Manifest 2023: There’s Never Been a Better Time to Build
Mar 23, 2023|
Eclipse Partner Aidan Madigan-Curtis participated in a panel at Manifest — titled “Put Your Money Where Your Mouth Is” — on investing during macroeconomic uncertainty, particularly how supply chain will be affected.
At Manifest, a leading conference for logistics and supply chain technology innovators, Eclipse Partner Aidan Madigan-Curtis joined Peter Votkjaer Jorgensen, Partner at Maersk Growth, Andrew Leto, Founder and CEO of Emerge, and Santosh Sankar, Partner at Dynamo Ventures, to discuss where investors should be directing their capital to transform supply chains, even during an era of uncertainty.
“While venture capital in general has been pulling back in the last year — and we see a bit of that certainly in supply chain — versus the fervor that existed in 2021, it's our belief that there's never been a more exciting time to build businesses across our industries.” She continued on to highlight how the circumstances affecting investments and capital deployment aren’t unique to the post-pandemic era. According to Madigan-Curtis, an unprecedented era of disruption, including deglobalization, decarbonization, and aging infrastructure, have created a highly attractive opportunity set for entrepreneurs and investors in physical industries. This is in part because the problems to solve are essential — like our sources of energy generation and storage, our food production, and our housing stock, and in part because the status quo is not sustainable as a society.
Deglobalization: Bringing supply chains closer to home
The pressure on traditional global pathways are creating cracks in supply chain. Madigan-Curtis credits this to unparalleled tensions between the United States and China, the ongoing war in Ukraine, in addition to increasing regulations throughout Europe related to supply chain and logistics. Off-shoring manufacturing, which monopolized the industry for decades, has proven to no longer be a viable solution. Investors are turning their attention to reshoring, nearshoring, and friendshoring.
“We're very interested in manufacturing automation, as well as solutions for metal parts fabrication,” said Madigan-Curtis. “And when you really think about end-to-end manufacturing, it's not just chip fabs – it’s about how you actually make finished devices or finished products not only onshore, but also friend-shored or nearby and in new environments.”
The panel also discussed how deglobalization and rising macro political strain are putting a heavier emphasis on the growth of defense technologies. A report from S&P Global emphasizes that supply chain resilience is becoming a “national security imperative” for many countries. As a result, global leaders are not only facing new import and export challenges, but they are also shifting priorities toward developing and implementing formalized strategies to create greater resiliency across all critical supply chains.
Decarbonization: The growing need for electric infrastructure and carbon-neutral technology
The panelists discussed how organizations across every industry are putting a concerted focus on decarbonization, establishing net-zero initiatives, and investing in carbon neutral technologies. This signals a tremendous opportunity for the supply chain market, according to Madigan-Curtis. She argues, “The interest is not only in energy manufacturing, like battery manufacturing, but battery supply chains. We are establishing new ways of both discovering and processing critical minerals, which are, generally speaking, processed somewhere else in the world right now. I think we’ve seen the government take major steps to try to subsidize and incentivize manufacturing for those minerals and the full supply chains for batteries, and that's an area of interest for us as well.”
In addition to finding solutions to battery supply and energy storage, there is also the question of how to reduce the carbon footprint of supply chains themselves, again presenting an opportunity for innovation and investment. Jorgensen noted there is a “very high focus on resilient supply chains, visibility, and decarbonization in particular.” He went on to say that people “want to have a carbon neutral supply chain, which is not something you just pull out of your pocket. So that's something we've been faced with and therefore, we look to invest in.”
Aging infrastructure: Upgrading the foundations of society
Infrastructure, which heavily relies on government funding and policy, is at a pivotal moment in the United States. The Infrastructure Report Card reports 43% of public roadways are in poor or mediocre condition and 45% of Americans do not have access to public transit — signifying the aging infrastructure in our country is in dire need of an upgrade. Those entrepreneurs developing solutions that will address the detrimental consequences of outdated infrastructure are capturing the eyes of investors. But, the raw materials and labor required to make these imperative changes are difficult to source, as proven during the pandemic. As a result, critical construction is backlogged. Madigan-Curtis says investing in solutions that can accelerate and decarbonize the supply of raw materials — as well as the time to build — presents huge opportunities for capital return.
Madigan-Curtis calls out housing as one of the biggest areas in need of modernization, and the key areas of focus for companies she’s interested in investing in as it relates to addressing the nation’s housing crisis: “Our roads, our bridges, our tunnels, our housing. Housing stock is at an all-time low, which is why it was so impacted by inflation. We just made an investment in a modular prefabrication construction company and are very interested in companies innovating in the aging infrastructure environment.”
Automation: Digitizing factories to ramp up production
Modernization requires digital transformation, and Madigan-Curtis believes the current issues with the outdated technologies in the supply chain industry will be alleviated by automating hardware to operate as a service (HaaS). She referenced a report that looks at the growth of HaaS and how services — such as automation, monitoring, and analytics — are creating revenue reliability for manufacturers. The report specifically highlights the acceleration of digital adoption. Robotics makes the physical labor less strenuous, tedious, and ultimately safer for humans, enabling workers to innovate and develop new skills.
“Automation can fix some of the workforce labor issues around jobs that people don't want,” said Madigan-Curtis. “I also think there are opportunities to better skill workers, and we’re investing in that space as well. How do you educate a modern workforce towards the skill sets needed in increasingly digitized manufacturing environments? We've seen a lot of changes in hybrid-robotic work, and I think there's a lot of work to be done skilling our workforce to adapt to this shifting hybrid digital-physical workplace.”
Put Your Money Where Your Mouth Is
The sheer number of organizations innovating across supply chain, logistics, and manufacturing are plentiful. Madigan-Curtis highlighted the factors Eclipse is focused on for any revenue-stage company — including revenue size and growth, gross margins, and a strong team — that will actually set an organization on a path to profitability and scale. Those developing physical, full-stack products face a separate set of challenges around how to adeptly build in historically capital-intensive sectors that some investors might be wary of. These full-stack businesses are Eclipse’s core competency, and teams looking for thesis-aligned capital in physical industries can find a great partner in Eclipse.
When asked what one piece of advice she would give to the founders in the audience, Madigan-Curtis said, “It might seem like an obvious piece of advice to give, but make sure you’re building a good business. By that I mean: ensure you have a ready market for your product, you have a clear plan around how invested dollars will enable you to hit critical next milestones for your commercialization, you have the right team to scale, and a path to strong gross margin and profitability. The investing world departed from caring about these core metrics for many years, but it is critical for founders to go back to business fundamentals and make sure that your plans map to that.”
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