Dynamo Dispatch (01/21/19)

Issue 50 | Maersk, VW, Bringg, Flash

Dynamo Dispatch. Weekly update from Dynamo covering the latest and greatest in supply chain, mobility, and building venture-scale businesses.

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Weekly Commentary 💭

Market size is something venture investors spend a lot of time trying to understand. At the seed stage, apart from a quality founding team, having a thorough market understanding is a top priority. Founders in our industry still struggle to size their market and convey associated growth in an accurate way. In part one of this three part series, let's unbundle the "how big is this market?" ask made of founders.

Market sizing helps an investor determine if the problem a startup is focused on is large enough to yield a “big company” that can generate a venture scale return. The addressable market should specifically outline the dollars spent trying to address the problem a startup is solving and/or the money wasted because the problem persists. Growth rates are also important to point out — a small but fast growing market, a large stable market, and a shrinking market all have varying implications. Additionally, based on your business model/go-to-market, having clear statistics on the number of "accounts" or "units" in the addressable market are important — dollars tend to "attach" to this figure. This is referred to as a top-down approach to sizing.

It’s also important to size bottoms-up using “units” and “revenue per unit” figures. While this analysis usually yields a smaller value, it shows founders have a deep, first-hand understanding of their market as well as the innovators and early adopters that can help drive product/market fit. I tend to find such an analysis along with a top-down approach to be helpful. In a small but fast growth market, showing sizing across time is also helpful. In general, investors are looking for billion dollar markets where the ability for small penetration yields large revenues.

Due to this dynamic, founders in overstate their market. In supply chain and mobility, market sizing can be overstated or mis-calibrated — easy to do when everything around us has been on a truck, cleared through customs, or distributed via a warehouse. Remember that headline numbers like GMV, freight spend, and technology spend are generally not good market sizing figures (they are too broad) and imply a lazy approach to understanding the market.

Let’s use an example. If you’re building routing software for trucks, your top down market should not be TMS or technology spend. Instead, it is the industry spend on specific modules related to route planning and navigation as well as the costs associated with poorly planned routes and delayed deliveries. Also important is the number of fleets, tractors, and truck drivers along with growth rates. I point to these three figures given they have implications on the total dollar value of the market and also the startup’s business model. Bottoms-up, if my business model charges per truck, I would focus on the number of tractors, growth in new tractor purchases, mix between large fleets and owner/operators, distribution across long haul/ last mile/drayage, and pricing per tractor. If we can have an estimate of spend variations between long haul, last mile, drayage, that would help as viability of an early product and go-to-market comes to question. Bringing both together, there’s now a specific yet holistic view of the routing software market.

I understand that market sizing numbers don’t always exist in the public domain and hard to assemble — it requires research, data digging, and educated and justifiable assumptions. I would not that this can be iterative as various scenarios or analysis are conducted to get investors (or founding teams) to a point of comfort and conviction. Starting simpler and layering "reasonable complexity" is a helpful tactic — trying to build from an overly granular base can be daunting but also unhelpful (too in the weeds). The supply chain has the benefit of having process (warehousing to last mile) and layers (assets, technologies, services) — these can naturally help size a market in a thoughtful manner without too little or too much detail. Ultimately, the purpose is to convey a real understanding of the dollars attributable to a certain problem — business models are built on the back of these market figures.

Would love to hear other tactics founders have used to help navigate the constant question, "how big is this market?"

We Are Dynamo,

Santosh 💥

Supply Chain 📦

Amazon Making Waves in Ocean Shipping. Amazon is the only retailer (or 1PL in logistics-speak) that has end-to-end logistics capabilities "that gives Chinese goods a seamless path from the factory floor all the way to the front steps of an American buyer’s porch.”

Maersk Automates Container Street Turns. Using technology from E2open, empty containers can be easily reused at a fraction of the time and cost. Currently, reusing an empty container is fraught with phone calls, fees, and deadhead dray miles. Yes, often times, an empty container at a shipper's dock is sent back to port only for the shipper to receive an empty one back.

🌟 Amazon Launches Electric Vest for Human/Robot Interactions. The vest keeps workers safe when they need to enter an area to fix a robotic system or retrieve items. Built-in sensors alert the robots to the wearer’s presence, and they slow down to avoid collision.

📊 WEF Report on Technology & Innovation in Manufacturing. As the line between manufacturing and supply chain functions blur, the WEF highlights "lighthouse" initiatives that combine connectivity, intelligence, and automation to enable Industry 4.0. Related: Summary of the Fast Radius/UPS 3D Printing Partnership.

Supply Chain Roundup at NRF's Big Show. It turns out that retailers are still learning what the true cost of executing omni-channel fulfillment is; great post-purchase experiences market themselves; large players are still getting a handle on their data lakes (because not all of it might be relevant/useful).

Ryder Details Smart Warehouse Efforts. The facilities in Chicago, Miami, and Dallas showcase a variety of IoT, robotics, and wearable technologies to support scalable operations and real time visibility.

Walmart Debuts First High-Tech Consolidation Center This Summer. The CA-based facility will receive, sort, and ship freight at 3x more volume. Automated receiving and upstream sorting allows Walmart to have a more streamlined supplier operation and an ability to respond better to a store's needs.

Mobility 🚗

VW to Invest $800M and Open EV Line in Chattanooga, TN. A big win for the Dynamo of Dixie, VW doubles down with their first EV manufacturing line in the US. Production will begin in 2022 based on VW's modular electric toolkit chasis. The announcement will also bring 1,000 new jobs to the region. Related, Ford and VW Align on Commercial Vans and Pickup Trucks. There will also be an exploration of further collaboration around connectivity, autonomy, mobility, and electrification.

🌟 UPS Piloting eScooter Last Mile Delivery. I have been personally interested in the last mile opportunities a flexible form factor like scooters can bring dense, urban areas. Turns out UPS is using 25 URB-E scooters in SoCal to test out the efficiencies.

🌟 Uber's Autonomous Ambitions for Micromobility. At a DIY Robotics event this weekend, Uber ATG announced plans to weave autonomous technology into bikes and scooters. The new group is called Micromobility Robotics and part of the JUMP division.

Bikes Scooters > AVs. "No longer does anyone credibly claim that self-driving cars are the future of transportation." In fact, bikes and scooters have shown their ability to reshape passenger and goods flow in dense, urban environments. I've always thought the bike was the most under-appreciated form factor of all — no more as people want more options to get around their cities and towns.

Why OEMs Build Multiple Cars on the Same Chassis. Cost might be the obvious reason but common chassis allow for a common system that allows for standard process, widely held best practices around assembly, and ultimately, quality of product. While this is not a new trend, it seems to be accelerating with more OEMs partnering together on AV and EV. The outcome will likely be commodity hardware (vehicle) with differentiation brought by design aesthetic and software.

Aicha Evans New CEO of Zoox. Evans joins after a 12 year career at Intel and comes ready to scale a business that builds autonomous cars from the ground-up (vs retrofitting).

Inside the World's Most Ambitious Mass Transit Project. Mumbai's $3.3B Metro Line 3 subway system will move 7M+ people over 20 miles under and through some of the most densely populated neighborhoods, sacred religious grounds, one of the world's largest slum, and airport.

EU Could Require Insurance for Electric Bike Riders. The January 22nd vote would require riders to get third-party liability insurance similar to what is required for motor vehicles. The impact would clearly have an adverse impact on the ease of access and low cost afforded by current e-bike regulation. Hard to ignore that some of the world's largest insurers are Europe-based and likely welcome this new opportunity for premium.

Strategic Developments, Fundraises, M&A 💸

Bridgestone and Iris Capital Partner on CVC. Bridgestone's European unit will partner with Iris Capital to scout for and invest in new mobility, Industry 4.0, and digital transformation technologies. The vehicle will span the EMEA region.

Chronicled Raises $16M Series A. The company builds blockchain-powered solutions for supply chain.

Bringg Raises Series C. The $25M round for the last mile delivery platform was led by Next47 with participation from a variety of CVC.

HyperScience Raises $30M Led by Stripes Group. HyperScience provides large organizations with solutions for automating the transcription of human-readable documents into machine-readable data easing data entry, invoice processing, and data reconciliation.

Wiliot Raises $30M from Amazon, Avery Dennison, and Samsung. If successful, Wiliot's chips wouldn't require traditional wired power but use energy from cell, Wi-fi, and Bluetooth networks. The implication on IoT across supply chain is massive.

Euro Scooter Upstart, Flash Raises Series A. The €55M found was led by Target Global and will help fund an ambition to "unbundle the car" with micromobility solutions.

Alto Raises $14.5M. Alto has raised funds over two rounds to scale-out its members-only ride sharing service.

Volvo Group VC Invests in Momentum Dynamics. Momentum Dynamics specializes in high-power wireless charging systems for transportation.

Infor Gets $1.5B Investment Ahead of Planned 2020 IPO. The supply chain-focused software provider continues to ramp it's product investments around the CloudSuite product line and integrate the 2015 GT Nexus acquisition.

Blockchain Logistics Startup, OpenPort to Close. The company had raised $4M+ in funding and built an app to connect shippers with truckers in emerging Asian markets. They were also in the process of rolling out a blockchain-enabled proof of delivery solution to streamline the process.

DSV Looking to Acquire Panalpina for $4B. The combo would create the 2nd largest air freight forwarder, 4th largest ocean forwarder. The pro forma business would also become a top 5 global 3PL with the ability to sell integrated solutions.

FedEx Ramps Last Mile Offering. FedEx Freight Direct, that will move larger, bulkier items to customers’ homes and businesses, and even offer light assembly for an additional fee.

Company Building 🛠️

Marketplaces: The Search-to-Fill Metric. A drill-down on a key marketplace metric that measures the percentage of searches or requests that result in completed transactions.

🎙 How I Built This: Nolan Bushnell of Atari & Chuck E. Cheese's. In honor of Bushnell visiting Chattanooga this past week, we share a Dynamo favorite.

Red Herrings at Early Stage Startups. An overview of common distractions or "false priorities" that trip up early stage teams. I particularly see #3 — over-focus on hiring industry insiders when the minimum viable team requires generalists.

Who's Hiring? 👩‍💻

Customer Support Rep at SKUPOS in Denver, CO.

Senior Front-End Engineer at Stord in Atlanta, GA.

Product Manager at Sennder in Berlin, Germany.

Check out other jobs at Dynamo portfolio companies.

❤️ We would love your support. Please forward to friends or share on Twitter or LinkedIn.

🗞️ If you were forwarded this and found it interesting or helpful, please sign up.

🎙 Check out Dynamo's podcast series, The Future of Supply Chain.