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Where Will Supply Chain Tech Investments Go in 2022?

On-demand delivery and fulfillment technologies reached a fever pitch last year as companies delivering meals, groceries and other items to consumers led the $33.6 billion in total funding to supply chain and logistics startups.

The 2021 global funding total shattered previous records and reflected an 86 percent increase in funding from 2020, according to CB Insights’ “State of Supply Chain & Logistics Tech” report.

The year-over-year spike may have, in part, been due to the height of the pandemic’s impact on business operations in 2020, but the ramp was also caused by pent-up demand for e-commerce coming out of Covid, CB Insights managing analyst Rachel Binder said.

“I think it was partly due to the pandemic for sure, but I think we saw also a substantial amount of that funding jump came from the on-demand side, so it was just a year for on-demand delivery,” Binder said.

On a regional basis, in the fourth quarter, companies based in Asia secured the most funding, raising a total of $4.6 billion across 71 deals. U.S. companies were next with $2.6 billion raised in 65 deals. Europe rounded out the top three regions with the most investor activity, with $2.1 billion raised in 39 deals.

Last year’s funding total is likely to be a tough number to beat, Binder said, calling 2021 unprecedented given the surge in e-commerce.

“I think investment in the supply chain more broadly remains strong [in 2022] and, at this point, it’s really helping these companies build up these war chests, especially on the demand side,” Binder said.

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With on-demand delivery most relevant in the food space, the segment’s growth and maturity could make way for other supply chain technologies to come into focus this year.

Binder pointed to ShipBob, Shiprocket and Huboo as examples of e-commerce fulfillment solutions that could snap up the spotlight.

“These are companies that are able to help smaller retailers, smaller brands and even larger retailers that don’t have the fulfillment capability that Walmart or Amazon have,” Binder said. “I think also automation solutions like robotic fulfillment, so that would be another component to reducing cost of fulfillment. We’ve seen a lot of activity in the last couple years around investing in automation and robots. The other one is visibility platforms like project44 and FourKites. Those solutions I think will hold relevance this year just because so many things are happening along the supply chain. There’s been disruption and there’s unprecedented demand for e-commerce.”

Last year was also marked with more companies in the supply chain tech space reaching unicorn status and more mega rounds of $100 million or more, according to the CB Insights report.

That’s in part due to what the research firm said is a maturing of supply chain and logistics tech companies. On-demand delivery, supply chain visibility and digital freight matching companies lined up mega rounds, which accounted for 74 percent of last year’s investments. The 87 mega rounds in 2021 reflected a 107 percent increase from the prior year.

CB Insights’ report also noted the shift in 2021 to more investment in mid- and late-stage companies in another sign of companies’ evolution and growth. Mid-stage companies accounted for 26 percent of investments last year, while late stage accounted for 15 percent. That compares with 19 percent and 11 percent, respectively, in 2020.

Exits of supply chain and logistics tech firms, either through a traditional initial public offering or reverse merger, totaled 18 last year. That compares to three in 2020.

Given where many companies are at in their funding cycles, it’s likely this year will continue to see more IPOs, Binder said. Meanwhile, special purpose acquisition company (SPAC) deals may moderate out some. SPACs have been particularly popular more recently among electric vehicle companies that went public through reverse mergers only to see their stock slip.

For well capitalized companies, strategic investments are likely to continue. Digital freight forwarder Flexport and Tencent Holdings were among the busiest investors in the quarter and the only two corporates in CB Insights’ list of the top investors for the period. Flexport, which raised a $935 million Series E this month, was the second most active with investments in seven companies.

Many of the supply chain tech companies in CB Insights’ report are investing and acquiring complementary services, and it’s something to keep an eye on, Binder noted.

“I think we’re going to see more strategic investments within the companies in the [report] cohort,” she said. “In the supply chain, strength is associated with scale and availability of data and availability of capabilities.”