Dynamo Dispatch (01/13/20)
Issue 91 | Ride Health, Vecna, Next Level
|Jan 13|| 1|
Dynamo Dispatch. Weekly update from Dynamo Ventures covering the latest and greatest in supply chain, mobility, and building venture-scale businesses.
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🎙 Check out Dynamo's podcast series, The Future of Supply Chain.
Weekly Commentary 💭
Week 1 of 2020 is in the books and a few observations to start the year. In VC land, there’s plenty of dry powder among investors ($1.5T including PE, according to Prequin) who are exhibiting a “flight to quality” and are less tolerant of unproven business models, addiction to VC-funded customer acquisition, and weak unit economics. To founders’ credit, most teams we’ve spoken with the last three months have acknowledged the need to build a “real business” with consistently improving fundamentals.
In the supply chain, we enter a seasonally slow period after a banner holiday season. On the international front, we have positive movement with China on a trade agreement that could give a boost to weak industrial activity while the impact of IMO 2020 is to be seen. Trucking rates coming into 2020 are up near 9%, but there continues to be a correction of supply as weaker fleets are culled from the system. We’re seeing shippers and suppliers prioritize technology spend in solutions with proven operational impact (as seen via M&A, internal R&D, and external engagements). B2C last mile is being forced to sustainability by investors (see Rappi, Grubhub, et al). It might be that in last mile, the appropriate adage is “Your lack of margin is my opportunity.”
Mobility continues to push along: AVs remain in the trough of disillusionment (but Velodyne’s $100 lidar could be huge in hindsight), micromobility is still grappling with unit economic questions, and electrification seems all but a commonality by the end of this decade. We’d love to chat with founders building real businesses around AVs (we don’t care if the peanut gallery is down on the space), doing interesting things in electrification, and 10x-ing passenger movement, broadly.
Looking ahead to the week, we’re back on planes starting this week with a day trip to Houston… drop us a note if you’re a founder, venture investor, or ecosystem stakeholder in the region.
We Are Dynamo,
Santosh, Ted, Barry, and Jon
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Supply Chain 📦
🌟Walmart Recruits Picking Robots in Online Grocery Battle With Amazon. This week Walmart unveiled a 20,000 sqft automated warehouse in Salem, NH boasting 30 Alphabot picking robots. The robots, which can pick 10 times faster than humans, are a key part in the wave of microfulfillment operations making online grocery efficient enough to become mainstream. Related, eCommerce Grocery 2020 Predictions.
Rising Low-Sulphur Fuel Costs Begin to Bite Shipping Lines in Asia. Major European bunkering hub, Rotterdam, is favoring far better than Singapore in the wake of IMO 2020 adjustments. Fuel prices in Asia are over 20% higher, leaving some carriers like PIL with several vessels sitting idle waiting for bunker supplies. Check out this week’s Future of Supply Chain podcast where Santosh and Eric Johnson Discuss IMO 2020.
Grubhub Considers Strategic Options Including Possible Sale. Grubhub was one of the pioneers of the food delivery business, having gone public nearly six years ago amassing a $13B valuation at its peak. The company has since stumbled as new entrants in the name of DoorDash, Postmates, and Uber Eats have squeezed margins and markets seek strong unit economics. This trend stretches far beyond food delivery, as Rappi is afflicted by much the same, Delivery App Rappi Lays off 6% of Workers. But back to food delivery, Dinner Bell vs. Doorbell: Children Use Delivery Apps to Subvert Family Meals.
📊McKinsey: Greatest AI Cost Savings Found in Supply Chain Management. Supply chain and manufacturing are the two largest benefactors of AI tools. McKinsey’s survey found that 61% of users saw a reduction in supply chain planning costs, as well as improvements in forecasting accuracy. The market for industrial AI is expected to grow by 52% between 2017 and 2024.
How FedEx and UPS’s Battle Against Amazon Is Changing Online Retail. As Amazon’s blitzkrieg on conventional parcel carriers continues to transform shipping, small e-commerce players will continue to be squeezed in the months and years to come. The founder of DTC cookware company Milo commented, “either [the 3PLs’] businesses are going to be chopped in half, or they are going to keep steady by increasingly everyone’s rates slightly.”
📊ISM: Manufacturing to Lowest Level Since 2009. The US saw the fifth straight month of manufacturing contraction as global trade tensions create turmoil across the industry and suppliers look to pass on costs tied to tariffs. There are signs that several sectors including food, beverage, and tobacco products will improve as a result of the phase-one trade agreement, but the outlook for the transportation equipment sector appears grim, as Class 8 Truck Orders Tumble to Decade Low. The silver lining to the trade games, Airbus is Shifting Production to the US.
Knight-Swift and DAT Partner on Rate Forecasting. DAT launches its first pilot of RateView with Knight-Swift this quarter, with additional pilots planned for Q2 with other carriers. DAT possesses a unique ability to offer robust forecasting given its enormous database of hundreds of billions of dollars in freight transactions. On the air front, Flexport Winds Down Dedicated Air Operations.
📊2020 SMB Shipping Strategy Report. Smaller players are still struggling to adjust to the changing consumer expectations driven by the Amazon Effect. 25% of SMBs report competition from Amazon and Walmart will drive their logistics strategy in 2020. Expect investment in leveling the playing field to continue as the importance of delivery is here to stay — 48% of customers said they would choose a different retailer after having a negative delivery experience. Related, How On-Time Was FedEx Compared to UPS and Amazon for Holiday Deliveries?
Uber Looking for the Formula for Success. Despite cost-cutting, Uber continues to mark up huge losses and lost ground in ride hailing, micromobility, and food delivery. Everyone has been patient with Khosrowshahi given the circumstances he entered into, however, over two years in, patience is starting to wear thin. Related, Los Angeles Considers Making Uber and Lyft Go All-Electric,Public Bus Rides for Uber Customers in Las Vegas, and Waymo secures bigger award against workers who went to rival Uber.
🌟Lime Ceasing Operations in 12 Markets. The downsizing comes as there’s a “flight to quality” with investors and operators, alike focused on viable business models and clear unit economics. As part of the downsizing, Lime expects to lay off ~100 people. Downsizing elsewhere, Getaround to Lay Off 25% of Workforce.
Hyundai Will Make Flying Cars for Uber’s Air Taxi Service. Hyundai announced that it will be mass-producing its eVTOL to supply Uber Elevate. Hyundai has made bold claims of 5-minute recharging on 60 miles of range, but this technology is very much still in its early days. At this point, there have only been a handful of test flights done around the world. Elsewhere in air travel, Delta Air Lines Bets on AI to Help Its Operations Run Smoothly in Bad Weather.
VW Launches Autonomous Technology Unit. The division will be based in Belmont, CA, focusing on commercial use cases, such as cargo transport. VW continues to diversify its AV efforts with both in-house and third-party bets, but ultimately is sticking to conservative projections. Related, Feds Are Content to Let Cars Drive, and Regulate, Themselves.
Mitsubishi Motors Enlists Israeli Startup as Japan Plays Catch up on Connected Cars. Mitsubishi is the first Japanese automaker to join a car-data marketplace. Japanese OEMs have been laggards with regards to connected-car services, with just 30% of vehicles sold last year featuring embedded connectivity. Related, Aptiv Smart-Car Platform Wants to Be the Brains Behind Connected Tech, Toyota and Big to Build a Prototype Future City in Japan. and Amazon Alexa Will Ride With Rivian's Electric Pickup and SUV.
How Elon Musk Built a Tesla Factory in China in Less Than a Year. Tesla kicked off production in China this week, the world’s largest EV market, having ramped up the factory in half the time it took for the Nevada gigafactory. In addition to local production, Musk has announced plans for local R&D to create a vehicle designed specifically to fit the Chinese market. Musk rides the hot hand in Germany, Tesla Strikes Emissions Deal That Could “Effectively” Pay for Berlin Gigafactory.
Reducing EV Charging Infrastructure Costs. There are obvious parallels to the solar power industry in making EV infrastructure cost-effective. Component costs will continue to drop steadily, but the emphasis needs to be placed on streamlining indirect costs, such as permit delays, utility interconnection requests, and conflicting regulations. While less problematic than the US, Europe faces similar challenges, UK Power Grid Won’t Handle Popularity of Electric Cars.
Velodyne's Tiny Velabit Packs a Big Lidar Punch for Just $100.Velodyne’s newest lidar is compacted into a form factor smaller than a deck of cards. This development offers promising new use cases for drones and even in mainstream cars — as another low-cost safety technology belonging to the same group as cameras and radar. Speaking of radar, Echodyne Launches Echodrive Radar for Autonomous Cars.
Fundraises, M&A, Talent 💸
Vecna Robotics Raises $50M Led by Blackhorn Ventures. Venca is a workflow orchestration and self-driving forklift provider. The company’s platform is used to manage fleets while interfacing with workers and equipment to optimize freight capacity, warehouse capacity, and waste.
Next Level Aviation Raises $15M Led by Turning Rock Partners. Next Level Aviation is a provider of spare parts for aircraft, focusing primarily on stocking for the Boeing 737 and Airbus A320 families of aircraft.
Ride Health Raises $6.2M Led by Activate Venture Partners. Ride Health connects healthcare providers to transportation options, whether that is an Uber (a company partner) or a regional transportation company. The company estimates 3.6M Americans fail to receive healthcare each year because of transportation impediments.
Seko Logistics Acquires Air-City for Cross-Border E-Commerce. Seko reported it is looking to expand in three main areas: omnichannel logistics; white-glove services; and value-added freight forwarding. Air-City was one of the first forwarders to be certified by the Chinese government. “Air-City gives us strategic airfreight volumes and expertise into China, as the demand for US goods increases along with a rising middle class in China.”
Trimble to Acquire Kuebix to Transform and Connect Transportation Logistics Ecosystem. Kuebix’s cloud-based TMS comprises more than 20K shipping companies. This advances the growing trend of increasing visibility and collaboration between carriers, shippers, and intermediaries. The transaction is expected to close in Q1.
Goodyear Launches Venture Capital Fund. The $100M fund will be focused on mobility investments over the next 10 years which leads us to believe it will be a follow-on investor in the startup solutions they leverage. Key themes include electric and autonomous technologies, connected mobility solutions, next-generation public mobility, next-generation aviation mobility, future transportation infrastructure, future maintenance and operations, emerging technologies, and new tire materials.
Saia’s CFO Leaves for Top Executive Job at Americold. Saia CFO Robert Chambers has departed from the LTL carrier after 8 months to return to his former employer. He will be succeeded by 6-year company vet Douglas Cole.
Company Building 🛠️
First Round State of Startups 2019. We always include this in our newseltter given the data-informed insights into founder sentiment. Interesting to see concern about a bubble/rockier 2020, diversity still an area for improvement, and hiring continues to gain in complexity with Glassdoor data, compensation, diversity, and remote work all key areas for prospective employees.
Expanding Into Multiple Geographies. Feld shares his thoughts on startups expanding into secondary/tertiary US cities. The magic ingredients to make it work are a culture/operations wired for a multi-location workforce, direct flights from HQ to your secondary hubs, and GREAT video conference. Consider this our invitation for you to open an office in Chattanooga… we’ll even show you around.
Haters. Paul Graham shares his thoughts on dealing with haters as founders must with the success of their startup. “The mistake here is to think of the hater as someone you have a dispute with. When you have a dispute with someone, it's usually a good idea to try to understand why they're upset and then fix things if you can. Disputes are distracting. But it's a false analogy to think of a hater as someone you have a dispute with. It's an understandable mistake if you've never encountered haters before. But when you realize that you're dealing with a hater, and what a hater is, it's clear that it's a waste of time even to think about them. If you have obsessive fans, do you spend any time wondering what makes them love you so excessively? No, you just think "some people are kind of crazy," and that's the end of it.”
Who's Hiring? 👩💻
Check out other jobs at Dynamo portfolio companies.
❤️ We would love your support. Please forward to friends and share on social media.
🗞️ If you were forwarded this and found it interesting, please sign up.
🎙 Check out Dynamo's podcast series, The Future of Supply Chain.