Steve Sarracino, CEO of Activant Capital, a growth-stage investment firm that specializes in supply chain, logistics, and direct-to-consumer businesses, is on the front lines of the many sea changes going on in those sectors, most centered on technology.
Activant take stakes based on specific criteria, generally in fields of sales support, supply chain logistics and order fulfillment. In the fast-growing e-commerce world, attractive firms are those that can offer end-to-end logistics management.
A veteran in investments and capital growth, Sarracino talked to Sourcing Journal about his company and the issues he sees affecting the industry, including some skepticism about blockchain and its role.
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Sourcing Journal: Tell us a little about Activant and its aim.
Steve Sarracino: I founded Activant in 2013. We’re a growth equity firm focused on commerce and IoT (Internet of Things). We invest in very high growth businesses that are slightly past the venture stage. In terms of commerce, that includes sales enablement, and supply chain, logistics and fulfillment. And there’s a lot of crossover there, particularly on the back end with logistics and fulfillment, and with respect to IoT, which we define as full-stack hardware and software.
We’re a team of eight located in Greenwich, Conn. We manage $200 million [in investments] right now and we write checks in the $20 million to $25 million range. We only do two to three deals a year. We try to find category leaders.
SJ: Do you only take majority or minority interest in companies?
SS: We generally take a minority interest. We like to partner with founders and entrepreneurs to grow their business. All of our capital comes from endowments and charitable foundations. A big part of our pitch is…making sure we’re investing in businesses that have inherent value, whether it be strategic or financial, but still have the potential for venture-like returns.
SJ: What do you look for when investing in a logistics or supply chain company?
SS: What we look for in the sector is someone that can provide the connective tissue, meaning using technology so you can have full visibility and transparency on where your products are, and decrease some of the friction as you move from one vendor to another as your inventory and work in process moves cross the globe. And that’s become a real issue and what we think about in the space is who’s providing value from a technology perspective and not just trying to build a better broker or freight forwarder.
The other companies we look for are more full-service providers, people that do more full end-to-end outsourcing management of logistics. It sounds like a DHL, which it is, but there are a lot of things you can do to build a better DHL.
SJ: One of the logistics companies you’ve invested in is Turvo. Can you tell us about them?
SS: Turvo is a company that has figured out how to build software that can provide connective tissue between all the different types of transportation modes–ships, trucking, air–seamlessly. They’ve actually solved this problem and some of biggest carriers in the world are putting their entire platform on Turvo.
Turvo spent a lot of money over three years and built out a platform without telling anybody who they were. This includes invoices, dock scheduling, freight forwarding, across all forms of transportation. They started out not to displace brokers but to enable them to run more efficiently. A key objective is not to have phone calls or emails and just to communicate on Turvo.
SJ: What do you see as key issues in the logistics space today?
SS: The carriers have realized they have to reinvent themselves to compete. What we hear is “how do we tech-enable” the processes? What you need to do is put the customer and the container at the center of your organization and figure out how to communicate with them and how to move the product more efficiently. It’s a massive undertaking.
On e-commerce: It’s the 4PL concept. (Fourth Party Logistics is when a provider is an integrator that accumulates resources, capabilities and technologies to run complete supply chain solutions.) The supply chains are getting longer and the technological requirement for last-mile delivery is challenging retailers. That’s all going to shift as we “techify” the supply chain and logistics.
On blockchain: I haven’t seen one large-scale use of blockchain in enterprise yet. There are some inherent deficiencies–as you use it more, the processing power gets higher and the requirements get higher. Also you might not want everyone to see where that product is and what you’ve done with it. We’re very skeptical about it and there are better ways to solve what people are trying to achieve with it.
SJ: What types of companies are you looking to invest in today?
SS: Right now, we’re looking at somebody in the payment area who does a better job in the area of the one-click checkout experience outside of Amazon, and weaving that all the way to shipment and the logistics provider–basically a horizontal platform.
We’re also looking for data-heavy players that help companies manage inventories and consumer data and just get smarter around using that, and of course, have a stronger ROI (return on investment).
