TLDR:
Logistics funding for start-ups has dropped by nearly 90% in the last two years, falling from $25.6 billion in 2021 to $2.9 billion in 2023. This decline is attributed to factors such as high interest rates, a global slowdown in the shipping industry, and excess capacity among cargo carriers. Despite this sharp pullback, funding for last-mile start-ups and software and systems start-ups has seen an increase. Indian start-ups have also seen a rise in funding due to companies diversifying their manufacturing and supply chains. The overall outlook for the logistics sector remains uncertain, but there is confidence that funding will return in the long run.
After reaching an unprecedented $25.6 billion in 2021, venture funding for logistics start-ups fell to just $2.9 billion in 2023 — a two-year plunge of nearly 90 percent, and the lowest level of funding since 2015.
A number of factors are driving this sharp pullback by investors, including high interest rates, a global slowdown in the shipping industry, and excess capacity among cargo carriers.
Before the Covid-19 pandemic, e-commerce spending had been growing at an annual rate of 10–15 percent, accelerating to 29 percent growth in 2020. However, the growth rate has slowed down to approximately five percent annually.
The decline in demand for physical goods has led to a decrease in global freight volumes, with sea freight volumes stagnating and air freight volumes decreasing between 2022 and 2023.
Despite the overall decline in funding, last-mile start-ups and software and systems start-ups have seen an increase in funding over the past two years.
Indian start-ups have almost doubled their share of total funding between 2022 and 2023, benefiting from companies diversifying their manufacturing and supply chains.
Confidence remains that logistics sector funding will return in the long run, with the sector accounting for 10 percent of GDP. Entrepreneurs are advised to focus on a realistic path to profitability as investors may demand financial viability sooner rather than later.
