News / TIACA Innovation: Find new technologies via Plug and Play

Plug and Play offices

During TIACA’s Innovation days in Silicon Valley last month, organised by Matchlabn, senior delegates from across the air cargo industry met a wide variety of start-ups. The Loadstar is publishing a series of short articles looking at new technologies potentially suitable for the industry.

Start-up: Plug and Play

Plug and Play, founded in 2016, is a conduit between start-ups and large corporations, as well as being a seed investor. Its large Silicon Valley-based building is a “sourcing channel for venture firms”. It has so far sourced nearly 4,000 start-ups, accelerated more than 300, and made 34 investments.

Family-owned P&P invests about $20 to $30m a year in start-ups, mostly at the seed stage. Its lowest cheque value is about $25,000, and its largest is “north of $1m”. Decisions are taken fast, between two weeks and three months, while venture capital firms tend to take longer, about six months. It tends to take between 1% and 5% equity, and exits when the start-ups go public, or are bought out.

In contrast, venture capital firms generally look for 15% to 25% equity, with a board seat – but only invest in up to five a year. For the VC community, between 1% and 10% of start-ups reach unicorn status.

“If you have one big hit, it makes up for the other losses. It’s a risky business,” said a Plug and Play executive.

“The tech team is what is important to us – they need to be prepared to pivot, to be flexible. The tech team is more important than the business people.”

Corporations, which find the new companies via P&P, like to work with more mature start-ups.

“We need a handful of corporations serious about digital transformation, maybe five companies to invest as an accelerator. The biggest value for start-ups is our corporate partners, which could become their customers.”

Its corporate partners currently include the likes of Geodis, DHL, CH Robinson, DSV, DB Schenker and Brussels Airport.

P&P focuses on a number of sectors, but the supply chain practice has been one of the fastest-growing, especially since the start of the pandemic; travel was one of the hardest-hit.

“There is a lot more capital coming online,” said Farzin Shadpour, VP and MD of Plug and Play Supply Chain, speaking at Tiaca’s event in San Francisco last month.  “Mega deals are starting to creep in. More dollars, more acquisitions and the size of acquisitions is increasing. $1bn offers are starting to creep in and the space is starting to attract mainstream platforms.

“We are looking to deploy $500m, and will be constantly putting money in over the next few years. We are increasingly excited by emerging markets in Latin America and Africa. There is a lot of really great activity there.”

One of its current interests is in SAF distribution. It is also looking at airport technology, track and trace, better forecasting and imaging solutions.

“I think there will be a paradigm shift in the next few years, in IoT sensors. Sensors for pallets, case and item-level tracking.

“The holy grail is a totally automated supply chain. How can you create tech that can monitor in real time to detect event-driven problems and alert stakeholders? It’s going to take around five years for truly automated supply chains.”

P&P has not invested in drones because of the regulatory issues and because “hardware, such as drones, needs to raise hundreds of millions of dollars, while we invest small amounts”.

Mr Shadpour added: “The supply chain industry is currently stuck in a series A crunch. It’s very fragmented in market share, and people are waiting for generation two or three to come out.

“And there are fewer start-ups in air freight – although there are some such as Zen, cargo.one, Xeneta. But air cargo is starting to come online now.”

P&P’s building was part of its offering, housing start-ups. Occupancy before Covid was about 95% – now it is just 40% however.

“We are not relying on rents, though.”

Use case: seed money for start-ups; introductions to new technologies for corporations.