Singapore’s maritime start-up scene looks to have escaped the worst of the tech sector meltdown, but insiders warn that it may have to adjust to the new reality.
Big tech companies have seen hundreds of billions of dollars wiped off their valuations, while at the same time thousands of staff have been laid off in a bid to rein in costs.
While some companies, such as Flexport, have been among those shedding staff, some industry observers say maritime start-ups are benefiting from the bull run many shipping sectors have recently experienced.
“Shipping is countercyclical so most of our customers have just had a record year of performance where they have made more money than ever before and now, they need to invest or spend it,” Nick Clarke, chief executive of Greywing told TradeWinds.
“While maritime start-ups are affected by the new venture fundraising environment, there is less impact from a global slowdown than in other sectors.”
Shaun Hon, general partner at Motion Ventures, said the maritime industry has been undervalued for a long time and that is why he says he is seeing “a lot of great opportunities in the space”.
“There hasn’t been any noticeable change in the amount of fundraising by maritime start-ups and the appetite from investors because these start-ups were never in an overheated funding environment to begin with, thus there isn’t any correction in valuation or amount raised,” he said.
“But now it’s slowly starting to increase because a lot of investors outside the space have begun to realise how undervalued maritime start-ups are.
“For Motion Ventures, we haven’t slowed down our pace of investments and if anything we are increasing our pace because we see a lot of good opportunities,” he added.
Axel Tan, innovation lead at IMC Ventures, said when there is a correction in valuation across the board it will be hard for any industry to go against that trend.
“The importance of managing finances and driving profitability will be greater. What the earlier-stage maritime start-ups have going for them is that they are still at a point where they can adjust their funding and growth strategy.”
Tan said there are still opportunities out there, especially for investors who are well connected to get the best deals out there in the market.
“We do see greater scrutiny on financials. For example, later-staged start-ups are focusing more on positive Ebitda rather than revenue growth at all costs,” he said.
“In general, start-ups are more in tune with what is going on in the global markets and hence the more realistic valuations.
“At IMC Ventures, we continue to focus on early stage maritime and logistics companies who are targeting large opportunity markets with good business models,” he added.
Tan said the current slowdown seems to be “more complex [than the last dot.com crash] and is happening amid other global tensions that might take time to show its full effects”.
“In 2000, smartphone internet penetration was almost nil as compared to how widespread it is now,” he said.
“Today, information spreads almost instantaneously, and we can act anytime through apps and mobile optimised web portals. Perhaps this could partly explain the virality and sheer speed of the recent bank runs.”
Tan said IMC Ventures is reviewing opportunities “more carefully”.
“In some areas, better valuations do bring start-ups within our mandate, so we are able to consider a wider opportunity set,” he said.
“As a corporate VC, we will not react to lower valuations by investing more. That being said, we do see an opportunity to tap on the growing pace and relevance of innovation for maritime.”
With all the redundancies in the tech sector, is this an opportunity for maritime start-ups to recruit talent that would otherwise be unavailable to them?
“Absolutely,” said Motion Venture’s Hon.
“There are a lot of challenges that come with hiring talent with domain knowledge, but maritime start-ups are well-funded and will continue to be so for the foreseeable future.
“That makes it a great choice for people who want to join a team with a strong foundation and stability.
“The current state of the maritime industry has very much sparked a new boom. There are a lot of companies that are funding new projects, and they all need talented people to help them succeed,” he added.
Greywing’s Clarke thinks there will be a much higher volume of applications because there are so many more people available having left the large tech companies.
“But given that recruiting is one of the hardest things to do in a company, I am not sure it will be any easier. Truly great people are usually employed or building and if you want to find them that’s typically what they are doing,” he said.
However, IMC Venture’s Tan has a slightly different take.
“Tech talent was expensive when growth was cheap. For start-ups that have validated their customer market and are building out tech to scale, this would be an opportunity,” he said.
“For those in earlier stages, tech might not yet be the bottleneck. Product and marketing, business development, and engineering talent would come first.”
Looking ahead, IMC Venture’s Tan said the maritime start-up sector is still small and growing, and so it should be able to shrug off events like the collapse of Silicon Valley Bank and continue to grow.
“But the valuation growth and metrics that investors focus on will change, and so maritime start-ups might have to raise money and grow differently than the era before,” he said.
“The maritime business itself has benefited from significant excess profits in the last year or so, and several companies have announced big budgets for innovation and environmental investment. I think that presents a unique tailwind for start-ups in the maritime sector.”
On the question of whether the downturn will hold back technical innovation in the maritime start-up space, Greywing’s Clarke is sanguine.
“There is nothing better than a crisis to drive innovation,” he said.
“It is not the strongest who survive but those most adaptable to change, and I think a lot of start-ups, including us, are about to find out just how adaptable we are.”
