Seeing Investor Interest in Logistics Startups Amid the Covid-19 Pandemic

Although globally the logistics industry is stunted, it does not reduce demand from related parties who need these services. As the backbone of the service E-commerce, logistics has an important role to support the activities of various related parties. Especially in the midst of the current pandemic, it seems that the role of logistics is increasingly crucial, supporting the recommendations work from home and social distancing.

In Indonesia alone service E-commerce such as JD.ID, Tokopedia, Shopee, to Bukalapak receive a fairly high demand for the items that are most needed today. Ranging from fresh ingredients to medicines and medical devices. Free shipping promos to giving vouchers and other attractive offers are also given to customers.

Another phenomenon that then occurred in the logistics industry was, when many companies to startups had to lay off their employees due to the spread of Covid-19, startups targeting logistics services recruited many employees, with the aim of helping to cope with the increasing demand for online shopping. Starting from Amazon which has to add about 100 thousand employees, up to WarehouseAda who opened job vacancies to support their business during the quarantine period.

Logistics sector step on the gas

Several logistics services received funding from investors throughout early 2020. At the end of March 2020 it was recorded, RaRa Delivery which is one of the startup graduates of the accelerator program batch 4 GKPnP, announces early stage funding (seed funding) $ 1,2 million or around Rp 19,7 billion. The investment was led by 500 Startups. AngelCentral is also involved in this funding round.

Startups that provide services "same-day delivery"The plan is to use the fresh funds to accelerate business growth, operations and technology development in Indonesia. Founded by CEO Karan Bhardwaj, RaRa Delivery is included in the list of logistics startups that receive funding when the spread of Covid-19 occurs globally.

Last January 2020, truck and warehousing service platform Waresix, announced additional funding from EV Growth and Jungle Ventures. Less than 6 months after announcing it raised US$14,5 million in a series A funding round led by EV Growth in July 2019, Waresix raised an additional US$11 million in capital in an extension of the funding round.

In the last 18 months, the company has raised US$27,1 million in capital. The company also supports its growth using loans and working capital facilities from leading regional banks and other financial institutions.

"For logistics in my opinion it is enduring business. As soon as the market normalizes, the goods will need to flow. For funding, it should be from the side venture capital and private equity will look at companies that have solid business model and sustainability plan. Because if you only rely on subsidies at a time like this, it's quite difficult, isn't it, because value proposition unclear,” Waresix CEO Andree Susanto told DailySocial.

Meanwhile a logistics fleet management platform that tries to help fleet managers adopt technology to maximize their business, Webtrace, has also announced early stage funding led by Prasetia Dwidharma. Also joining in this funding is Astra Ventura.

To DailySocial Webtrace CEO Erwin Subroto said that in Indonesia currently spending on land logistics is estimated to reach US$290 billion in 2020. Apart from the large market, the population of commercial vehicles (9,6 million units in 2019) has created intense price competition.

Webtrace tries to be a platform that can be used by fleet managers to provide technological solutions so that logistics businesses can run more efficiently and increase productivity and security. This is done by implementing sensors and IoT solutions that will generate various data and analysis real-time.

"With or without the spread of Covid-19, logistics will always be the backbone of the Indonesian economy. Especially after the spread of the Covid-19 virus begins to subside, there will be changes in economic and consumption patterns that are increasingly centered on logistics services themselves," said CEO & Co-Founder of Webtrace Erwin Subroto.

Positive growth of logistics business

The condition of being an archipelagic country makes logistics costs in Indonesia one of the highest in Asia, even contributing to a quarter of Indonesia's gross domestic product which reaches $1 trillion. Indonesia's position in the 2018 Logistics Competitiveness Index released by the World Bank continues to improve.

Since March 2019, logistics services in Indonesia have been among the industries that are most sought after by investors. DailySocial noted that around 7 startups received initial to advanced stage funding from investors. Starting from Cargo, Triplog, Ritase, Waresix, Logisly, Shipper, and Finfleet. The investors involved include EV Growth, Golden Gate Ventures, East Ventures to Kejora Ventures. The amount of funding provided ranged from $3,5 million to $14,5 million.

Recorded in the country, spending on land logistics is estimated to reach $290 billion in 2020. Apart from the large market, the population of commercial vehicles (9,6 million units in 2019) has created intense price competition.

However, Indonesia's ratio of logistics costs to GDP still reaches 24%, lagging behind Thailand and Malaysia. This creates a potential of $240 billion in the logistics sector in Indonesia. High logistics costs not only weaken the competitiveness of the industry, but also increase cost of doing business for SMEs in Indonesia. It is hoped that current logistics services can overcome these problems by providing services that support the growth of SMEs and services E-commerce in Indonesia.