“If you think about the economy, supply chain is at the center of the economy, and transportation is essentially the supply chain. And we’re at the center of all of that.” Santosh Sankar, co-founder and director of logistics and supply-chain focused venture capital fund Dynamo, is bullish on their hometown city Chattanooga’s geographic vantage for becoming a logistics technology hub.
Sankar, who moved to “Gig City” — so-named for its publicly-owned, city-wide Internet connection — only three years ago, points out that Chattanooga is smack-dab in the middle of two of the country’s biggest logistics giants: UPS in Atlanta and FedEx in Memphis. One in five Chattanoogans are employed in supply chain or transportation-related roles and more freight passes through the metro area every day than any other in the U.S.
But, the $1 trillion industry is still heavily reliant on legacy systems and low- or no-tech processes. Dynamo, the only logistics-focused early-stage firm in the country, launched in 2016 with a first fund of $18 million to help change that.
Sankar’s three co-founders were already entrenched in the Chattanooga startup scene as partners at Lamp Post Group, an incubator which counts logistics companies, media properties and other venture firms under its umbrella. They also formerly founded a third-party logistics provider, Access America Transport, which merged with Coyote Logistics and was then purchased by UPS.
Those deep industry connections are what sets Dynamo apart, according to Sankar. When they first started, they not only had the fund but also a 12-week accelerator, which counted GE Ventures, Kenco and Ryder as partners.
The accelerator saw several successful startups emerge from the program, such as Atlanta-based STORD, which went through the first Dynamo accelerator in 2016. Dynamo contributed to STORD’s recent $2.4 million seed round, and Sankar is active as a member of STORD’s Board.
But, Sankar says they realized after the second round of the program that it wasn’t the most efficient way to serve founders — their true differentiators were those industry connections and market knowledge. Though a few broader accelerator programs have supply chain or transportation-geared startup programs, no other VC firm in the country is as laser-focused solely on this market.
They decided to end the formal accelerator in favor of focusing on investments as well as a new program, a four-day Founder’s Camp that condenses that education into a much shorter period of time. They won’t charge startups, don’t take equity and will accept up to 20 companies at a time.
Of course, the Founder’s Camp program helps Dynamo with their sourcing and deal flow — they still have capital left to allocate out of their initial fund and plan to do a deal a quarter — but it’s also about exposing global companies to the potential of Chattanooga. Once they experienced the city, several of the Dynamo accelerator startups moved their headquarters or established a U.S. office in Chattanooga.
“Given our initial focus in trucking, they [Dynamo] helped us ramp up our sales efforts and opened a lot of doors in this industry. After the accelerator we knew it was important to keep a presence in Chattanooga,” explained the team behind WorkHound, an employee feedback platform for the trucking industry that came to Tennessee from the Midwest.
And the local ecosystem is showing definitive signs of maturation. During the Revolution Rise of the Rest fund’s visit to Chattanooga this past month, Dynamo hosted a logistics round table with three categories of companies: startups, scale-ups and large enterprises. Many of those scale-ups also call Chattanooga home, proof that the city is a place where young companies can successfully grow.
Bellhops, for example, is an on-demand moving company that was founded in 2011, launched in Chattanooga and has since expanded to over 20 cities across the Southeast and Midwest. Last year, they brought on Uber’s former Atlanta General Manager, Luke Marklin, as CEO.
Marklin told Hype that, given the importance of ease of transportation to their business, Chattanooga was an ideal place to grow the company.
Sankar points to Steam Logistics, another Dynamo portfolio company, and data, media and financial markets company FreightWaves as additional examples of Chattanooga’s scaling logistics tech successes.
Photos provided by Dynamo