Steven Dana: 0:03

Machine learning algorithms integrating with autonomy is something that's been happening. But it really feels like we're on the precipice of something even greater. And it, it's been certainly been in the news lately around, ChatGPT and, language models. And it's not clear I haven't seen that world merge yet with the autonomous companies in supply chain automation. But it's really interesting to imagine how that, could start, happening

Tom Raftery: 0:32

Good morning, good afternoon, or good evening, wherever you are in the world. This is the Digital Supply Chain podcast, the number one podcast focusing on the digitization of supply chain, and I'm your host, Tom Raftery. Hi everyone. And welcome to episode 311 of the digital supply chain podcast. My name is Tom Raftery, and I'm delighted to be here with you today sharing the latest insights and trends in supply chain. Before we kick off today's show. I just want to take a brief moment to express my sincere gratitude to all of this podcast's amazing supporters. Your support has been instrumental in keeping this podcast going. And I am really grateful for each and every one of you. If you're not already a supporter, I'd like to encourage you to consider joining our community of like-minded individuals who are passionate about supply chain. Supporting this podcast is easy and affordable with options starting as low as just three euros or dollars a month, which is less than the cost of a cup of coffee, but your support would make a huge difference in keeping the show going strong. To become a supporter, simply click on the support link in the show notes of this, or any episode or visit tiny url.com/d S C pod. Now without further ado, I'd like to introduce my special guest today, Steven. Steven, welcome to the podcast. Would you like to introduce yourself?

Steven Dana: 1:57

Thanks, Tom. Glad to be here. I am Steven Dana. I'm a partner at Drake Star Partners, and we are a technology focused investment bank.

Tom Raftery: 2:09

In over 300 or so episodes of this podcast, Steve, I've never had a technology focused investment bank on the podcast before. What's that got to do with supply chain number one and what is it an investment bank does? A technology focused investment bank does? So two questions. What, what do you guys do and what's that got to do with supply chain?

Steven Dana: 2:32

We help companies raise money and we help, when they're going to get sold or seeking an exit and sometimes something in between quite often actually. And then, supply chain, as you know very well, is being disrupted by technology and there's, that means there's tons of change and tons of disruption and tons of new companies forming and growing. And I'm part of that ecosystem, helping, those companies, raise money and, and exit.

Tom Raftery: 3:07

Okay. And do you specialize in supply chain or does your company specialize in supply chain or, you know, where where does supply chain fit into the whole, the whole picture?

Steven Dana: 3:19

I focus on supply chain automation. It's kind of a broad term, sort of what does that really mean? To me it's, the technology, particularly for me, it's emerging and advanced technology that is in the warehouse and in the factory primarily around, robotics and sensing software and advanced services. And my firm, Drake Star, we're. Our technology focus covers a variety of areas, and I lead that focus around the industrial technology, supply chain area.

Tom Raftery: 3:55

Okay, cool. And you recently came out with your supply chain automation report. Can you talk to me a little bit about what kind of, findings you came out with that that report?

Steven Dana: 4:12

Yes, it's an interesting time in the financial markets. And you know, it's been definitely, I've been part of, as an advisor, for I guess the better part of 20 years now. And so I've seen a few of these cycles, each being unique, but there's some, you know, some lessons to be learned across them. In this current one, and from, you can see in our, in our, report, deal volumes. So companies, you know, the number of companies raising money, let's say mm-hmm, or selling broadly around technology, have decreased sharply, since, call it summer of 2000, you know, 22. But if you peel back the onion a bit there around this area that I cover, supply chain automation, deal volumes were actually slightly up from what was record levels already, going into the beginning of 2022, and then in 2021. The dollar value of those deals has come down a bit and that mostly is from a reduction in the very large deals. But we are talking about you know, smaller growth type companies, which is, you know, growth and mid-cap companies, what, what we focus on, not so much, companies going public or those sorts of things. In that area, there's been a lot of energy continuing, and a lot of deals. So that was one large takeaway. Some of my clients are realizing when they just read sort of the headlines. It, it's not as obvious.

Tom Raftery: 5:47

Okay. So there's more happening in supply chain than in a lot of other sectors.

Steven Dana: 5:54

Yes, exactly. It's in, say, FinTech and, and other areas. There's been a dramatic reduction even in those other, smaller midcap deals that don't rely as much on debts or the public markets. Even in that area, you know, other technology sectors there's been a, a large decline, but in supply chain automation, it's still going strong. Why? There are, well first of all, there, there are a couple macro factors. So one there aren't enough people to do the work that needs to be done in a factory, in a warehouse. Okay. And the companies that I'm working with often are helping, not replacing people by any means. They were mostly, they're, keeping people in the loop, but helping those people do so much more and helping you know, customers satisfy demand without, having those, people. So that's helpful. Also there's been a movement towards you know, reshoring. factories and production processes back to, to the US, and we tend to have a kind of a global view, but just thinking from the US perspective, that's another thing affecting things. And also the tech is just getting better, right? Um mm-hmm. What to be sort of science project stuff or, you know, pilot, we call it pilot purgatory. It's now, you know, production scale things that are occurring.

Tom Raftery: 7:24

Okay. Fascinating. You were at ProMat this year the, the, the big conference in Chicago, I think it is. What were the takeaways you got from that?

Steven Dana: 7:38

There were a couple themes that jumped out from, ProMat and around technology and I think are worth. And I think, you know, quite different from the last time I was there, which, which was, you know, admittedly a couple years ago. The first being electrification. So the industrial, a lot of the industrial world is turning to is electrifying. And that, obviously there were more sort of battery storage, electric storage systems, charging systems and that sort of thing than I would've expected. The robotics companies, which, you know, used to have sort of smaller booths and weren't as core to the show are now massive booths all in the center with huge lines and a lot of energy around that. And becoming, very large, companies. And I think those were actually the two, you know, main technology themes that I, that I noticed.

Tom Raftery: 8:32

And when you say electrification, is it like electrification for electric vehicles or is it like electric arc furnaces for for smelting iron or, or where, where are we there? Or, or somewhere in between or all of the above or, what kind of electrification?

Steven Dana: 8:51

So electrification of the charging infrastructure and of OEM vehicle would be the simple way to put it. And then the digitization of those vehicles and allowing them to be intelligent and know where everyone is and the safety elements of it. So I guess would be broad. A more, I guess a better way to say it is the digitization of, of the vehicles within the supply chain and then all the data and intelligence that's around that.

Tom Raftery: 9:20

And the other one is robotics. So there's a huge uptick in interest around robotics, at least at ProMat. And are, is that reflected in, in deals you're seeing as well?

Steven Dana: 9:30

Yeah, I mean we we recently plug, we, it's my plug, but we recently raised money for a company That's that's in the robotic space that does sort of welding automation, which is in that factory side of what I, what I focus on. But also on the supply chain side there's been, you know, an increase in very large deals around robotics, though we have a company like Locus Robotics or Auto Store that are now, you know, becoming quite massive.

Tom Raftery: 10:01

Okay. What are some emerging technologies or trends that you think will have an impact on the future of supply chain automation?

Steven Dana: 10:11

I think the machine machine learning algorithms integrating with autonomy is something that's been happening. But it really feels like we're on the precipice of something even greater. And it, it's been certainly been in the news lately around, you know, ChatGPT and, you know, language models. And it's not clear I haven't seen that world merge yet with the autonomous companies in supply chain automation. But it's really interesting to imagine how that, could start, happening. But on the more, you know, practical day to day basis, it's just everything's being digitized and there's the, the different equipment and even people right, are becoming part of larger sort of data platforms that are being optimized. In a way as maybe several years back, it was a bunch of point solutions. Nothing was really integrated. And now getting credible you know, real solutions that are looking at this digitized warehouse more as a whole holistically.

Tom Raftery: 11:15

Yeah. Yeah. you mentioned ChatGPT there, and I, I, I think it's fascinating. It has been revolutionary, obviously, I mean, fastest app to, was it a hundred million users ever? Combining that with robotics. If you could have a kind of a humanoid robot or a robot with a kind of a human face interface that can then can then speak back to you because we've got text of audio is no problem. Now we've got these large language models as well, so suddenly you could have these helper robots that you can interact with. You can speak to them potentially. I mean, this is, hasn't arrived yet, but you know, this is where I see the two of them coming together. You know, you get your robot and you get your large language model with a, with a ui. Mix the two of those together, and suddenly you're speaking in natural language to a robot, and it's replying to you in the way that ChatGPT replies to you in text today. The robot replies to you in the same way, and understands and carries out the tasks that you ask it to do. I mean, that's gotta be the next big thing, right, in automation?

Steven Dana: 12:24

If it is it would be really interesting to see which companies you know, which players. So how does that disrupt the existing ecosystem of those companies that are, you know, making a lot of money selling technology into warehouses and, and, and factories, of course, more broadly than that. Because I think those are very different, kind of companies that are than the ones that are, doing that today. And I can't sit here and pretend to know how all that's gonna play out, but I, I love just, it just, you know, gets me out of bed in the morning. Being part of all this technology disruption which is seems to be changing at even faster pace every day. Mm-hmm. And I know guys like you are, are, you know, keeping up with all of this and that's, it becomes harder and harder every day, I'll tell you, but it's super interesting.

Tom Raftery: 13:19

Sure. Are there, are there any industries in particular that are adopting these kind of automation technologies, better than others? You know, who, who are kind of the, I don't wanna say the winners, but who, who are the, the leaders in the space taking up automation and who are the bit of the laggards

Steven Dana: 14:15

In the, so the, one of the most demanding areas of the supply chain is around e-commerce. And also there's just a lot of you know, dollars going into that process. And therefore what we've seen is the companies that are focusing in on the e-commerce you know, section of, of logistics tended to be the ones that grew up, you know, faster and therefore, you know, attracted more capital. And there's a bit of a reinforcing cycle there. So with the, you know, consumers want what they want, when they want it, and that meanwhile we don't have enough people, as we mentioned earlier. So technology's so needed in that world, right? So that's been the area where we see the most adoption, the biggest companies. But there's other areas that are, growing very quickly, like a harder or another area which hasn't had as much adoption perhaps would be areas where there's smaller volumes with each thing or unit being unique because you, you wouldn't make sense maybe to set up a robotic cell for, you know, something where you're gonna have to change it in an hour, right? Because you're making a different thing, a widget, whatever it is. Sure. I heard about an example of that with cabinets. So apparently cabinets are often custom made. I've never had custom cabinets. I think I'm actually doing something wrong, so that's an area where it's really been very. You know, manual, right? But there are companies that are emerging that are helping you program robots very quickly and using cobots versus a large industrial kind of kind of robot. And so areas like that are areas where we we're seeing the technology get to a point It's good enough or will be very soon. Right. So that even those, well maybe we can call it the long tail of the supply chain will also be automated. And I've heard, I can't verify this, but that portion of the supply chain is actually larger. Right. In terms of maybe people or you know, total dollars.

Tom Raftery: 16:23

Okay. Okay. The e-commerce one makes a lot of sense, I guess, because many e-commerce companies would be digital native anyway, they would've started off you know, being, be, being an e-commerce, they would've started off being digital. And of course it's a very low margin space as well. And so, and you know, to your point, it is quite warehouse and labor intensive. So in a time of labor shortages, I can see how they would jump on automation very, very quickly.

Steven Dana: 16:52

Far. Yeah. They bought, you know, like Kiva, like Amazon bought early on and Shopify bought Six River. Just underscoring that, that point that you just made.

Tom Raftery: 17:01

Yeah, absolutely. So Steve, as, as the supply chain automation, as it starts to become more widespread, how do you see the competitive landscape evolving for both the established players and new entrants in the market?

Steven Dana: 17:19

I think it's really interesting because whenever you have this kind of level of disruption, you have the opportunity, you know, of technology disruption, you have the opportunity for new players to emerge, right, that were once, you know, just startups, right? That become big companies. And we are seeing that with some of the companies I'd mentioned earlier, but many more that I didn't mention. Yeah. So I do think that we'll continue to see some larger players become mammoth companies. In addition to that, there have been a lot of companies that have raised, you know, a lot of money over the years and may find a home, you know, within the existing that are players that largely do control the market. On one end you'll see some of these companies who have successfully raised and are now quite revenue generating perhaps be, you know, not acquired, but their own, be beyond their own large. We do think that we're gonna see a lot of consolidation of this longer tail of, of companies that have, you know, in many cases fantastic technology, but perhaps because of, say distribution advantages within a larger company or maybe with a technology they have once married with a larger platform would be, you know, a fantastic fit, but on its own, may not be like a company. We think, you know, we'll see a, a lot of activity in the space, just generally of both those things.

Tom Raftery: 18:54

Okay. You mentioned electrification already, but how else do you think an increasing focus on sustainability and environmentally friendly practices might impact the development and adoption of supply chain automation technologies?

Steven Dana: 19:14

We're seeing it a lot maybe outside of the, the warehouse when you know, you're starting to think about the emissions produced by all the trucks and planes, trains, and automobiles moving things around the world. And there are we've seen a few different business models that have some, it's their central focus, but other just as a result being, you know, far greater efficiency. So I, I think just the machine learning, the optimization that look has been frankly something that's been part of the technology for, for many years will continue to get, to get better. We will have seen companies that are switching their fleets, for example, to electric fleets and that we'll be, I think we will, will continue to see that as another way where carbon emissions, you know, will, will be addressed. We're seeing it too in, let's say for example, construction sites where large fleets are are switching actually to, to electric, which I had not realized, but I guess the torque on, on electric is, is helpful for you know, doing work on a construction site. So that's a little bit outside of the, you know, warehouse and supply chain, but just another area where the OEMs are switching

Tom Raftery: 20:36

Sure. In construction, it's also handy for permitting because electric vehicles are significantly quieter and because they don't have tailpipe emissions, you can run them indoors as well without requiring ventilation. So, hugely, hugely advantageous in the construction industry to be using electric vehicles. Now, whether it's diggers, whether it's whatever. So, yeah, I, I can see lots of, of, of reasons why it would be taking off in construction. So what's up and coming with investors, what's kind of coming down the line? What are you guys looking at and saying, Ooh, this looks nice, and kind of rubbing your hands, gleefully?

Steven Dana: 21:19

Well, anything I bring too investors is they, they immediately love so I think that it, you know, being aware of the market we're in now I think that does play into it. Even though, like I said, the industrial slash specifically supply chain automation, there's more energy than I'm seeing in other markets. It's, it's still a different kind of financial world that we're in for the foreseeable. And that means that it's investors, you know, first and foremost have a little bit of maybe it's before they're all about market size and growth. That's all still important, but now it's also, you know, a bit of that safety margin. So if you're getting close to profitability or you can see it, that's, that's important. If you have a little bit more scale, a bit of more diversity with your customer base these are all things that are really top of mind for, for investors. Beyond that, some areas that are, you know, more interesting that we're seeing is around vision based solutions that combine, you know, machine learning and vision is an area we, we keep hearing from investors that they're doing a deep dive in semantically.

Tom Raftery: 22:30

Hmm. Fascinating, fascinating. Cool. Just to name

Steven Dana: 22:33

one there, there's a bunch.

Tom Raftery: 22:34

Okay. We're coming towards the end of the podcast now, Steve. Is there any question that I haven't asked that you wish I had or any aspect of this we haven't touched on that you think it's important for people to think about?

Steven Dana: 22:51

I think you've done a fantastic job, Tom, covering a little bit of, of giving I guess people an insight into what I've been up to and seeing these entrepreneurs change the supply chain, you know, world with robotics and sensors. And it's been fun chatting with you a little bit about that. If anyone wants to learn, you know, more about what we're doing at at Drake Star, you can find me on on LinkedIn Steven Dana, and I'd be happy to talk more about it.

Tom Raftery: 23:19

Super. That was my, my final question was gonna be that if people wanna know more is it just LinkedIn or do you have other things, I mean, your website as well. Will that give people more information or is there somewhere else people got, should be looking as well?

Steven Dana: 23:32

Yes at Drake Star's website we have our supply chain automation report, which goes into all the nitty gritty details of deals occurring in supply chain automation. And has my contact information as well as on LinkedIn.

Tom Raftery: 23:47

Perfect. Great. I'll put those links in the show notes so everyone has access to them. Steve, that's been fascinating. Thanks a million for coming in the podcast today.

Steven Dana: 23:56

Thank you, Tom. It's been pleasure.

Tom Raftery: 23:59

Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about digital supply chains, simply drop me an email to TomRaftery@outlook.com If you like the show, please don't forget to click Follow on it in your podcast application of choice to be sure to get new episodes as soon as they're published Also, please don't forget to rate and review the podcast. It really does help new people to find a show. Thanks, catch you all next time.