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VC investors see a truckload of money in digital freight sector

Targeting mainly micro, small and medium enterprises, these firms help reduce the hassle of documentation for clients through digitalisation, detect the whereabouts of shipments/consignments, reduce overall booking time, and negotiate cost-effecti...

, ET Bureau|
Mar 27, 2018, 08.53 AM IST
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Logistics
Globally, digital freight forwarders are making waves.
AHMEDABAD: India’s nascent digital freight logistics sector is attracting marquee venture investors as more large and small enterprises are seeking to leverage technology to move their goods.

Lightspeed recently invested an undisclosed sum for a minority stake in Mumbai-based Freight Tiger, a logistics software provider for freight forwarders. Accel Partners was in talks to invest up to Rs 50 crore in digital freight forwarder Cogoport and Saif Partners, too, is scouting for investment opportunities in the space. "Freight forwarding as a space is interesting given the large market size, high degree of fragmentation, and opaqueness—all characteristics of a market ripe for disruption," said Akshay Bhushan, associate partner, Lightspeed Venture Partners, India.

Freight forwarders are at the heart of global supply chains, playing a critical role in coordinating with importers and exporters, airlines and ship owners, ports and terminal operators, and thirdparty logistics operators who provide services such as trucking and warehousing.

Digital freight logistics startups primarily offer four solutions, said an investor whose firm is in funding talks with a freight forwarding startup, requesting anonymity. Targeting mainly micro, small and medium enterprises, these firms help reduce the hassle of documentation for clients through digitalisation, detect the whereabouts of shipments/consignments, reduce overall booking time, and negotiate cost-effective rates through bulk booking.

The size of the global freight forwarding market is about $166 billion, of which about 32% is in the Asia-Pacific region, according to industry estimates.

As for India, "the freight forwarding market size will be in the excess of $10 billion", said Arnav Kumar, Associate VP, Saif Partners. But the domestic market is largely untouched by technology, which should allow startups to create and capture some value, Kumar said, adding that Saif Partners is actively looking to invest in the space.

"The industry is set to undergo a massive transformation and is at an inflection point where shipping lines are looking forward to adopt technology and so are (small) exporters and importers," said Harsh Kumar, cofounder, Cogoport.

The startup handles about 3,000 containers every month, earning monthly revenue of about $2 million, Kumar said, declining to comment on the company’s fundraising plans.

Globally, digital freight forwarders are making waves.

Flexport, which has raised more than $300 million, featured on Forbes’ 2017 list of next billion-dollar startups. Four Kites, that provides visibility across supply chains, has raised more than $35 million from investors including August Capital, Bain Capital Ventures and Hyde Park Venture Partners. Last year, Freightos, an online marketplace for international shipping, raised $25 million in funding led by GE Venture, taking the company’s total funding to $50 million.

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