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Home » Logistics VC funding flows toward developing nations in search of steep growth

Logistics VC funding flows toward developing nations in search of steep growth

Latest financial backing reaches out to tech startups in Africa, Latin America.

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October 18, 2021
Ben Ames
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Investor funding has been flowing to logistics startups in Europe and North America for years, but some of that venture capital is now also backing tech firms in smaller developing nations, as analysts forecast far steeper growth curves than are being seen in established economies.

As e-commerce spreads its wings across every region of the world, countries in Africa and Latin America have the same need as U.S. states for logistics services, but their adoption rates could be exponentially greater because they are launching complex logistics processes directly from more basic foundations, funders say.

Although both use cases require similar tools for e-commerce, omnichannel, and last-mile delivery, fundamental differences in language, infrastructure, and workforces mean that supply chain solutions can’t be applied in a one-size-fits-all approach. Logistics giants with networks spanning major North American ports can’t simply open branch offices in new countries and expect success.

In one example, the Nigeria-based e-commerce fulfillment platform Sendbox today announced the completion of a $1.8 million seed round from investors for its services tailored for merchants in Africa. The latest round came from 4DX Ventures, Enza Capital, FJLabs, and Golden Palm Investments. It follows participation from Flexport and YC Combinator, and a 2018 pre-seed round from Microtraction and 4DX Ventures, bringing the firm’s total investment raised to $2 million.

Sendbox says it provide affordable access to local and international delivery options for small-scale merchants selling their wares on e-commerce and social media platforms, offering a single location to manage both local deliveries and international shipments to the E.U., U.K., U.S., and Canada. 

“African e-commerce is accelerating faster than anybody could have imagined a decade ago and it needs smart solutions to ensure that logistics and fulfilment capacity doesn’t lag behind,” Walter Baddoo, 4DX co-Founder and general partner, said in a release. “Not only were we impressed by Sendbox’s 300% year-on-year growth since launch, but we’re seeing the market potential balloon with over 40 million Nigerian SMEs and a projected industry value for social and e-commerce reaching $45 billion on the continent by 2025.”

Venture capitalists aren’t the only ones noticing the e-commerce growth potential of previously overlooked countries. U.S. retail trade group the American Apparel & Footwear Association (AAFA) last month signed an agreement with the Kenya Association of Manufacturers (KAM), promising to collaborate on policy, advocacy, and information sharing. That deal follows the 2020 launch of negotiations to form a Free Trade Agreement (FTA) between the U.S. and Kenya, and work to renew the related African Growth and Opportunity Act (AGOA) which is set to expire in 2025, AAFA said.

Initiatives are also sprouting up in South America, such as the October news that the California e-commerce logistics solutions provider Advatix Inc. had acquired UP-Time, a Santiago, Chile, vendor of e-commerce supply chain and technology solutions.

And in September, the Mexico City-based startup Cargamos said it had raised $7 million in follow-on funding, bringing its total seed round to $11 million, an amount it said is the largest for a logistics-tech company in Latin American history. Investors include Kavak CEO Carlos Garcia Ottati and Jüsto CEO Ricardo Weder as well as Nzaca, FEMSa, and Kayyak Ventures, according to published reports.

With its new backing, Cargamos hopes to expand its platform that facilitates e-commerce flows by repurposing unused spaces in empty parking garages and shopping malls as mini distribution centers. That model is needed to augment a last-mile delivery market in the region that is currently dominated by small, informal companies or independent drivers using their own trucks, the company said. 

A third example in the region comes from the Brazilian e-commerce platform Nuvemshop, which in September acquired Mandaê, a Brazilian logistics platform for small and medium e-commerce businesses. The deal came just weeks after Nuvemshop landed a $500 million investment, which it said was the third largest in Latin American history.

“We know that we still have a long way to go and that logistics solutions are a key to the success of online businesses,” Rodrigo Rivera, chief strategy officer at Nuvemshop and responsible for the Logistics and Payments business units in Latin America, said in a release. “But one thing is certain: we will continue to accelerate e-commerce in Brazil and Latin America, empowering each entrepreneur to show the world what they are capable of.”

E-Commerce Global
KEYWORDS Advatix American Apparel & Footwear Association (AAFA) Cargamos Nuvemshop Sendbox
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    Benames
    Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.

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