane’s solution is in response to the rapidly changing transportation market. The general cargo market, which is currently Smartlane’s focus segment, is growing exponentially, not least due to a rise in order volumes during the pandemic - a situation that has become even more critical due to a shortage of drivers and dispatchers. Also, the growing awareness of green, sustainable logistics shows once again that a cloud-based AI solution that aims to optimize logistical operations is essential to saving resources and ensuring operational excellence.

We therefore welcome the new investor to the club of motivated investors ready to support Smartlane on its way to the number one transport intelligence software. The investment will enable Smartlane to significantly grow its team and write the next chapters of its success story.

For many e-commerce firms it has always been essential to be close to big cities and metropolitan areas. With the goal of wanting to improve logistics within the city, more startups and investors are expected to reallocate capital to urban logistics and decentralized fulfillment solutions.

But is city logistics really that special? Yes, it is!

Why? Last mile delivery, especially within inner cities, is the most inefficient step of the entire supply chain, 61% of surveyed logistics companies say. This is also because it is the most expensive part of the supply chain, taking up a 53% share in the shipping costs. So, let’s talk city logistics.

By definition, city logistics refers to the distribution of freight in urban areas. With demand growing for both a service economy and life in urban areas, cities are challenged to provide more frequent and customized deliveries. More specifically, urban goods movements utilize around 20% to 30% of kilometers driven in the metropolitan area.

City logistics is a playing field that differs strongly from other areas — especially when it comes to logistics. Looking at supply chains, logistics mostly takes place in surroundings that are specifically created for the handling, storage, and transportation of goods. These surroundings are designed by logistics experts. As soon as logistics enters the city, this is no longer the case. In fact, logistical requirements are often neglected in urban planning.

And why is it such a complex concept?

• Software requirements: The city is the place where outdated B2B logistics software will meet the highest UX-related expectations of consumers. Studies show that 56% of consumers would not buy a brand again if they were not satisfied with the shipping service. This state-of-the-art customer experience can only be achieved when the software used by last mile logistics providers and retailers allows a smooth and steady communication with the recipient. As the systems used to date are technologically outdated in most cases, the key enabler of such experiences is missing.
• Process flexibility: Additionally, it is important to remember that the consumers developed more personalized and flexible service requirements throughout the last years. The delivery should be as convenient as possible, such as, for example, having the possibility to choose a specific time window for delivery of the order even though the parcel is already on its way. This complicates the processes for the company while the technology behind such processes becomes even more relevant.
• The number of powerful stakeholders: Inner-city logistics constraints are being defined at all levels. Not only by the European Commission, whose low emission zone policy is becoming more and more stringent, but also the cities themselves restrict the access of transport vehicles.
• The high density and diversity of competitors: Borders between CEP giants, food delivery services and innovative last-mile service providers are increasingly blurred (as can be seen when looking at Delivery Hero’s Germany come-back in the quick commerce market) as core competencies widely overlap.
• Hardware-related requirements: Scooters would struggle to deliver furniture, but neither are more trucks a solution either. Last-mile robots and drones are not only facing physical challenges posed by curbsides, lampposts, and cables, but also legal frameworks. For this reason, the most practical application of UAVs and other robots is still in the pilot phase.

Major VC investments in city logistics

A small tour of the more recent venture capital (VC) history in city logistics shows us that a lot has happened. Makers of semi and fully autonomous last-mile vehicles (e.g., Starship, Nuro) from all over the world receive billions in funding every year. Restaurant delivery startups like Takeaway became grown-ups a decade ago already. Those who deliver food and consumables instantly from their own micro warehouses — known as flash supermarkets — are the latest VC hype with hundreds of millions in VC funding for Gorillas, Flink, and others in only a few months. Both Gorillas and Flink were founded in Berlin at the end of 2020 and since have raised US$1.3 billion and US$304.2 million in total respectively. And even if we look at mobility as logistics’ partner in crime, micro mobility such as ride hailing, scooter and unmanned aerial vehicle (UAV) startups, e.g. drones, have been VC targets for a long time.

Despite all this funding, we are convinced that in Europe, city logistics has yet to live up to its full potential!

… and why it will remain a hot topic

From our point of view, some “white spots” in the urban area that are ready to be revolutionized include:

• Delivery service orchestrators: Who will find the solution that succeeds in reducing the number of vehicles of different service providers that cover the same routes every day? Pilots such as the Berlin KoMoDo project, in which Germany’s key CEP service providers (DHL, DPD, GLS, Hermes and UPS) collaborate by sharing city hubs, show the great potential of a joint effort. However, the digital concept breaking the established industry logic is still missing.
• Micro hub network operators: Who will succeed in decentralizing fulfillment infrastructures in a way that brings the new standard of instant and highly flexible delivery to product groups other than food? Initial investments by VCs indicate the new wave. However, the winning business model is yet to be found. Will it be the B2B service provider with innovative last-mile infrastructures and services — the “Gorillas for non-food retailers” — building a proprietary B2C marketplace brand? Or someone else?
• Retail connectors: Who will convincingly connect local retailers with the last mile for them to run a true omnichannel business? Are ship-from-store startups scalable? And do they offer potentially strong margins?
• Returns champions: Who will design the desperately awaited solution that takes the pain out of collecting, processing, and redistributing e-commerce returns in an environmentally friendly, convenient, and efficient way? Can business models that became huge in the U.S. succeed in Europe too?
• Crowd enablers: There should be ways to involve the crowd in last mile logistics. What is common across all Asian and South American regions has yet to take off in many European countries.

When talking about new LogTech business models, cities are the melting pot for cutting-edge technology-, hardware-, and consumer-driven requirements in logistics. These requirements are key to innovative concepts coming up in the future. VCs should be prepared and keep an eye on city logistics.

According to a McKinsey Research Paper, 93% of global supply chain leaders are planning to increase resilience along the supply chain. Accelerated by the current pandemic, it is a trend no manager should be missing out on, regardless of size, location, or industry of their company. That’s why we, too, took a closer look at the biggest drivers, problems, opportunities, and startups in this field.

One key tool to increase resilience is visibility within the supply chain: It refers to the exchange and availability of information and data within and between companies as well as between companies and stakeholders. A significant aspect of this approach involves tracking and tracing of the supply chain and the decision who to share this information with. Thereby, managers can identify critical paths in the supply chain and work on solutions or financial and operational buffers. Other advantages include enhanced availability, flexibility, and more control of the supply chain as well as strengthened risk management and improved transparency. Properly applied, supply chain visibility leads to supply chain resilience which can result in a competitive advantage.

Covid-19 key driver for increased awareness of this topic

Huge bottlenecks and chaotic developments in nearly every supply chain worldwide because of COVID-related shortages and/or outages shed a light on the importance of keeping track of the product journey from the very start to end-use. But there are also other interesting aspects supporting this trend:

• The number of companies using assistance in supply chain mapping doubled from 22.5% in 2019 to 40.6% in 2021. More than half of the organizations (57.6%) reported that COVID-19 was the reason for investing in supply chain visibility solutions.
• Supply chain disruptions like the pandemic, natural disasters, or cyber-attacks are very costly. McKinsey calculates that companies can lose 42% of a year’s EBITDA over a period of ten years.
• If we take a closer look, the percentage of organizations experiencing 10 or more disruptions in supply chain transactions has risen from 4.8% in 2019 to 27.8% in 2020, which reflects an increase by over 20%.
• Trends such as customer awareness and aspects of sustainability are also main drivers of supply chain visibility.
• But also, RFID, cellular devices, and services, as well as sensors, are becoming more ubiquitous. According to The Business Continuity Institute, about 55.6% of organizations are already using technology to assist them with analyzing and reporting supply chain disruptions.

All these aspects taken together demonstrate the increased awareness and urgency to bring more visibility into the supply chain.

Startups are challenging the status quo

The startup sphere applies different approaches and technologies to achieve visibility. From what we have noticed, they specifically use IoT sensors, blockchain and RFID technology for certain use cases. IoT sensors´ prices went from $1.30 in 2004 down to $0.44 in 2018, which makes them an interesting potential investment. But especially supply chain visibility platforms with a more general approach like Project44, FourKites, e2Log and Shippeo recently raised stunning funding rounds.

• Project44 raised nearly $400m with the biggest investor being Goldman Sachs and Emergence. The scale-up offers a visibility platform for shippers and third-party logistics firms. They connect, automate, and provide visibility into key transportation processes to accelerate insights and shorten the time it takes to turn those insights into actions.
• FourKites secured funding of more than $200m with Bain Capital Ventures and Qualcomm Ventures as the most recent investors. FourKites is a supply chain visibility platform designed for transportation into yards, warehouses, and stores.
• Shippeo reached nearly $70m in capital with Nordic Ventures as one of the funders. Shippeo is a supply chain visibility platform that provides shippers instant access to predictive information of all deliveries.

These examples underline the relevance of venture capital for this industry to grow further, but also the importance of this topic in general.

There are many challenges along the way to real resilience

Although supply chain visibility seems to be the focus of many, there are still quite a few major and minor challenges to be addressed. Especially the absence of technological readiness of many infrastructures and incomplete or low-quality data fail to support, or rather complicate this development.

Also, supply chain operations still lack adequate planning while the different connections are missing cohesion. Information in most organizations tends to be confined to the respective departments. The sales department has its own projections and budget, production has its own schedules, and buyers have supplier costs and delivery schedule data. This data fragmentation serves the purpose of the individual departments within an organization rather than the bigger picture — in this case: the entire supply chain. Additionally, each supplier and customer have their own information which they usually do not share with other supply chain partners at all. Everyone lives in their own bubble with their very own information with just little or no interconnection with the other partners.

Looking at this trend, interconnectedness is key and thus must be the goal. Since costs related to the supply chain are believed to account for 30% — 80% of sales, amalgamating the data of all departments is crucial for success.

What can we take from this?

Although total supply chain visibility exists in theory, in practice, companies must use the right visibility application to find the right level of transparency for the right use case in order to receive a real value from it.

Departments need to collaborate rather than go it alone, to create proper and useful supply chain visibility. However, the biggest challenge remains that most of the existing data is tracked elsewhere. If data were gathered and patterns identified, the supply chain could be better understood, leading to adequate visibility and understanding of the whole process.

The topic is very interesting for venture capitalists since there is a large number of startups trying to get a foothold into the supply chain visibility market. Compared to the situation a few years ago when software for this endeavor was not mature enough, startups nowadays have figured out how to manage and use it properly. And since everybody experienced the shortages of supply chains firsthand during the COVID-19 pandemic, many entrepreneurs are setting up a supply chain visibility startup — sometimes to great success, like Project44.

The industry is fully aware of the importance of supply chain resilience, and investors and decision-makers are hence ready to invest in proper solutions.F-LOG VENTURES

News and updates related to F-LOG Ventures, LogTech and Venture Capital.

As already communicated, we would like to show you who´s behind F-LOG. To give you a better idea of the team we prepared some questions for each of them. Let us introduce to you: Tim!

Tell us about your professional journey so far.

During my business administration studies, I founded a company in the food sector with a friend. We were able to quickly achieve initial success and grow. After the exit and graduation, I switched to the investor side, which always interested me a lot during my startup days. I have now been working in venture capital since 2014 and still passionately look for outstanding tech entrepreneurs.

What excites you about working in venture capital?

Without sounding pathetic, I have always found it interesting that venture capital is somewhat futurological. In our line of work, we try to find companies that come up with highly innovative products but have not yet acquired a relevant market share. So we try to gage if their product developments will be used by big companies or end customers in the next years which are not aware of their existence at that time. The fact that the people behind the companies often have an incredible amount of fire in them and regularly inspire me again is like the cherry on the cake.

What do you look at when investing in startups?

We try to obtain as much information as possible for our analyses. Special focal topics include, for example, team, market, growth, and exit potential. But I am convinced that you need a certain spirit in the team to be able to work together for many hours (with many ups and downs) toward the success of a young company. When you visit a company in the capacity of the potential investor, you are always in an exceptional situation. The team is prepared and wants to present itself from its best side. That’s why I try to pay special attention to certain subtleties, which can sometimes seem very mundane. For example, how respectfully the founders and team members treat each other. It is also quite revealing if people hold the door open for each other, or whether colleagues are poured a glass of water at lunch.

Why did you join F-LOG Ventures?

I believe that the European venture capital market still has some catching up to do in terms of supporting its portfolio. We want to set a new benchmark with F-LOG in the logistics sector and become the relevant LOG-Tech investor through our industry-specific know-how and understanding of the industry, but above all our network.

In your opinion, what is the hottest topic in logistics at the moment?

This is actually not an easy question, as there is an incredible amount happening in logistics right now. But we are currently looking with great interest into companies that are dealing with sustainability. You can literally see how the topic is growing as a focal point with end customers (and thus also with companies that supply these customers). Political pressure will also grow in the coming years. Companies that fail to pay attention to this will really feel the heat. I think there are quite a lot of low hanging fruits here, especially in logistics, which have extremely large market potential.

Are there any learnings from your professional life which you value in your private life, too?

Don’t time the market!

There is a time for everything and sometimes there is no point in rushing things. No matter how much you would like to make these things happen.

Are there any tips you would like to share with entrepreneurs looking for funding?

Do not take the search for capital lightly. Prepare for meetings with potential investors as best as you can, have your documents on point, and be ready to give a plausible answer to any question (especially the hard ones). Nothing is more off-putting than an unprofessional founding team. Remember: You never get a second chance to make a good first impression!