Last week we published a Supply Chain Matters Technology Perspectives commentary that was titled: Implications of a More Conservative Private Equity Funding Climate in the Month Ahead.
In our commentary we observed that with the growing possibilities of economic recession leading to interest rate hikes and the now more rapid increase in the cost of invested capital, a more sobering private equity fund raising climate is emerging. Venture firms are demanding clearer paths to profitability and more focused spending on the part of invested start-ups. Previously planned investments in added technology development, acquisitions or regionally based business expansion will be scrutinized for clearly articulated and evidence-based business and operating strategy.
We reiterated our belief that innovative supply chain tech and services companies will continue to find opportunities to leverage their technology and services deployments. However, their senior management teams are going to have to adapt to this more conservative business investment environment.
The notions of continual investment monies flowing in to garner market share and growth are going to be tempered by clear paths to deeper technology development, added profitability and the all-important SaaS recurring revenue growth. Later stage investments in supply chain tech firms are likely going to be more challenging without a compelling business strategy and growth plan.
We noted to readers that we would highlight and share what we deem as specific examples. One was the side bar commentary highlighting Walmart’s shrewd investment in EV parcel van start-up Canoo. We now add another, that being high flying end-to-end real-time logistics visibility tech provider project44.
Project44 Workforce Restructure
Last week, project44 confirmed to logistics trade publication Freightwaves that the start-up tech provider has cut upwards of 5 percent of its workforce, amounting to a reported 63 employees.
CEO Jett McCandless indicated to the publication that “no load-bearing positions” were impacted and that the moves were directed at trimming an over scaled recruiting team and: “repositioning the organization’s global operations to focus on its solutions to customers.” McCandless further indicated to the publication that the moves strengthen this tech provider’s financial health, and the company’s deal pipeline is the largest ever seen.
The tech provider’s COO indicated a focus on creating an engineering-first company telling Freightwaves: “We are going to be investing in technology and software because that is what is going to allow us to continue to deliver for our customers. We want to make sure that these customers are getting the value from the innovative products we are putting out into the market.”
In supply chain and logistics technology circles that this Editor monitors, there were indications already surfacing that project44 had additionally trimmed its overall sales force staffing numbers.
In January of this year, project44 announced that the tech provider received an additional equity investment totaling $420 million from a consortium of equity investors led by Thoma Bravo, TPG and Goldman Sachs Asset Management, resulting in a pre-money valuation of $2.2 billion. When combined with a $202 million equity raise in May of 2021, this start-up had set a funding record for logistics technology focused enterprise SaaS companies. The release in January pointed to project44 generating more than $100 million in annual recurring revenues (ARR). Further, $12.7 million of newly booked annual recurring revenue came in the final quarter of 2021, along with year-over-year bookings increase of 170 percent. Bloomberg reported at the time that the company’s ARR target for 2022 is $170 million, with a possible IPO destined.
Our Supply Chain Matters commentary related to that funding event included an interview with one of the company’s senior product marketing executives. Regarding where project44’s market growth will be enhanced in the coming months, three dimensions were outlined
The first was the continued breath of information captured across transportation modes both from a global wide coverage and multimodal perspective. The second is added depth in the types of information captured such as purchase orders, sales codes or SKU’s, along with providing added predictability context to such information. A third area was described as doing, namely the ability to act on needs that may be related to areas such as capacity management and planning, pre-transit planning, digital documentation and enhancing automated workflows. These efforts were described as enhancing the Interoperability of information flows among various customer systems of record or Cloud based applications.
From our lens, the restructure action by project44 of a modest workforce reduction appears to indeed be a renewed focus on deeper information integration engineering development for its technology suite which can position this provider for enhanced services offerings and a broader customer value position in the coming months. It could further provide the flexibility for an added acquisition moves if the opportunity presents itself in the currently changed market environment.
Lofty valuations of start-ups hinder the ability to exercise later stage funding rounds because if the risk of a lower valuation or of more controlling or guaranteed terms. We expect that there will be restructure moves occurring among other supply chain tech start-ups in the coming months. It is no longer solely marketing prowess and huge marketing spend that drives growth but rather a solid value proposition to fill recognized multi-industry supply chain business needs for enhanced visibility, agility resiliency and more proactive decision-making.
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