More venture capital is flowing into the supply chain as the wealth of data gained through Internet of Things (IoT) devices and other applications continues to expand.
Paul Asel, managing partner at NGP Capital, discussed the changes in venture investment with FreightWaves Chief Strategy Officer JT Engstrom during a virtual fireside chat at the American Shipper Global Trade Tech summit.
Asel said the fundamentals of venture capital remain the same but the magnitude has changed, meaning current Series A funding rounds are five to 10 times higher than in the past as the field of investors has expanded. He started investing in early stage companies in Silicon Valley 30 years ago and has been actively investing in logistics and location-based assets over the past eight years.
He said his firm sees the value in data-first companies now. The old way of venture capital was centered on enabling existing industries by selling software and other tools into those verticals. Now, the objective has become more focused on rethinking and disrupting processes in an industry or the industry as a whole.
Asel said most venture capital firms wouldn’t seek logistics investment opportunities a decade ago, but with the advance of intelligence and captured data in the supply chain the space is in play with several well-capitalized suitors seeking to put money to work.
Over the past six months he has seen a move from an emphasis on efficiency to a “broader view of resiliency.” More supply chains are focused on flexibility and becoming more adaptive to market shocks in real time rather than simply implementing efficiency and cost-cutting initiatives as they have done in the past.
Asel believes that most large disruption to industries comes from the outside of that industry by individuals with different perspectives and experiences. The fine-tuning and incremental innovation comes from within.
He advises new entrepreneurs with great ideas not to shy away because they may not have the requisite industry experience. He suggests they bring in advisers to backfill the needed industry knowledge. “Be humble about what are the skills that you’re going to need to be successful. How do you surround yourself with the right people to give yourself the best chance of success.”
Asel says product-market fit is the key. The product has to work and have basic demand within a market. Then the entrepreneur needs to show that the demand can scale beyond just the early adopters and that the unit economics will work.