I am involved with 4 early stage companies in the logistics space in Brazil: Athenas, CargoX, Comprovei, and Mandae. (at the bottom of this blog is a brief description and links to these companies)
With the economy in turmoil and politics and corruption scandals choking its recovery, investing in Brazil startups seems a risky proposition – more risky than investing in early stage companies in general.
And, yet. I am bullish and the logistics startups that I have invested in and which I advise are doing well.
And it is no coincidence. Emerging markets are rife for logistics disruption and Brazil has an almost perfect conflagration of Logistics challenges and opportunities.
In Logistics, we look to serve our clients through gains in performance and productivity. In bad times, this can be the difference between bad and disastrous results. In good times, those efficiencies scale.
So why Brazil, with all of its ancillary challenges? Because Logistics solutions are ideal in environments where certain situations prevail:
High fragmentation: Wherever there is high fragmentation, there is complexity. Complexity is rife for logistics solutions – process and standardization, alignment of vendors and providers, focus – all these factors allow for the management of fragmentation into a manageable, coherent deliverable. In Brazil there is geographic fragmentation – the country is large with multiple, varied economic zones. Trucking is fragmented – in excess of 650,000 owner operators, 127,000 carrier companies.
Disruption opportunity: Wherever there are intermediaries and manual processes, Logistics solutions can simplify, take the air out of the process, automate. In Brazil, there is still significant regulatory bureaucracy, and in many cases multiple handoffs of authority, signatures, stamps… in transportation, “agents” sit between the cargo owners and the truckers, collecting commissions to facilitate supply with demand. Much of this is done by telephone, kiosks in trucker parking lots. Automation and disintermediation are prime opportunities here, translating into costs savings, time savings, productivity.
Lack of multimodalism: When choice for transport is limited, complexity of service arises. In Brazil, up to 90% of containerized cargo moves by truck as there is no viable rail network. This creates a deficit of choice, an abundance of logistical issues from cost to congestion to asset availability – complexity.
Infrastructure: Brazil has significant infrastructure issues as related to its road network. Long transits over poor infrastructure; significant urban congestion. This leads to cost, delays, service delivery issues.
Uncertainty: Limited logistics choices creates uncertainty. When there are shocks in the supply chain ( strikes, peaks…) lack of choice creates disruption.
All of the above translate to higher logistics costs to facilitate trade and a diminution of service standard expectations and choice.
Brazil has all the characteristics that allow for disruption, innovation and standardization and the ensuing productivity that follows. Add to that its size, a population of 210 million, with the one of the highest internet mobility adoptions in the world . . . and Logistics startups that offer a great product are well positioned. And when these startups succeed in this significant Brazilian recession, their value is exponential when Brazil turns. And turn it will.
Comprovei – delivers route planning and management for the last mile to companies that have multiple deliveries out of one truck (think pharmaceutical and beverage companies that deliver to multiple stores on a route). Leveraging planning and route data, along with innovative electronic proofs of delivery, Comprovei allos for a TMS Bolton, or standalone solution for planning, execution and optimization.
CargoX – an electronic truck broker that optimizes customer demand and trucker supply. Leveraging asset and demand data, along with route algorithms, CargoX is disintermediating a manual, fragmented and inefficient process. Leveraging real-time data, CargoX optimizes customers and truckers and can create cost-efficient supply/demand scenarios through route planning and triangulation.
Mandae – revolutionizing the domestic parcel industry that has been plagued with lack of choice, uncertainty and product options. Mandae offers ecommerce companies innovative shipping products, leveraging a Brazil-wide network of providers across the parcel supply chain and allowing its customers the benefits of its scale pricing.
Athenas – An innovative Terminal Operating system that addresses the absolute lack of modern technology solutions for 90+% of container, bulk, grain and liquid terminals worldwide. In an environment of huge fragmentation of terminal operators, significant manual processes, and high cost of legacy technology, Athenas provides SAAS priced, algorithm-based productivity solutions, with IOT connectivity and workflow automation.