The first half of 2022 ended the era of expansive valuations in logistics technology that had characterized 2020 and 2021. The public market correction reached the private markets with about a two-quarter lag, as it typically does. By June 2022, Series A rounds in European logistics software that would have closed at 15-18x forward ARR multiples in late 2021 were pricing at 8-10x, and some previously oversubscribed rounds were not closing at all. We have been watching this correction carefully across the market we invest in and want to share where we have landed on what it means for the sector.
The short version: the correction has been more significant in the categories we were less enthusiastic about than in the categories where we have concentrated our own capital. That is partly self-serving to say, and we acknowledge that. It also happens to be an accurate description of what we're observing.
Where the correction has hit hardest
The categories that have experienced the largest multiple contraction in European logistics software are the ones that saw the most undisciplined capital deployment during the 2020-2021 peak. Freight brokerage platforms that raised at demand-pull multiples during peak supply chain disruption are now facing a much more normal freight market and a customer base that has more options and less urgency. The TAM-storytelling that justified peak valuations — "the global freight brokerage market is $4 trillion" — turns out not to support the revenue multiple when the growth rate normalizes.
E-commerce fulfillment infrastructure is a second category that has corrected sharply. Several European distributed fulfillment networks raised at revenue multiples that required sustained 50-60% year-over-year growth. When e-commerce spend normalized following the pandemic pull-forward effect, the growth rates they'd been posting became unsustainable. Corrections in this category have been significant — multiple European fulfillment infrastructure companies have done down rounds or restructured entirely.
Road freight capacity marketplaces have also corrected. The argument for investing in European road freight marketplaces in 2020-2021 was partly about market structure — European road freight is highly fragmented, with hundreds of thousands of small carriers — and partly about demand disruption creating shipper urgency to digitize procurement. Both of those structural factors are real. The issue is that several companies raised at multiples that required them to capture meaningful share of a large market quickly, and market share capture in a fragmented carrier market is slow and capital-intensive. The correction has separated companies that were building toward defensible network positions from companies that were riding a wave without building structural advantages.
Where we see the correction creating opportunity
For early-stage investors with dry powder, market corrections are most valuable when they compress valuations without compressing the structural case for the sector. We believe that is the situation in European logistics AI software at mid-2022.
The correction has not changed the fundamental problem set. European logistics operators still have supply chain software built on rule-based systems that don't adapt to variation. The ML tooling and cloud data infrastructure that makes AI-native logistics software buildable is still in place and improving. The cohort of experienced operator-founders who understand the problem domain at the technical level is still there — in some ways the correction is helpful here, because some experienced engineers who were considering founding companies in 2021 but were priced out of equity in well-funded companies are now reconsidering. We've had five conversations with potential founders in the past 60 days with backgrounds we're strongly interested in.
The correction has also been useful for separating genuine ML-native products from workflow software with ML features added. Under expansive market conditions, it was possible to raise meaningful capital on a TMS with some ML-based route recommendations layered on top, presenting it as an AI logistics product. Those businesses are harder to finance now because the ML layer doesn't produce meaningful differentiation and the workflow software layer is competing on price and enterprise relationships, not product quality. The category that has held up best through the correction — in terms of both customer retention and investor interest — is software where the prediction model is the core product, not a feature. That was our thesis and it continues to hold.
Fund I deployment in this context
Fund I is approximately 85% deployed as of mid-2022. We have made eight investments in total, including three made during the first half of this year at valuations that reflect the corrected market. The three 2022 investments are at entry multiples meaningfully below what we would have paid in 2021 for comparable companies, with no material degradation in the quality of founding teams or early traction metrics. That is an outcome we're satisfied with.
Our portfolio companies are at various stages of navigating the correction. Several are adjusting burn rates to extend runway in a fundraising environment that is meaningfully harder than when they raised their last round. We've been active in helping founding teams think through the trade-offs between growth investment and capital efficiency as market conditions have changed. The companies that were running the tightest ships operationally have had the least restructuring to do. The ones that had sized headcount and marketing spend for a continued 2021 market have had harder adjustments.
We are not saying any of our portfolio companies are in distress. We are saying that the transition from a market where growth capital was cheap and patient to a market where it is expensive and demanding has required real operational adjustment at companies that had calibrated their plans to the earlier environment. This is not unique to our portfolio — it is a universal dynamic in venture-backed software right now. But we think it is worth being honest about rather than presenting our portfolio as uniformly well-positioned.
What we're watching in the second half of 2022
Three dynamics we're tracking closely for the rest of this year.
Enterprise sales cycle length in European logistics operators. The 2021 market produced anomalously short sales cycles because supply chain disruption created executive-level urgency for software procurement. As that urgency subsides, we expect cycles to extend back toward historical norms of 9–12 months for enterprise TMS or WMS decisions. The portfolio companies that have modeled their second half of 2022 revenue on continued short cycles are the ones at most risk of plan misses. We've been explicit about this in board conversations.
The Series A market for logistics AI. Several of the companies we seeded in 2020-2021 are approaching Series A timelines in late 2022 and early 2023. The correction has meaningfully changed the Series A market. Rounds that would have been oversubscribed at 15x ARR in late 2021 will require proof of efficient growth at more disciplined multiples in late 2022. We've started working with affected portfolio companies on their Series A narratives early, rather than waiting for a fundraising process to begin. The founders who have the clearest story about why their specific ML product is defensible — why their model quality advantage will compound, why their data position creates barriers — will be in the best position.
The European sovereign logistics AI initiative. Several EU member state governments have indicated interest in funding domestic supply chain intelligence infrastructure following the 2021 disruptions. We are watching this closely, both as a potential customer for portfolio companies and as a potential source of non-dilutive capital for early-stage companies. The European Commission's supply chain resilience agenda is creating policy visibility for logistics software in a way that hadn't existed before. Whether that translates into procurement that is accessible to startups — rather than going primarily to established systems integrators — is still unclear.
Our posture through the correction
We are continuing to invest. With approximately 15% of Fund I remaining and Fund II conversations underway, we have capital to deploy into a market where we believe the best opportunities are better priced than they were 18 months ago. The correction that has hurt overvalued growth businesses has not changed the structural case for AI-native European logistics software. The founding teams who are building ML products with genuine prediction quality advantages, growing efficiently from a real early-adopter base, and maintaining strong operator relationships in their target markets are in a good position to build durable businesses from this environment. Those are the companies we want to back.