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Understanding the supply chain: A conversation with Sapphire Ventures’ Demi Obayomi

VC firm sees explosion in technology companies seeking to bring transparency, efficiency to logistics

Sapphire Ventures executive Demi Obayomi explains what trends the venture capital firm is seeing in the supply chain — and where technology can help. (Photo: Jim Allen/FreightWaves)

The COVID-19 pandemic ushered in many changes to society — and major disruptions to supply chains. That drove venture capital firms to seek out investments in technology companies promising to bring transparency and efficiency to the supply chain.

Venture capital supply chain investment in 2020 totaled $33 billion deal volume across 1,251 deals, the highest totals on both counts to that point, according to PitchBook data. The following year, though, the totals jumped, reaching a deal valuation of $58 billion among 1,540 deals.

The pandemic highlighted the limitations of the supply chain — and the investment community took notice.

“That opened up our eyes to [the fact] that supply chain logistics are not as agile as you would like it,” explained Demi Obayomi, a vice president of VC firm Sapphire Ventures.

Obayomi told FreightWaves the shortages of goods spurred interest among the venture community to identify technologies that could help.

“When we dug in, we saw there are emerging supply chain logistics technology and trends,” he said.


Robust dealmaking

VC deal activity remained active in the first part of this year, reaching $23 billion across 567 deals through the first two quarters. Sapphire on Wednesday published a blog post, written by Obayomi and Andrew Vogeley, an associate with Sapphire, that highlighted some of the challenges that spurred investment opportunities and more than 100 companies in supply chain and logistics that are working to bring more transparency and efficiency to market.

“The rapid shift in consumer buying behaviors since COVID hit often exposed the fragility of existing supply chain and logistics infrastructure,” the post noted. “While we aren’t out of the woods yet, we believe there’s a silver lining here. The challenges of the last three years acted as a catalyst for investment in the people, processes and technology that will lead to a more resilient supply chain and logistics ecosystem.”

Obayomi pointed to KPMG data that found only 11% of retail executives anticipate significant shortages of holiday inventory compared to 39% a year ago. He noted that while more executives are feeling positive about their inventory levels, businesses are not immune from future disruptions, whether that be COVID-related, geopolitical or other factors.

The supply chain — from the oceans to the last mile — is now seeing a breakthrough in technology providers that will alter the way it operates for years to come.

“We’ve always been able to track our Amazon packages … but in supply chain logistics, it’s a fairly new phenomenon,” Obayomi said. “The need is so key, so this is one of the most fundamental transformations in the supply chain. And that’s why project44 and others are [so important].”

Project44, a Sapphire Ventures portfolio company and supply chain visibility provider, recently announced an $80 million round of funding that valued it at $2.7 billion. But Obayomi stressed there are plenty of companies in the supply chain that have the opportunity to create a solution that changes the game.

Visibility is now table stakes

“Real-time tracking and visibility quickly shifted from a ‘nice-to-have’ [feature] to table stakes, as shippers demanded the ability to track their multimillion-dollar goods in the same way that we can track our personal packages,” the Sapphire blog noted.

Obayomi pointed out three trends that he believes are among the most important for technology firms: visibility, customer experience and risk management.

“Whenever you purchase a new piece of software, you need to feed it with data and information, so you need to connect it to your other systems,” he said. “The data and information already lives elsewhere, and that is what we are seeing in supply chain and logistics. It has to connect … so you can understand where your trucks are at any given time. There is a new generation of companies that are emerging that will be that middle layer to enable companies to connect to each other.”

It is critical, Obayomi said, that technology companies provide that interoperability to enable a more transparent supply chain. In the Sapphire blog, companies such as Chain.io, Orderful and Procuros are mentioned as companies filling this need.

He also mentioned the role customer experience plays today.

“Consumer technology has moved so quickly. Consumers are so fickle,” Obayomi said. “If someone is shopping and has an option of something that is going to be delivered in one week and another option where it will be delivered in one day, [that is an easy choice].”

The same dynamic is now playing out in the supply chain. In this area, he brought up the growing number of last-mile technology companies that are “filling that gap to be the partner to the retailer.”

“They are also helping with things like connecting you to a logistics company,” Obayomi said. “These last-mile delivery companies have the connections to the DoorDashes, to the Ubers and other delivery providers.”

Finally, Obayomi talked about the increased focus on risk management. Supply chain firms faced disruptions due to overseas factories shutting down because of COVID-19, and there is increasing risk due to geopolitical concerns.

“There is a big need for companies to have these kinds of backups and fail-safes so when one factory goes down, [they are options],” said Obayomi, noting that companies should expand their network of suppliers. “When the world went heavy on globalization, people went where the cheapest labor was. [Now the pandemic and political environment] has led to a rethinking of how we structure the supply chain in case one region goes down for some reason.”

An industrywide view

Obayomi also touched on how the industry can best optimize, noting that “you have to have an industrywide view” where you can “combine four or five shippers” to create efficiency in freight movement.

The siloed approach that has existed doesn’t lend itself to efficiency, and companies that are not able to share data and create visibility are also not situated to do so.

“That’s the hope that technology can do for us,” Obayomi said. “You have to have a sufficient number of customers because ultimately you are going to have a number of people moving stuff from Philly to New York, but you have to have them all as customers [or connections to those that do].”

The Sapphire blog also highlighted businesses dealing with machine learning, automation, communication and those looking to eliminate waste and implement environmental, social and governance leadership among several other categories.

“Every single good and service we consume has passed through an entire supply chain and logistics journey of its own, making the digitization of this category one of the most important opportunities of our generation,” the blog noted. “We have been amazed by the amount of innovation taking place within the category and are excited to back entrepreneurs on a mission to redefine how supply chain and logistics will work in the coming decades.”

Click for more articles by Brian Straight.

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Brian Straight

Brian Straight leads FreightWaves' Modern Shipper brand as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and fleetowner.com. Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler. You can reach him at [email protected]
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