As Supply Chain Startups Need to Garner Attention from the Investment Community, Last-Mile Innovations Can Help Unlock New Opportunities

Earlier this month, last-mile solution provider OneRail raised US$42 million in Venture Capital (VC) backing for product development and to expand its team. The Series C funding round was led by Los Angeles-based Aliment Capital. The venture raise brings OneRail’s total funding to US$109 million. The Series C investment will be used to expand OneRail’s Software-as-a-Service (SaaS) platform, OmniPoint, aiming to streamline last-mile and fulfillment solutions for consumers.

OneRail has had an eventful year with regard to expansion. In June, OneRail acquired order management software company Orderbot. Before that, it also announced the launch of the new Inventory Visibility solution within its cloud-based platform to offer item-level visibility to companies.

A funding decline in the logistics industry has been a prominent problem for budding innovative companies and startups since 2022. After peaking at an industry-wide total of over US$25 billion in 2021, venture funding for logistics startups fell to just US$2.9 billion in 2023. This is a 2-year plunge of nearly 90%, and the lowest level of funding since 2015. A few factors can be attributed to this dip, including high interest rates until 3Q 2024. Because of this, global VC funding across all industries dipped to 35% from 2022 to 2023.

Another aspect of this is a downward trend in the underlying factors specific to logistics. The deceleration of e-commerce growth has been a prominent trend that has influenced funding. While the e-commerce market continues to grow, it has grown at a much slower pace compared to the pandemic heights back in 2020. E-commerce growth peaked at over 34% in 2020, falling to less than 5% by 2022. This decline has led to a decrease in global freight volumes, including maritime freight.

On the contrary, a large portion of the growing interest in startups within the investment community can be attributed to those focusing on last-mile delivery. Below are the startups that raised significant funding in the last-mile space:

• Zipline: The San Francisco-based drone delivery company raised US$330 million in funding last year, making it the highest-valued drone delivery company.
• XpressBees: Indian shipment visibility platform XpressBees raised US$80 million in funding last year.
• Starship Technologies: Starship Technologies a startup out of Estonia that was an early mover in the delivery robotics space, has picked up US$90 million in funding as it works to cement its position at the top of its niche.
• Whizz: In June, this leading e-bike subscription service for last-mile delivery drivers secured US$12 million in a Series A funding round.
• Pandion: This parcel network services designed for e-commerce residential delivery and founded by the Amazon Air founder, announced US$41.5 million in Series B funding earlier in March.
• Last-Mile Artificial Intelligence (AI): Last year,  the platform designed to help software engineers develop and integrate Generative Artificial Intelligence (Gen (AI) models into its apps, raised US$10 million in a seed funding round led by Gradient, Google’s AI-focused venture fund.

The last-mile delivery sector undoubtedly holds the greatest promise for innovation. A lot of this can be attributed to its direct impact on consumers, continued emphasis on streamlining e-commerce, and rapid urbanization. There’s also an added element of sustainability in the form of carbon-neutral delivery services and fleet electrification that’s growing. In addition to last-mile being the most expensive pillar of supply chain management, it has also been the fastest-growing one. According to ABI Research’s Last-Mile Delivery Solutions market data (MD-LM-102), last-mile delivery revenue globally will continue to grow by over 13% Year-over-Year (YoY) until 2032.

There are certain significant challenges that need to be addressed for businesses focusing on the last mile. Startups looking to grow need solutions that can scale beyond niche markets. Similarly, use cases surrounding efficiency and cost reduction need to be prioritized, as these are the biggest pain points in the industry. In addition, driving further innovation is required to draw interest from the investment community as the companies listed above have done. The following steps could be taken:  

• Focus on Data: Leveraging big data for end-to-end last-mile visibility and proactive planning is a growing industry problem in the last-mile delivery space. Applications like real-time Estimated Time of Arrival (ETA) adjustment and automated dispatch management are being sought by end users.
• Pilot Sustainable Innovations: Fleet electrification is an area that is gaining a lot of traction, so innovating in areas like battery technology, optimizing charging infrastructure, and vehicle retrofitting can garner immediate attention.
• Rural Last Mile: We see a lot of investment in the urban last-mile space, but not in rural areas. Catering to the rural delivery market with cost-effective logistics models can present significant opportunities as well.
• Integrate with Larger Platforms: Integration capabilities with Transport Management Systems (TMSs), Fleet Management Systems (FMSs), or Enterprise Resource Planning (ERP) solutions can add more value to end users.