[Funding alert] The lowdown on AI logistics startup Locus' $22M funding by Falcon Edge and Tiger Global
AI-backed supply chain optimisation company Locus secured $22 million in a Series B round of funding led by Falcon Edge Capital and Tiger Global Management, with participation from existing investors Exfinity Venture Partners and Blume Ventures. This takes the total amount of funding raised by the startup to over $28 million. The deal values the company at nearly $100 million.
Founded in 2015 by BITS Pilani alumnus Nishith Rastogi and IIT Kharagpur alumnus Geet Garg, Locus is an advanced supply chain optimisation company that uses proprietary algorithms and deep learning to provide route optimisation, real-time tracking, insights and analytics, dynamic sales journey plans, efficient warehouse management and vehicle allocation and utilisation.
The team at Locus
Here’s a deep dive into the funding story, and the changes it will bring about in the company.
Fund raise process, dilution and changes in the board
Falcon Edge Capital led the round and will get a seat on the board of the company. For the current round, Navroz D Udwadia, Co-Founder, Falcon Edge Capital, led the deal, while Scott Schleifer, Managing Director of Tiger Global Management led it for Tiger Global. According to Nishith, the conversation started in November 2018 with Navroz, and was finalised over the next two months, while Tiger’s confirmation came in Febrary-March 2019.
Nishith explains the equity dilution with this round,
“Between the company and rest of the team, we’re still majority holders with board majority as well. Our investors have appreciated that because we’re an IP heavy company, and it’s important for us to maintain control of our direction.”
What interested investors?
According to Nishith, it was the growth and future aspects of the company that convinced the investors. He adds, “They were amazed by the fact that companies like BlueDart which have existed for decades and are experts in logistics, are not only our clients, but large scale clients. And that we’ve delivered double digit efficiency gain, which is huge.” He believes everybody on-board is very focused on billion-dollar-revenues, not just valuation.
“We believe the trillion dollar global logistics market is ripe for disruption via technological change, particularly AI and machine learning driven solutions. With Blue Dart and other prolific anchor customers, the team has demonstrated the ability to build and deliver cutting edge technology and algorithmic driven outcomes that provide attributable ROI to the enterprise at scale,” says Navroz D. Udwadia.
Navroz sees Locus expanding its breadth and depth of product and sales reach, moving from route optimisation to a full-stack SaaS offering to the enterprise around its logistics needs.
For how long will the funding sustain?
Nishith says, "The current funding will sustain us for a couple of years, by which point we should be approaching profitability. But for such players (with deep pockets) this is the very first cheque - put in to fund for milestones, more than a time frame."
In this case, the key milestone is global expansion. Nishith adds, "Right now, we dominate the Indian market, and have a good engine running in Southeast Asia. Now we want to dominate the Southeast Asian market too, and have a good engine running in North America and Europe. We are also looking to achieve some early signs of success in new markets."
What will the funding be used for?
The series B funding will primarily be used for the following:
Expansion - Locus has operations in the US, Indonesia, Singapore, India, and Australia with a significant presence in the India market. This funding will help it penetrate deeper into the new markets including North America and Europe while strengthening its presence in Southeast Asia.
Hiring - Locus is 100 member strong team at the moment, and is looking to become a 250 member team in the next six quarters. Nishith adds, “Out of this, 60 percent of the team will be in India, which should comprise of more than 90 percent of the technology team. Remaining team will be spread across SE Asia and North America (significant presence) along with a small outfit running in Europe (London or Switzerland)".
Revenues – Locus will soon touch $10 million in annual recurring revenue. With this round, the company plans to generate $25-30 million additional revenue over the next two years. Nishith is keen to change the current revenue bifurcation with the geographical expansion.
Currently, half the company’s revenues come from India, while Southeast Asia, Australia, North America and rest of the world account for the rest. He says, “At the end of two years, our broad estimation is that India and Southeast Asia will contribute about 25 percent each, and North America about 35 percent. The remaining will be Europe and rest of the world.”
Market sizing and long term vision
Locus currently serves 40+ clients globally, saving logistics cost at scale, increasing productivity and profitability for enterprises across multiple segments, owning a peak of over 1 million orders processed in a day.
Locus operates in four key industries where the cost of logistics/profit margin is a very important:
1. FMCG and retail
2. Ecommerce – key client: BigBasket
3. Third party logistics – key client: BlueDart
4. Human movement – field forces – key client: 1MG coming to collect blood sample at your home.
To give an idea of the market, just North America spends about $1 trillion on third party logistics. Considering conservative numbers, Nishith believes Locus still has a potential market of $500 million. He says, “That’s one sector in one geography. So, we’ve a revenue potential of $3-5 billion between 2023 to 2025.”
Though Locus hasn’t made any acquisitions so far, the company is planning to acquire some companies primarily for the talent (engineering).
Related read: BITS Pilani alumni pivot twice to find Locus