By: Bill Pescatello, Managing Partner at Evolv Ventures
Our focus on autonomy
At Evolv Ventures, we spend a great deal of time looking at the changing landscape for CPG companies and emerging technologies that can have the greatest impact on our industry. In that search, when it comes to logistics, there are few technologies we discuss more or that are as high profile as autonomous trucking. Its size and impact on global logistics and the CPG industry will be nothing short of revolutionary.
The global trucking industry is one of the largest markets in the world that touch all of our lives and has been estimated to be as large as $4T. In the United States, truck driving is the primary occupation in more than half of all US states. There are about 1 million truck drivers in the US, and even that is not enough. Worker shortages and driver costs continue to rise and are one of the biggest issues facing the trucking industry today. With rising costs and driver shortages, greater automation is in high demand and will continue to be a high priority throughout this ever-growing industry.
In terms of the importance of this market to the CPG industry, it is estimated that two-thirds of our nation’s consumable products are trucked to the market. It is one of the CPG industry’s greatest costs in bringing products to the market and innovations in trucking autonomy has the potential to save CPG companies hundreds of millions, if not billions, of dollars down the line.
In fact, it is estimated by McKinsey that shipping costs could decline by as much as 45% with full autonomy. These savings are game-changing and would have a profound effect on logistics costs and potentially improved margins for large CPG companies.
While the promise of full autonomy is impressive, we also have to be realistic about the timing and hurdles to reaching full autonomy. Most experts believe we are 10+ years away from seeing anything assembling full autonomy (some estimating decades) and the advances will need to come in incremental steps.
Safety considerations, technical impediments, local and national regulations, and building the infrastructure needed will take time. We will get there eventually, but there is a lot of work to do to get there. As we move to a world with fuller autonomy, very large companies will be built but countless emerging startups in the space will not survive this long adoption curve.
As investors, it will be critical to find the right opportunities in this space and the industry-changing companies that will likely come out the other side.
So where to invest?
At Evolv Ventures, we will continue to look at long haul autonomous trucking companies but have a specific investment focus today, due to the long adoption curve. Rather than investing in companies that may be a decade(s) away from being operational, we are focused on companies that can start to be successful now and will lead this evolution to full autonomy.
In particular, we are working and investing in autonomous technologies that can operate in smaller and more controlled environments. Companies that address automation within and around our plants, warehouses, and yards at Kraft Heinz. While this may initially represent a smaller market than long haul trucking, opportunities in these spaces still represent a significant market and are in high demand.
Of all the Fortune 500 companies we talk to regularly, we have yet to find one that was not actively looking for partners to more effectively automate their warehouse yard operations. Warehouse yards are notoriously inefficient and often neglected by partners. These operations have a significant impact on logistics costs and can greatly affect your speed to market.
While yard operations may not be a $100B+ market today, warehouse and shuttle operations represent what we estimate to be a $26B market, and will be one of the most important hubs in bringing about full autonomy for large shippers in the future.
This first and last mile of the supply chain will also have deep integrations and once connected with warehouse management systems, hardware on the docks,and trucking partners, large shippers will be very hesitant to switch systems. Furthermore, as autonomous technology evolves, we believe long-haul shippers will more easily be swapped out and commoditized, while those deeply integrated at the operating level and at the warehouse/yard level will continue to expand, grow and be successful.
Why we chose Outrider
In evaluating warehouse yard operations, we did extensive analysis and leveraged every resource at our disposal at Kraft Heinz and among our investment partners. We talked to every company we could identify in the space, worked with our internal warehouse and logistics teams to validate the tech, and compared notes with many of the largest shippers in the world. Inevitably everyone we talk to came to the same conclusion. Outrider is the clear leader in autonomous yard operations.
1. Vertical focus: Outrider had the best understanding and solution in autonomous yard operations. Being laser-focused on warehouse yards and not the highways has allowed Outrider to nail all the details of warehouse operations that others miss.
2. Limited competition: Evolv and Kraft Heinz could not find an adequate solution that we would be comfortable using today that appeared viable outside of Outrider.
3. Deepest autonomous tech team: No other company we could find in warehouse operations had a team that could compare. The current team of industry-leading technologists has helped build over 35 autonomous systems for some of the most advanced technology companies in the world.
4. Best in class early customer bases: Despite still being an emerging player, Outrider has one of the most impressive early pilot partners we have ever seen. If you are a tier 1 shipper you are likely working with or talking to Outrider today.
5. Just the beginning: If Outrider can nail the first and last mile of yard operations (which we think they can), they may very well be the best-positioned company in autonomous trucking.
From the work that we did, Outrider is the clear leader and partner of choice when it comes to warehouse yard automation today. Critical details around how to autonomously handle tight yard spaces with heavy loads, automatically operating dock doors and air brakes, and effectively integrating with warehouse management systems were not found elsewhere. The Outrider team understood our pain points as a CPG company and stood above the rest. With their focus and leadership position, Outrider has a clear advantage to win a large and critical space that can shape the future of autonomous operations.
Working with Outrider to make the world safer and cleaner
Finally and not to be overlooked, Evolv is also very proud to be associated with the value-driven team of Outrider. In addition to capturing greater operating efficiencies for large companies, Outrider is helping bring about a cleaner and more efficient world. Since founding the company, Andrew Smith and his team at Outrider have been very active in advocating for the replacement of outdated and inefficient diesel trucks and replacing them with cleaner, safer electric vehicles. Through their work, while Outrider is automating warehouse yards, they are helping companies around the world lower their carbon footprint.
We at Evolv are thrilled to continue this important work with Outrider and do our small part in helping make the world a better place.