Dynamo Dispatch. Weekly update from Dynamo Ventures covering the latest and greatest in supply chain, mobility, and building venture-scale businesses.

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Weekly Commentary 💭

AI is a loaded term and is rightfully met with skepticism especially by decision makers in legacy organizations. That said, it’s an important concept to understand and to be able to implement in any organization. My friend Ash Fontana at Zetta Ventures just published his book The AI-First Company: How to Compete and Win with Artificial Intelligence. I encourage novice, expert, and skeptic to get a copy as it has useful background as well as practical ways of implementing AI within an existing organization or effort.

Also, we have our applications for our July 2021 Venture Fellowship open - apply or send brilliant people our way - applications close on 5/15! Note: this is a full-time commitment.

We Are Dynamo,

Santosh, Ted, Barry, Jon, Katie, Rachel, and Emily

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Supply Chain 📦

Amazon Fuels North America’s Most Severe Warehouse Shortage. Canadian cities have the lowest warehouse vacancy rate in North America and this was spurred by Amazon increasing its footprint by 12M ft2 across nine major Canadian markets since the end of 2019. Amazon’s warehouse annexation includes a quarter of all the space that came up for lease in Toronto in 2020, increasing its footprint 10 times in Montreal, and quadrupling it in Ottawa. Canada has been slower to adopt to eCommerce than other countries, so there was less warehouse space. Since the start of the pandemic, eCommerce sales in Canada have tripled and now represent 10.4% of Canadian retail sales. This has driven up the price of warehouses by as much as 25% in the Toronto area. Warehouse brokers are sounding the alarm. CBRE has predicted that Canada could be without warehouse space by the end of the year. Also, Amazon Will Account for 40.4% of US eCommerce Sales This Year and RFID's eCommerce Growth Spurt.

ACT: Truck Driver Availability Hit New Low in March. The number of truck drivers in the American labor market hit a new low in March, further exacerbating transportation market tensions as the economy continues its recovery from pandemic restrictions. The driver availability index descended to a fourth consecutive three-year record low, due to changing demographics, limited vehicle inventory, unemployment benefits, and increased drug testing. Volumes recovered in March after winter weather-related delays in February, and the supply-demand balance rose from February to March which was a bright spot in an otherwise bleak report. Speaking to transportation executives, we see demand continuing to be strong through year-end as Supply Chains Play Inventory Catch-Up Against a Growing Backlog of Orders.

Supply Chains Are On the Cusp of a Data-fed Revolution. The move toward digital supply chains will require managers to be bold and hand over decision making to machines. This will speed up decision making processes and machines will also give supply chain executives the power of prediction. The prediction will allow supply chain executives to have an understanding of prices, supplies, and lead times that will massively reduce working capital. Predictive analytics will give supply chain executives a constant news feed of data where they can get directional indicators on where their supply chains are the most vulnerable and where they can improve performance. All of this will save time and money for companies. Humans will still have a role in this new data-centric world, but their skill sets will be centered around understanding what to do with this new knowledge. 

Inflation Risk Intensifies With Supply Shortages Multiplying. Supply shortages and logistical logjams may force a number of consumer-facing companies to raise prices. Raw material prices have risen to their highest levels in almost a decade. This has pushed the gauge of global manufacturing to its highest level since 2009 and US producer prices to their highest prices since 2008. JPMorgan analysts estimate that non-food and energy import prices in the largest economies rose almost 4% in the first quarter. Many economists and Federal Reserve officials maintain that price gains are temporary and will be curbed by forces such as virus worries and unemployment, but investors remain skeptical. Businesses can’t wait for temporary increases to pass and this has made the prices of everything from children’s clothing to garbage bags increase. Related, ‘Crazy’ Prices and Rampant Shortages Frustrate Manufacturers and Threaten to Slow Economic Recovery and Here Are The Companies Hiking Prices In Response To Inflation. 

Container Contract System Broken – BCOs Steer Toward Short-Term Deals. BCOs will commit 25% less volume to long-term contracts this year, sending almost twice as much volume to spot deals. This could leave carriers with fewer contracted forecasted containers and BCOs with more time and resources to spend on negotiating contracts. Shorter contracts would mean bigger returns but many account managers don’t think it is wise to put all of your eggs in that basket and ignore annual contracts. Short-term contracts would mean that both shippers and carriers would spend less time growing their businesses and more time negotiating contracts which lead many in the shipping industry to believe that the current contracting process is broken. Also, A Summer of Sold-Out Ships Awaits as Sea Cargo Chaos Intensifies. 

Chicken Shortage Sends Prices Soaring, and Restaurants Can’t Keep Up. Chicken breast prices have doubled since the beginning of the year and chicken wing prices have hit records according to market research firms. Chicken suppliers are struggling to raise their production because there are not enough workers. At the beginning of the year, chicken prices were low and restaurants had stockpiles of chicken in cold storage facilities. With restaurants reopening and the chicken sandwich gaining popularity on menus in restaurants all over the country, the stockpiles are depleted and chicken suppliers can’t keep up with the rise in demand, so they have raised prices. Chicken wings also became a pandemic staple. Due to their ease of delivery, restaurant chains such as Applebees added them to the delivery menu and fast-food restaurants’ servings of wings grew 33% in the 12 month period that ended last March. More food supply chain news as Driscoll’s Desperately Needs to Know America’s Appetite for Strawberries, Kroger to Deliver Groceries Via Autonomous Drones in Ohio, and La Nina Gives a Turbo Charge Boost to Already High Food Prices. 

US Push for Carbon-Neutral Ships Expected to Reveal Industry Divisions. The Biden administration’s push to cut ship emissions will likely face a backlash from Asian and South American nations that fear rising export costs. A switch to non-carbon fuels could cost $3T globally and this could double the cost of exporting goods to other countries. This sticker shock has led major exporters such as Argentina, Brazil, and China to demand exceptions or financial support if such a measure gets passed at the next meeting of the IMO in 2023. While climate benchmarks such as 2030 or 2050 may seem far away, 10 or even 30 years in the world of shipping is a blink of an eye. Ships usually take 2 years to ship and stay in operation for around 25 years, so today’s buying decisions must take into account future stricter emissions regulations or there could be major financial consequences. In other maritime news, World’s Biggest Brands Adopt Checklist to Rescue Seafarers. 

Global Air Cargo Demand Reaches Highest Level Since 1990. Global air cargo demand experienced an increase of 4.4% in March 2021 compared to March 2019 which is the highest level since records began in 1990. M/M air cargo demand also increased, but at a slower pace, with volumes up by 0.4% in March over February 2021 levels. International capacity from dedicated freighters rose by 20.6% in March 2021 compared to the same month in 2019, and belly-cargo capacity of passenger aircraft dropped by 38.4%. Global capacity continued to recover in March 2021, up by 5.6% compared to February 2021. Despite this, capacity remains 11.7% below pre-COVID-19 levels due to the ongoing grounding of passenger aircraft. Economic conditions continue to support air cargo. Elsewhere, XPO Outlines the Three Trends Underpinning Q1 Results - e-commerce, outsourcing and warehouse automation.

Mobility 🚗 

California Plan: 80% EVs by 2035, 50-Mile Plug-in Hybrids, Tighter Tailpipe Emissions. California revealed its Advanced Clean Cars II program which mapped out next-generation standards for the state which sets the direction for next-generation federal regulations. This proposal doesn’t eliminate the combustion engine or end the sales of gas-powered vehicles, but they will need to be under the hood of plug-in hybrids. These hybrids must be able to go 50 all-electric miles which is a big step for plug-in hybrids. The state of California doesn’t expect these plug-in hybrids to make up more than 20% of the vehicles on the road. The state will instead rely on battery-powered EVs to make up the remaining 80% of vehicles on the road. California also wants to avoid a world where gas-powered vehicles get dirtier. The state will phase in a requirement for 0.030 grams per mile of smog-forming emissions by 2028. While the state hasn’t set specific greenhouse gas reduction targets--the Trump administration banned the state’s ability to do so--Governor Gavin Newsom expects that these goals would achieve at least a 35% reduction in greenhouse gas emissions statewide.  Looking globally, Global Plug-in EV Market Share Reaches 5.8% in 2021 while China’s Greenhouse Gas Emissions Exceed Those of All Other Developed Countries Combined.

Arrival and Uber are Working on an Electric Ride Hailing Car. Arrival and Uber are working on a “purpose-built” EV that is specifically designed for ride hailing. The EV, which is expected to come out in 2023, won’t be exclusive to Uber, but instead will be an affordable option that millions of ride-hailing drivers can purchase. This project isn’t intended to be a redesign of the car as we know it. Instead, the car will feature ergonomically designed driver seats, more legroom for customers, and bench-style seats that make it easier to get in and out of the car. This partnership signals that Uber is serious about fulfilling its promise to make 100% of its rides electric in the US and Canada by 2030. In other electric ride hailing news, Tesla Model Y Taxis To Hit NYC Via Gravity Pilot Program.

When Autonomous Cars Teach Themselves to Drive Better Than Humans. Humans are imperfect drivers, but AVs could be reaching the point where they make better decisions than humans do. This week Cruise tweeted out a video of one of their AVs nudging over a cyclist from behind. According to Cruise, the point of that exercise was to help their vehicles understand that cyclists can be unpredictable, but the best option is to give them more space, which in this case happened to be nudging them into another lane. This illustrates the potential difference between human drivers and autonomous systems. Humans would have less situational awareness since they are not trying to predict the future in the way that AVs are. Humans still have the edge in unpredictable situations, because we have a lifetime of knowledge, but the more data that AVs collect the better they will be at predicting uncertain events. In other AV news, Automakers and Universities Team Up to Fix AV Industry's Talent Gap and GM Expects to Offer Personal AVs to Consumers This Decade. 

Argo AI Reveals New, Potentially Game-Changing LiDAR Sensor. Argo AI has developed a LiDAR sensor that is capable of seeing as far as 400M (437 yds) ahead and can produce a photographic level of detail. For context, current lidar sensors can only see roughly 300 yds ahead. This increase means that AVs could operate safely at speeds of 65 mph or higher. AVs rely on sensors that can see more than 1K meters, but they have issues operating in weather and dark conditions. This new LiDAR technology can help AVs perform in these inclement conditions which is one of the main hurdles for the mainstream adoption of AVs. These new LiDAR sensors will be used in Ford’s commercial AVs when their service begins in 2022 and Volkswagen vehicles at a later date. Big week for LiDAR news as Outsight Introduces the First LiDAR Pre-Processing Software Engine, Apple Awards $410M to Face ID and LiDAR Scanner Supplier II-VI and from our portfolio company Tangram Vision The 2021 Perception Sensor Industry Map. 

Your Car Is About To Be a Software Platform, Subscriptions and All. Cars, especially luxury cars, are becoming 5,000 lb SaaS platforms. Taking yet another cue from Tesla, automakers ranging from Porsche to GM are implementing subscription features such as speed managers, app-based maps, and a suite of other digital experience features. While this move may be aligned with how consumers pay for movies and music, it is not guaranteed that consumers will take to paying monthly for seat warmers and efficiency models. In 2019 BMW had to walk back an $80/yr fee for Car Play after getting dragged on social media. If automakers can create features consumers are willing to pay for--that elusive, SaaS-y product market fit- some industry experts think digital subscriptions could be a $100B (an even more elusive hectocorn) business for automakers. Related, Porsche Plans More Deals to Add Electric, Digital Technology.  

Hyundai Plans Next eGMP Models by 2022 & 2024. Hyundai is planning to release a second electric model based on the eGMP in 2022. After that, there will be a one year break and a third model will be released in 2024. The eGMP is Hyundai’s electric vehicle platform which can be used for compact and midsize cars and SUVs and will be the foundation of Hyundai and Kia’s EVs. These models will follow the original eGMP which set a new standard with its futuristic design. These new models will have a larger wheel base, a longer range, and more efficient charging than the original model. In total Hyundai has announced that it intends to release 12 electric models on the market by 2025. The automaker has not confirmed if they will all be based on the eGMP system which has a system voltage of 800 volts, but industry experts believe that cheaper models will most likely rely on a system voltage of 400 volts. Elsewhere in EV news, Volta Trucks Aims to Sell 27K eTrucks by 2025 and Charge4Europe and Total Cooperate for Ultra-Rapid Charging. 

Goodyear Tire CEO Has Enough Supply to Blunt Looming Rubber Shortage. The auto industry, which is reeling from a shortage of semiconductors, could face another crisis: a rubber shortage. Rubber trees in Southeast Asia have dealt with a leaf disease that killed trees and reduced supply. On top of this, there has been an increased demand for rubber and China has been stockpiling rubber in warehouses. This has sent the price of rubber soaring. Goodyear CEO Rich Kramer has said that the company is monitoring the situation, but the company has enough rubber on hand to avoid a negative impact on the business. Rival Michelin Wants to Make Tires Out of Recycled Plastic Bottles.

Fundraises and M&A 💸

AeroCloud Systems Raises $1.7M Led by Playfair Capital.AeroCloud Systems is a SaaS platform for airport management. Their platform is currently operating in airports that serve as few as 20K and as many as 28M customers per day. The new capital will be used to further take on the established giants and expand into the UK and European markets. 

Flextock Raies $3.25M. Flextock is an Egyptian company that helps consumers and businesses manage eCommerce, fulfillment, and logistics operations. The company, which was a part of the latest YC batch, has signed more than 100 Egyptian merchants to its platform since its launch. The funds will be used to continue to grow the company. 

Hwy Haul Raises $10M Co-Led by Elises Capital and BluePointe Ventures. Hwy Haul is a startup that uses AI and machine learning to connect loads of fresh produce with carriers across North America. Produce spends half its life in the supply chain and $15B is wasted every year due to inefficient shipping methods. Hwy Haul’s technology aims to cut down on this waste and make these processes more efficient. The new round of capital will be used to further scale its business.  

Zoomo Raises $12M AirTree. Zoomo is an Australian startup that uses eBikes to electrify delivery. The company made its name through partnerships with Uber Eats and DoorDash by helping delivery workers access eBikes at discounted prices. The new funds will be used for further expansion. 

Youibot Raises $15M Led by Softbank. Youibot is a Chinese company that makes robots for industrial automation, logistics management, and inspection and maintenance. The startup’s technology is the strongest in electronics manufacturing and electric power patrol. The capital injection will be invested in research and development for its mobile robots and proprietary software as well as team building and market expansion.  

Energy Exploration Technologies Raises $20M. Energy Exploration Technologies (EnergyX)  is an American lithium extraction company. The company is also a leader in the scientific innovations behind solid-state lithium-ion batteries which are used in EVs. The funds will be used for further expansion. 

Oculii Raises $55M Co-Led by Catapult Ventures and Conductive Ventures. Oculii is a provider of advanced AI software for radar perception in autonomous systems. The startup just launched the Eagle and the Falcon which offer unparalleled resolution and performance in autonomous systems. The startup’s technology is already being used in commercial deployments. The new round of capital will be used to continue to develop its product and scale its business. 

Path Robotics Raises $56M Led by Addition. Path Robotics is a robotic welding startup. The startup’s technology is primarily used in automated manufacturing and can address current workforce shortages in welding. The fresh capital will be used to expand their team and their business. 

Material Bank Raises $100M Co-Led by General Catalyst and Durable Partners Capital. Material Bank is a state-of-the-art marketplace for architecture and construction materials. The company has invested heavily in robotics-enhanced logistics centers. Material Bank’s marketplace matches buyers and sellers and delivers an order the next day. The new round of capital will be invested in scaling the business.  

Einride Raises $110M. Einride is a Swedish startup that makes autonomous pods designed to carry freight. The company is best known for its Einride pod which is a self-driving truck that doesn’t have a cab and can be controlled remotely. The pods have been on the road in Sweden and have carried freight for Oatly. The capital injection will be used to fulfill customer contracts, double their team, and expand into Europe and the US. 

Solid Power Raises $130M Led by Ford and BMW. Solid Power is a solid-state battery startup. The startup wants to develop affordable, powerful rechargeable batteries to speed up the adoption of EVs. The capital infusion will be used to expand in-house manufacturing capabilities and position the battery maker to eventually supply future EVs. 

Gopuff Acquires Fancy. Gopuff, a company that delivers groceries and other essentials in 30 minutes or less, has acquired Fancy, a UK-based delivery company. Both companies operate networks of microfulfillment centers otherwise known as “dark stores'' that are strategically stocked so orders can be fulfilled in less than 30 minutes. This acquisition will be key in Gopuff’s plans to expand into international markets starting with the UK. Terms of the deal were not disclosed. 

SPAC Radar 📡

AEye in $1.52B Deal with Cantor Fitzgerald. AEye is a LiDAR technology developer. This valuation is a $500M drop from the $2B valuation it had in February with the primary reason for the lower number being due to “changing conditions” in the automotive LiDAR market.  In 2021 LiDAR companies Ouster Inc. and Luminar Technologies Inc took the SPAC route and lost 10% and 22% of their respective value since making their market debuts. This has made some investors wary of taking LiDAR companies public via an SPAC at what could be an inflated valuation. 

Company Building 🛠️

Defensible ML. A simple framework to building defensible ML companies - a great starting point for ML founders given ML companies are very different and more difficult to scale compared to their simpler SaaS counterparts.

Reflexivity. An exploration of reflexivity - the self-reinforcing effect of perception and sentiment on an outcome (whether it’s asset prices or otherwise). Interesting read.

Stripe and Solid-State Economics. Solid-state is more of a qualitative trait for software, but it applies when a system is: 1) Useful for some real-world function; 2) Deterministic, or, since that's impossible, graceful at handling the occasional errors that do crop up; and 3) Composable, such that one system can take inputs from another and pass them on to a third.”

Who's Hiring? 👩‍💻

Technical Lead - Localization and Mapping at Gatik AI in Toronto, ON.

Product Designer at Backbone AI in New York, NY.

Senior Developer Evangelist at Tangram Vision in San Francisco, CA (remote ok).

Check out other jobs at Dynamo portfolio companies.💥 Have you seen any interesting startups recently? Introduce us.❤️ We would love your support. Please forward to friends and share on social media.🗞️ If you were forwarded this and found it interesting, please sign up.🎙 Check out Dynamo's podcast series, The Future of Supply Chain.