- This could be a turning-point year for maritime tech startups — particularly those with a green twist.
- For a reason why, look no further than the January IPO roadshow presentation of ocean carrier ZIM (NYSE: ZIM).
- The global shipping industry, long stubbornly resistant to change, now faces heightened external pressure.
- Simultaneously, more VC managers are setting their sights on ocean shipping.
A recent news article published in the Freightwaves written by Greg Miller reveals that maritime industry start ups are gaining momentum.
Maritime industry is garnering interest
“Maritime is gathering interest among VCs and private equity as the next industry to digitalize,” said Evan Efstathiou, CEO of SkySail Advisors and Burmester & Vogel, in an interview with American Shipper. He described current valuations as “amazing.”
Marina Hadjipateras, general partner of VC firm TMV, commented, “I see a huge surge in interest from VCs who haven’t focused on any of this before.”
TMV raising new funds
TMV is currently in the midst of raising $60 million for a new fund that will focus, in part, on investments in supply chain and shipping startups. Earlier this month, the Ioannis Martinos-led Signal Group launched Signal Ventures to invest in “the growing activity in the maritime startup scene.”
Hadjipateras told American Shipper, “There are a lot more investors looking at this space. There’s a lot of capital out there. And there’s a lot of energy on all sides, from shipowners as well as founders. We’re seeing a huge amount of optimism in terms of what’s in store for the future.”
Low penetration versus other industries
For such a massive industry, ocean shipping still has a lot of low-hanging fruit left to pluck in terms of efficiencies.
Tech’s relatively low penetration in shipping was addressed this month at a a virtual conference held by the Hellenic American/Norwegian-American Chambers of Commerce (HACC-NACC).
Digitization has never been incorporated
Historically, digitization has never been [incorporated] in commercial negotiations between charterers and owners.
That’s changing due to widespread pressures to embrace ESG (environmental, social and governance).
Institutional investors are also on the bandwagon, prompting listed shipowners to publish sustainability reports.
All of the combined pressure from charterers, banks and investors should drive more technological adoption by owners seeking to enhance fuel efficiency and sustainability.
That should increase opportunities for startups.
A sustainability focus “is mainstream now,” said Hadjipateras. “It’s not just nice-to-have. It’s need-to-have.”
Not just about emissions and efficiency
Most maritime tech companies focus on either making operations cost less or providing transparency on trade flows to inform strategic and trading decisions.
The latter category is the purview of companies including Cargometrics, AXSMarine, Kpler and Vortexa, among others.
This segment is clearly attractive to investors: Vortexa closed $19 million in Series B round earlier this month.
The pitch is that the total addressable market (TAM) goes well beyond shipping.
The COVID effect
The initial onset of the COVID crisis had a negative effect on maritime startups. Shipping businesses went into survival mode.
The last thing they had time for was trialing a new software solution.
That crisis mentality has now passed and COVID has actually increased the focus on tech. “There have been a lot of tech winners generally as a result of COVID,” said Efstathiou, who believes the broader valuation upside is cascading over to shipping startups.
But there are caveats
This may all sound like a recipe for boom times in the VC-backed maritime startup space. But there are some big caveats.
First, people have been talking up the pending technological revolution of ocean shipping for years. Shipping’s historical aversion to change is deeply entrenched.
Second, IMO regulations make for good pitch fodder, but IMO decision-making is an extremely drawn-out, dysfunctional and unpredictable process.
There are no guarantees that IMO member countries will come together on decarbonization.
Third, with regard to startups focused on vessel visibility, ship-location data is widely available through companies such as MarineTraffic. Much of the value-added intelligence comes from knowing who owns the cargoes — something no software solution can tell you.
Fourth, TAM numbers touted to VCs may be too high. The scope of global maritime trade is massive, but as Henderson pointed out, it’s highly segregated.
‘Boat too big to turn’ finally turning?
Hadjipateras doesn’t see existing players as competition for newcomers.
“What’s happening now is that expert engineers [in startups] are becoming more accepted by shipping companies. So, partnerships are more viable.
Founders may not have backgrounds in shipping but they are experts in technology. Shipping companies may not want to spend the time building that [technological expertise] in-house.
“If you look at the companies we invest in, a lot of what they’re doing looks similar to what huge corporations are doing. But we don’t see these corporations as competitors. We see them as possible acquirers or partners,” she said.
Just as ZIM touted partnerships with startups in its IPO roadshow, Hadjipateras sees the potential for shipping companies “to bring founders in-house and incubate startup companies.”
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Source : Freight Waves
