As companies are still smarting from the stress of the snarled supply chain, modernizing the way they move goods by embracing technology can help them increase efficiency, transparency, and resilience, BV Investment Partners managing partner Eric Ahlgren told PE Hub in an interview.
Earlier in November, Boston-based BV announced the formation of a new platform company called ArchLynk, which aims to help companies manage their supply chains using business software from SAP.
ArchLynk brings together Novigo and Krypt, two California-based founder-led providers of consulting services. Novigo, based in San Mateo, was founded by Joerg Rohde, while Krypt, co-founded by Jigish Shah, is based in San Jose.
ArchLynk, which aims to leverage artificial intelligence and machine learning, will be led by Sekhar Puli, the co-founder of REAN Cloud, a former BV portfolio company sold to Hitachi Vantara.
Hit by multiple supply chain disruptions during the pandemic, companies are now seeking ways to increase efficiency, Ahlgren explained.
“What makes this an interesting opportunity is that global companies have learned some pretty hard lessons over the last couple of years, and the investments that they are going to make going forward to modernize their supply chain will make them more resilient and more transparent and enable them to be more nimble and not make the same kinds of mistakes [again],” Ahlgren said.
“The growth drivers underpinning our thesis include the onshoring and reshoring of supply chains, disruptions resulting from Covid-19 and the war in Ukraine which are increasing supply chain complexity and driving demand for better resiliency, and elevated ESG standards that are driving demand for better supply chain transparency,” he said.
Historically, investing in the cloud ecosystem has been a very active theme for BV, Ahlgren said. He described both Novigo and Krypt companies are “leaders” in the SAP global trade and supply chain consulting space with complementary roles.
“Overnight, this [deal] makes us the largest independent, pure-play, SAP digital supply chain partner, and there are benefits that come from scale in this space,” Ahlgren said. “Our goal is to become a one-stop shop partner of choice within this ecosystem.”
Although crucial efforts have been made by governments, global companies, logistics and consulting firms and others to smooth the supply chains, some investors are scaling back their investments on grounds that the space is getting flooded with innovations.
Asked if he feels that there is an over-investment in the supply chain sector, Ahlgren said: “I’d push back a bit on that. I don’t think anyone is saying that the supply chain has been solved,” adding that, “I think near-term demand and supply imbalances have been fixed largely by the market, but what hasn’t really been fixed is the plumbing of the global supply chain and how the software systems are designed and implemented to make sure that these issues don’t happen again.”
As the macroeconomic conditions tighten, Ahlgren said his firm is taking a long view on supply chain and the SAP cloud transition.
He said even though there could be some near-term headwinds, “we do believe that the offsetting tailwinds make this an attractive growth investment. We are building this platform for organic and inorganic growth.”
In terms of exit, Ahlgren said BV’s plan is to build a scaled business with a lot of strategic value. “We have found over and over again that a business like that tends to be very attractive to larger strategic acquirers.”