The supply chain industry has accepted its technological revolution.
Investors have flooded supply chain tech startups with billions in capital — $7.7 billion in Q1 alone, a 355% increase year-over-year to address the inefficiency that has historically plagued the industry.
These same startups have seen increasing valuations around 100% year-over-year for late-stage startups, as questions on supply chain resiliency flood earnings calls, while government administrations call on specialized task forces to address supply chain disruptions.
All of this attention is attracting Big Tech executives to the industry, filling roles in product development and capital deployment to consult the innovators behind this technological insurgence.
Many of these leaders gravitate toward the opportunity to be a part of the supply chain’s own version of the 1990s Information Revolution and the industry’s startup founders are welcoming these assets with open arms.
Inefficiencies allow value creation
The fragmentation of the supply chain industry is one of the leading factors attracting Big Tech executives to one of the last industries yet to embrace the technology needed to eliminate its inefficiencies.
Mark Hoyt, former chief financial officer of Groupon’s Europe, Middle East and Africa finance function, spoke with FreightWaves about his transition last month to Loadsmart, a digital freight brokerage, as the company’s new CFO.
“I’m [working] on the floor with everybody else and I’m able to hear what’s actually happening with our shippers and carriers,” he said. “My eyes have been opened to how much commerce takes place in the US and how important logistics is to the entire underpinning of the US economy. There are opportunities for us to step in and help make this overall process more efficient.”
With Loadsmart’s $90 million Series C raise from late 2020, Hoyt will be able to take his experience at the two-sided marketplace Groupon (NASDAQ:GRPN) and apply it to the same business model Loadsmart is building for its customers.
“With our healthy balance sheet and the cash infusion we raised in November, we are putting capital to work,” he said. “We are starting to add new solutions to our platform and looking to leverage other outside technologies that would take us 18 to 24 months to build. When we combine all of that within our platform, you can create this multiplier effect where we can generate more value for our customers.”
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Convoy’s recent Big Tech recruits have found the same attraction to the inefficient industry. Mark Okerstrom, the president and COO and acting CFO of Convoy described to FreightWaves the challenges of the industry that mirrored the problems he helped solve during his tenure at Expedia Group (NASDAQ:EXPE) and Vrbo.
“It’s similar to what we did with Vrbo at Expedia,” he said. “Small hotels were unable to compete with a lot of the big hotels because they didn’t have the big marketing budgets and other assets that they have.
“We democratized all of that. We found the same on the carrier side, small owner-operators don’t have big marketing budgets. They don’t have big sales teams to go and sign up freight from around the country, so they sign up with Convoy and we give them full access to that.”
Solving these inefficiencies in a groundbreaking way is something that fuels these innovators.
“Coming to Convoy is bringing me back to my roots,” said Dorothy Li, past vice president of Amazon (NASDAQ:AMZN) and newly appointed CTO of Convoy.
“What Convoy is doing is really democratizing the set of services for smaller companies. What I have been doing at Amazon Web Services is really making data and analytics very accessible to even nontechnical people. It’s a combination of building a user interface that’s friendly, but also building platforms that allow other people to build on top of our services as well.”
Revolution of the human experience
Li wasn’t just attracted to innovating an industry desperately needing innovation. What brought her real joy was being a part of a revolution that affects the lives and habits of people around the world.
“Convoy has this bold and big mission of transporting the world’s goods with a network of endless capacity and zero waste,” she said. “I think about this mission and I think about the fact that if we fulfill this mission, the world is better off and not many opportunities have that. The bigger the company is, the better it is for the planet.”
Christian Lee shared similar thoughts after joining the team at Transfix, a transportation solutions provider.
“I think what we are doing at Transfix goes much deeper than providing transportation services in the sense that the fundamental premise of the business model is less waste,” the former CFO of WeWork told FreightWaves. “It’s a massive win for everyone involved.
Related Article: WeWork CFO joins Transfix executive team to accelerate growth
“That is the very definition of the business we’re building is one that reduces waste in every aspect of the transportation ecosystem. That gets me really excited because I think there’s a way to tell that story and investment in that just continues to have benefits for literally every part of society.”
Supply chain needs them
As lucky as the industry is to be going through an attractive technology revolution, industry leaders need these individuals to help strategize the development, deployment, and ultimately, the recruitment of individuals to build these solutions.
Ben Eachus, co-founder and CEO of the warehousing and fulfillment platform Flowspace, explained to FreightWaves the importance of bringing on the company’s new chief product officer, Sam Daoud.
“We want to build one of the biggest fulfillment networks in the country and to do that you need people who have both seen what that looks like and have done it themselves,” he said. “Sam’s experience building a successful e-commerce business from the ground in the Middle East and at Amazon is the reason we felt strongly about bringing Sam on to the team.”
He explained that the experience building teams to create this innovation is a big piece of the equation as well.
“We are trying to solve a really big problem in fulfillment and in order to do that you want the best,” Eachus said. “I think people get excited about being around people with a track record of success. That in turn has helped us recruit even more people with track records to solve these problems.”
Dan Lewis, the founder and CEO of Convoy, described the similar reasoning behind recruiting Li to build innovative teams to build tools for problems that have been deeply rooted in transportation for decades.
“Amazon Prime and the Kindle were groundbreaking and they set the stage for many other companies to try to build similar tools,” he said. “I think a big part of her experience is thinking about these problems that are uncharted and figuring out how to get people who’ve been doing it the same way to do them differently.”