Until recently, the term “logistics startup” was almost an oxymoron.
Logistics is an asset-centric business. For most of history, you couldn’t start a business in the industry without a fleet of ships, warehouses, or trucks. That’s a very high barrier to entry.
But in 2021 and into early 2022, M&A in logistics and related technology went through the roof to reach about $20 billion in total deal value¹. New logistics tech platforms like Flexport raised almost one billion dollars in funding², and startups have appeared everywhere².
So why is logistics such a hotbed for startups today?
As ecommerce competition heats up, brands have realized they can’t afford to use the same one-hundred-year-old shipping giants. Legacy shipping businesses have failed to adapt to new technologies and practices like order tracking and speedy fulfillment. In their stead, smaller logistics companies and online businesses have appeared to provide the tech and efficiency the industry needs to adapt.
At Bootstrappers, we’ve interviewed founders streamlining and innovating in almost every aspect of logistics – all with almost zero investment. If you’re interested in starting a business in logistics, we want to give you some tips we’ve learned from four of them.
Solve a Scaled Problem Manually, Like CBIP Logistics
When they started CBIP Logistics, Nick Bartlett and Chris Crutchley were already logistics insiders with a large amount of experience and accumulated capital. When they invested in a tech company to escape the rat race, they saw firsthand the power of technology in logistics. Then the partners used their industry knowledge to build a contracting business that brought logistics to the masses.
Nick Bartlett was a consultant in Hong Kong SAR when he decided he wanted to become an entrepreneur. He invested in a logistics tech company that quickly aggregated couriers (the people you call when you want to ship internationally) from different ports in one place. He later came on as a full-time employee.
He and his business partner later exited the business but recalled the astronomical demand for their service and realized it was too imperfect for scale. While numerous tech platforms rose to help people find logistics providers, Nick and Chris realized these companies still lacked the flexibility and personal touch medium-to-large businesses crave. They needed to be logistics providers breaking into tech, not tech providers breaking into logistics.
They created a whiteglove logistics service partnering with businesses to help them source logistics providers globally. But instead of asking clients to create supply chains, they’d charge a little extra and do it for them.
Now they make millions from only a handful of large contracts and use their excess money to streamline the process.
Lessons from CBIP Logistics:
- Get some insider work experience. Especially in logistics, connections are helpful.
- Don’t rush to build a purely technological solution. Solve customer problems first.
- Expand on another company’s idea.
Start With a Warehouse, Like OTW Shipping
In May of 2022, Bootstrappers had the pleasure of speaking with two early 20-somethings who bought a warehouse and turned it into a fulfillment giant for small ecommerce stores.
Nick Malinowski and Parker Barnes both worked as packers at logistics warehouses as teenagers. While there, they realized many ecommerce brands couldn’t meet the order volumes required by most warehouses but the brands desperately needed the space.
To start, the partners needed to solve a chicken-or-egg scenario. They needed a warehouse to attract customers but couldn’t get one without them. Worse, warehouse leases were anywhere from five to six figures a year – a steep bill for a 20-something entry-level employee and a college student.
But they didn’t let that stop them.
By chatting with businesses on Reddit, Nick and Parker convinced a handful to give them a shot and rolled that up into a lease with a local warehouse. But to convince these clients to join, they needed to make promises like fronting postal fees and paying for software. They needed a $10,000 loan from their family and friends, which they repaid in days.
Today their business is growing fast, and they are going to open a new warehouse on the East Coast. They think they will likely get Acquired by a larger provider down the line.
Lessons from OTW Shipping:
- Look for the customers your competitors are ignoring. They’ll make bets on you.
- Work with cofounders who balance your skills.
- Take measured yet manageable risks.
Read our full article on OTW Shipping
Make an Ecommerce Management Business, Like OzDingo
In October of 2022, we interviewed two Australians who transformed their garage-based reselling business into a seven-figure ecommerce sales and marketing hub for local brands. To do it, they slowly grew their own ecommerce business until they saw an opportunity to scale quickly by helping customers grow their stores.
Mal Badawi and Andrew Hana went into business together reselling goods they bought in bulk from Asian manufacturers. Eventually, they expanded their operation to include a warehouse in a backyard garage. This slowly became a larger warehouse in downtown Brisbane employing a team of mostly young parents working flexible hours.
Eventually, they noticed many local Australian merchants they helped with warehousing and fulfillment manufactured high-quality, unique products. However, these merchants had little idea of how to do marketing or sales to grow their business.
Mal and Andrew decided to launch a new business model doing almost the opposite of stores like Amazon: They’d take control of marketing and sales for these brands, linking them to major marketplaces like Amazon and eBay, and push logistics onto the sellers.
To pad the costs of creating their own online sales platform, Mal and Andrew used the income from their reselling business, which still runs to this day. Now they want to be the go-to spot for Australian sellers trying to sell and market online.
Lessons From OzDingo:
- Narrow your focus for better customer loyalty.
- Never be afraid to move upmarket.
- Treat employees well and they’ll treat you well.
- Find another avenue to bankroll your tech.
Read our full article on OzDingo
Find the Hidden Market, Like Omnics
After over a decade of working for enterprise logistics business, SimFlex, Akhil Oltikar and Matvey Kazakov realized that SMEs couldn’t afford great logistics software. Instead, they organized large global orders using frequently inaccurate spreadsheets. If you haven’t heard the stats, studies from 2008 posit that almost 90% of spreadsheets contain errors³.
The two partners worked together to build cheaper software focused on single payments, not recurring fees. As of our interview in June of 2022, they made $600,000 ARR and were growing quickly.
Here’s how they did it.
After quitting their jobs at SimFlex, Akhil and Matvey leveraged their reputations to convince previous clients to buy subscriptions before they even had a product. Then they hand-picked a team of coders from former colleagues and built a tool that could get into the backend of every single element in the supply chain. That included warehouses, warehouse management software, and third-party logistics providers like trucking and shipping companies.
To make themselves more affordable to these “smaller” businesses, Omnics made most of its money from a one-time setup fee rather than large recurring payments. They would also charge lump sums if clients wanted to increase the amount of service they received and would upsell if needed.
To boot, they’ve created a great source for labor and future hires. They offer internships for students at partner colleges to bring the best and brightest new grads on board.
Lessons from Omnics:
- Find large customers who can’t afford enterprise-level service.
- Leverage your reputation to get customers to bet on you.
- Don’t feel stuck in one pricing model. A small change could unlock hordes of customers.
Read our full article on Omnics
Can You Easily Sell a Logistics Business?
You might wonder how easy it is to sell your logistics startup once you begin. After all, the ability to sell helps reduce the risk of losing invested capital.
The answer is yes but with some caveats.
As logistics businesses are traditionally asset-heavy, they are more difficult to sell than other businesses. Just a warehouse and a forklift can add six figures onto a price tag – that’s before you evaluate how much more use they have before they need repairs or break entirely.
Logistics SaaS platforms, agencies, and marketplaces, on the other hand, are much easier to sell. They are asset-light and therefore can be transferred quickly with little outside inspection.
As you’ve seen from the startups listed above, many started as asset-based businesses. Then, their founders figured out a technology, ecommerce, or agency element to add as they learned what their customers wanted. These sections of their business are much more desirable for acquisition by average buyers.
Sell Your Logistics SaaS on Acquire
On Acquire, we allow you to sell any type of ecommerce, SaaS, or agency business quickly, securely, and legally anywhere in the world.
Just create a seller account, fill in your company data, submit ID verification, and connect metrics. We’ll connect you with thousands of interested buyers around the world and give you the tools you need to close a deal.
Read more about how to sell your business on Acquire
Want to see which other businesses are selling on our platform right now? Create a free buyer account and browse our marketplace today. And let us know if you have any questions.
Sources
¹https://community.ionanalytics.com/supply-chain-woes
³https://www.marketwatch.com/story/88-of-spreadsheets-have-errors-2013-04-17
The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.
