Here’s why we are extremely excited to announce a $1.3m seed financing in Kontainers, the booking.com of the container shipping industry.
We're excited to announce today that EC1 Capital has led a $1.3m seed round in Kontainers, with participation from our friends at Partech Ventures and Northstar Ventures; the company previously also took part in the Ignite accelerator program.
We have been tracking the company for well over a year now, since a receiving a cold email in October 2014. That time gave us a chance to understand the industry, monitor how the team has executed and how momentum has started to build-up. Below is the investment thesis that drove us to conclude a financing in this disruptive and fast growing company.
What problem is Kontainers solving?
Since containarisation of global trade took off post World War II, the way the industry operates has barely changed: when importers or exporters want to get a quote for a container they must contact a freight forwarder by phone/fax/email, on rare occasions via web forms, and wait for a reply. Getting a quote back may take up to days, with little to no transparency in the process. In addition to that, companies are required to go through the tedious customs and bill of lading paperwork, which takes further time and human resources away from the actual business.
Up till now there was no single tool for exporters or importers to get instant access to container rates, complete the booking and then track their goods, until Kontainers came about.
The Pain Killer
Kontainers is an online point-to-point booking platform that electronically interfaces with shipping lines, strategic freight forwarders, trucking partners and customs clearance partners, importing shipping routes and rates and combining them with real time sailing data. The customer is then presented with a snapshot of the entire trade lane, so they can make an informed choice on the fastest, cheapest or greenest shipping line. The entire booking can then be completed online in seconds, including trucking and customs, just as easily as booking a hotel room on booking.com.
So why did EC1 Capital invest in Kontainers?
1) An enormous market and vision: powering global trade
The ocean freight industry in undoubtedly one of the largest industries we have had the luxury of investing it. Over 650 million TEU's (twenty foot equivalent units) passed through ports globally in 2013, transporting goods worth an estimated $5.6 trillion and growing. Containers are truly the backbone of world trade.
The freight forwarding part of the value chain is incredibly fragmented, with 6,000 freight forwarders only in the UK & US, serving approximately 600,000 customers. The ocean segment of the freight forwarding market is worth $63 billion a year, with the largest player commanding a market share of just under 15%. All together intermediaries control over 70% of the containers booked, with shipping lines getting the remainder of the bookings directly, typically from the largest accounts (e.g. Argos, IKEA, M&S, Tesco). Shipping lines today just aren't equipped to deal with SMEs, which has allowed freight forwarders to thrive despite inefficient, labour intensive and technologically antiquated operations.
Kontainers, by leveraging technology, is effectively re-inventing how a large portion of global trade is carried out: by making it simpler, cheaper and more efficient for importers and exporters to ship goods, Kontainers is ultimately enabling more trade. The opportunity is to one day become the operating system that powers global trade.
2) The right team: industry + tech
CEO Graham Parker has 15 years experience in the freight forwarding industry: aged 22 he founded what became Ireland’s largest ocean forwarder, doubling in size every year since 2003 and achiving an unprecedented growth in this industry.
What we loved about Graham is that he has been working on this problem for his entire career and Kontainers was born out of 'scratching his own itch’. Graham has developed a deep understanding of client’s needs, frustrations and the technology required to solve this problem, which we believe is critical to build a successful business in this sector.
CTO Charles Lee has vast experience across many area of technologies, with a focus on big data and machine learning. He was part of the original team that decoded the Human Genome. With a critical eye on product development, he was involved in a successful social photo startup Hotprints which later sold to Picaboo.
Graham Parker and Charles Lee, founders of Kontainers
This great combination of industry experience and a strong technical expertise is complemented by a high caliber board including Lars Jensen, former senior director of Maersk, the world’s largest and most innovative freight shipping line, where amongst other things he was in charge of developing their e-business since its inception.
3) The right timing: an industry at the verge of digitisation
Picking the right team in a large market is only a good bet if the timing is also right. Ocean freight is one of the last frontiers of digitisation, still dominated by unsophisticated intermediaries who conduct their business with phone calls, pen and paper and Excel spreadsheets.
What Kontainers is trying to do is not entirely new in fact, it has been tried before as far back as 10 years ago with companies like YouShip, part of Mearsk. However the market has historically been very resistant to technical change and slow moving, so the timing as never been right, until today. When various other parts of a business are now run on software (communication, accounting, sales, warehouse management, etc), we believe we are at a point when all industries are forced to evaluate their position in the digital age: by looking at the rate of adoption by customers and the level of interest that Kontaniers are attracting in the industry, we believe that time is now for the freight industry.
4) Great fit with EC1 investment theme: disruption of legacy incumbents
One of our recurring investment themes at EC1 has been the adoption of high-tech in low-tech industries: we’ve previously backed a number of tech businesses disrupting large legacy incumbents that are using inadequate or non-existant software, as we believe the shift to the cloud is inevitable and happening at an accelerating pace. A few examples in our portfolio would be HandsHQ, (cloud-based documentation platform for health and safety in the construction industry), UserReplay and Hypaship (innovating ecommerce SaaS businesses) and SmartTrade (the mobile operating system for tradesmen). We are now doing it again with Kontainers, which plays right into this theme, disrupting the legacy freight forwarding industry.
Kontainers have gained impressive traction and industry validation in a short space of time, the team has been executing on an exciting product roadmap at a speed we have rarely seen before. The sheer size of the addressable market makes this one of the largest industries yet to be disrupted by technology, and we believe Kontainers is best placed to become the market leader.
We are looking forward to joining the Kontainers team and other co-investors on this journey, let’s hope we have a smooth sailing!
The official press release can be read here and in The Wall Street Journal.
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