Dynamo Dispatch (08/27/18)

Issue #33 | Spreadsheets in supply chain, JD and Li & Fung to monetize logistics assets, and more

Dynamo Dispatch. Weekly update from Dynamo covering the latest and greatest in commerce and trade, #logisticstechnology, and building venture-scale businesses.

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Weekly Commentary 💭

I want to talk about the dynamic of value-add resellers, integrators, and distribution partners this week. For startups, these relationships can be extremely valuable in driving a ramp in sales — leverage a larger entity's resources and network to distribute at an attractive acquisition cost (sometimes a revenue share, other times paid as an expense, and selectively via a token investment).

Specifically, I see these arrangements to be interesting in one of three instances: 1) when the target market is extremely fragmented (think trucking or SMB retail); 2) access is difficult and might require a consultative sale (think healthcare or government); 3) complexities of international markets. Seems to makes sense but what are some specific pitfalls we've experienced with such arrangements?

The first is using third parties as the go-to-market instead of a component of the go-to-market. Used broadly, this results in dynamic where sales end up out of the control of the company. The sales process is important in driving enterprise value accretion — it's not just solely that there is a great product but the ability to distribute and own the channel to the best of one's ability. Third party sales arrangement should be used like a razor — to cut away things that don't keep it focused on a subset of a market or specific customers. Related to the first point is ownership of the customer relationship. We've seen multiple instances where a partner got fired or replaced and other by-standing service providers were collateral damage. It's important for a startup to build and reinforce relationships and feedback loops with a customer. The intermediary who made the introduction will also benefit as they won't be unfairly treated for the screw up an another provider. Ultimately, it enables one to outlast vagaries of corporate purchasing decisions by having a strong touchpoint to influence and negotiate to a point of success. The last is the easiest to control — rushing to sign a deal out of excitement. Take time to negotiate incentives, payments, relationship management with end customers. There needs to be a willingness to put in the upfront work to understand motivations, conversations to align all parties in an honest effort to maximize outcomes, and clear understanding of success or failure. The "gray area" contracts can cause headaches down the line including around payment collections, exclusivity arrangements, and even fundraising.

I would love to hear others' experiences in this area — it's one of the more dynamic aspects of building a business. When done right, high-value and leverage as well.

We Are Dynamo,

Santosh 💥

What We’re Reading 📖

Spreadsheets as a Supply Chain System. Excel's ubiquity allows it to be a swiss army knife and a potent competitor to many software startups in supply chain (and elsewhere) — change is hard. A survey of 140 executives shows what we are dealing with in building enduring supply chain technology companies. 29% of late adopters said they considered "outdated" systems a key barrier to innovation, and 78% said they used Excel. By contrast, only 17% of early adopters saw technology as a barrier to innovation, with just 56.3% saying they used Excel.

JD to Monetize Logistics Assets. JD announced that it will seek to unlock the value of it's logistics business by creating a separate unit that can operate as a business under the JD umbrella. The group is investing heavily in technology to better enable their eCommerce business with logistics revenues up 151% in 1H 2018. Related, Li & Fung to spin out logistics unit — “With uncertainties of global trade due to recent announced increases in tariffs, we expect brands and retailers will be more cautious in placing orders during the second half of the year,” Chairman William Fung said.

Workhorse Introduces Electric Pickup and... a Helicopter?. Workhorse is entering the consumer market with the first electric pick up and also is working on an electric helicopter. The company is already ramping their electric delivery van business that is also piloting drone delivery options. The breadth of it's new products — land and air show how mobility companies view their future — it's not uni-modal.

SAP Pilots Blockchain Solution. The corporate blockchain bonanza continues with SAP showing it's pilot in partnership with 16 food, pharma, shipping, and tech companies. Our belief is that provenance related to food and pharma are the low hanging fruit during the initial rollout of the technology. It is worth noting that it's successfully pulled a consortium together that includes Intel HPE, UPS, and A3 (Airbus). The education and exploration continues to determine the best manner to use blockchain as well as the benefits it can truly provide across stakeholders.

Kentley-Klay Voted Out as Zoox CEO. Last week, Zoox's board opted to change CEOs and voted Kentley-Klay out with little notice or details. The company recently came out of stealth with a $3B valuation after raising ~$800M to build their take on the autonomous car. In the AV world, Lyft's partnership with Aptiv surpasses 5,000 drives since the January launch and Getaround raises $300M from Softbank.

CitiBikes Testing Electric Version. Motivate is staying with the times and prepping to electrify their fleet. On broader consumer mobility, Santa Monica, CA opted for Uber and Lyft over Bird who's usage is strong (1.2M trips averaging 1.5M since 09/2017), and the NYT penned an editorial in support of electric scooters in the concrete jungle.

What We’re Listening To 🎧

Autonocast: Stefan Seltz-Axmacher of Starsky Robotics. As reality sets in for the autonomous drive technology space, the long-term goal of Level 5 and ubiquitous ridesharing is giving way to more limited, pragmatic deployment scenarios. One of the opportunities that is coming into focus in this shift is autonomous trucking and freight delivery. Dynamo founder, Stefan Seltz-Axmacher, CEO chats about building autonomous trucks at Starsky Robotics.

Capital Allocators: Josh Wolfe of Lux Capital. It's great to hear how others have approached building an enduring venture firm. Josh covers his passion for science and finance, building a competitive VC, sourcing/diligence/decisions and more.

Who's Hiring? 👩‍💻

Robotics Software Engineer at PlusOne Robotics.

Deep Learning & Perception Engineer and more at Gatik AI.

SDR at Stord.

Check out other jobs at Dynamo portfolio companies.