Investors who have been holding on to their cash due to pandemic-related uncertainty have reentered the arena, and many are eyeing the logistics space. The coronavirus pandemic simultaneously highlighted the industry’s importance and illuminated areas ripe for improvement in the space, drawing attention from private equity and venture capitalists alike.
“It takes investment to create new things, especially when technology is involved. Any industry that has undergone significant change and improvement has required significant investment to make it happen,” Emerge Chief Technology Officer John Hess said. “It is nice to see that logistics is getting that at this point.”
Venture capital investment, specifically, is red-hot in the freight industry. The most innovative companies in the space have attracted growing VC attention the past few years due, in part, to the industry’s rapidly accelerating focus on technology and high-tech solutions to ubiquitous issues.
“I think the industry is getting so much VC attention because there is a belief that there is a lot of opportunity for improvement. The pandemic has played into logistics in ways that none of us have ever anticipated,” Hess said. “What the pandemic has exposed is that the industry operates at a very high level of capacity utilization, and when things get out of whack, there is essentially no spare capacity. That is where we are today.”
There is plenty of opportunity for innovative companies to solve for these headwinds, a prospect that excites both new investors and existing stakeholders across the industry. Emerge, for example, announced last month that it has closed a $130 million Series B funding round.
Emerge is working to solve industry challenges by reinventing freight procurement. The Emerge Freight Procurement Platform helps shippers manage both spot and contract freight with flexibility and simplicity. Through flexible contracts and mini bids, the company enables shippers to respond to unexpected market shifts without resorting to the spot market.
“This is a really exciting time because we get to invest in the ideas we have been working on for a long time,” Hess said. “For us, this investment is going to have a significant positive impact.”
Continued VC interest in the freight space will help ensure the industry continues to move forward with the high-tech solutions that are already being developed. Increased interest from tech-savvy investors is likely to provide companies with the inspiration — and funding — to explore solutions and ideas that seemed unattainable only a few years back.
Right now, investors are showing significant interest in things like developing 5G networks for roadways and improving in-cab solutions for truck drivers. Going forward, Hess expects VC investments to fuel increased automation efforts and uncover opportunities to use trucks themselves as data creation tools.
Ultimately, venture capital could provide the logistics industry with the tools it needs to catch up to other essential industries like health care when it comes to high-tech solutions and continued technological evolution.