Jeff Bezos Investment in Beacon - A Strategic Move?

What does it take a world millionaire to invest in your startup? No doubt lots of people thought about this when the news broke out on Monday that Amazon founder, Jeff Bezos, has invested in a young UK tech firm- Beacon.

Beacon based in London and founded in 2018, wants to disrupt the global shipping industry by using A.I. to find cheapest shipping routes while offering customers supply chain financing to help cash flow. But how and why did this early-stage business, started by two ex-Uber executives, gained his interest?

What Beacon has to offer the market?

Beacon makes the global transportation of products across borders easy. At the helm of global e-commerce titan Amazon understands the challenges of supply chain management and import/export economy.

If there is a tech, that can make the process efficient than it is better for his business.

Beacon service irons out the micro issues for businesses transporting their goods globally, including streamlining the transportation of products and providing the paperwork necessary for exportation.

The real unique selling point of Beacon is that they offer international services across the freight sector including by Air Ocean and land. Their technology allows global delivery to be seen in real-time, it also provides data on shipping costs and prices while its machine learning tools optimize routes and transport processes to find the most efficient methods for its buyers/users.

Another major factor that makes Beacon stand out is its ability to offer ‘fast finance’. The firm says that it can offer finance within 72 hours to importers, who often get financially squeezed by having to pay suppliers before their goods arrive.

Why is Bezos interested in this Start-up?

Bezos’s reason to invest in Beacon is not clear yet. Not only is international trade fraught with transportation impediments such as delay at the border caused by the bureaucracy of goods and cash flow bottlenecks, Brexit and the ensuing Covid-19 crisis had only made the sector’s chronic issues worse, meaning that more businesses will flock to solutions providers that promise to make operations easy.

With Covid-19 shutting down manufacturing hubs across the whole world, as businesses slowly get back to normal, efficient transportation processes will be important to ensure their cash flow health and survival. The same goes for businesses affected by Brexit where import and export businesses will be keen to reduce their chances of delays at ports.

Beacon has entered the analog world of global logistics and has disrupted the sector with its new technological offering. As an innovator himself who pioneered mainstream e-commerce culture with Amazon, it is ‘that’ not surprising that Bezos saw Beacon’s global potential.

Jeff Bezos Invested in Beacon due to ‘Personal’ Reasons?

Jeff Bezos’ investment in digital freight forwarding and supply chain finance firm Beacon is a personal one, the U.K. start-up’s CEO told CNBC on Wednesday after the closing of its $15 million Series A funding round.

“It should be really clear that this investment is from Mr. Bezos directly. It’s a personal investment, not one made by Amazon. Amazon is aware and had to approve of it, but there is no commercial relationship and this has no direct tie with Amazon itself and it’s important to make that distinction,” Beacon CEO Fraser Robinson said.

Asked about the potential for established shipping giants like DHL and Maersk to use the same technology and sharpen the competition, Robinson said he expects the industry to digitize itself.

“The truckload piece, the Uber Freight piece, is a component of what we do, and they can and will be a great partner for us as part of the solution we provide, but it’s fundamentally a very different business,” Robinson said.

Beacon says that its supply chain finance offering sets it apart from traditional freight forwarders by helping to solve the biggest challenges faced by importers today- cash flow.

Suppliers often demand payment before goods are shipped, importers need flexible finance to meet their working capital needs. To address this, Beacon offers qualifying customers financing within 72 hours, which also entitles them to shipping discounts.

BIFA rebuke

But Robert Keen, director-general of the British International Freight Association (BIFA), disputed some of the claims made by Beacon, for example, its characterization of forwarders as slow and inefficient and reluctant to modernize. And he rejected the suggestion that with digitalization accelerating globally as a result of COVID-19, the future of the traditional freight forwarder was more precarious than ever, describing it as merely a “PR puff”.

Keen also said that digital disruptors “will no more kill-off today’s forwarding sector than the advent of European rail did in the 1800s”, adding: “Over the last five years, I have read reports that suggest the rise of software start-ups spelled the end for forwarders. I feel like Bill Murray in Groundhog Day.

Why is Beacon good for Amazon?

Considering what Beacon plans to achieve in the future, Bezos’s investment is still looking good for Amazon. Logistics is one area where Amazon still has a lot of work to do. As shopping would shift online, the company has been working to speed up its delivery system and make it more cost-effective.

Currently, Amazon’s delivery system is constrained due to the lockdown. At the height of the coronavirus outbreak in the US in the first quarter, some Amazon customers had to wait for as long as a month to receive their deliveries which is not good for a huge shopping titan.

Besides, logistics is a major expense for Amazon. To address the delivery challenges, it released its workers to go and start delivery firms in 2019 to ship its packages. The company might purchase self-driving technology developer Zoox in a bid to enhance its delivery system.

Beacon’s technology enables clients/customers to enjoy benefits like optimized shipping routes and lower costs. Therefore, Bezos’s Beacon investment could help solve Amazon’s current logistics challenges, which could boost Amazon stock.

At $2,442 per share, Amazon stock has risen 32%.  Amazon is one of investors’ favorite technology stocks in 2020. Investors have flocked to Amazon shares. They have realized that the pandemic created a huge demand for the company’s businesses. Overall, the on-going pandemic boosted online shopping, which sent more retail customers to Amazon.

 Bezos Investment in Beacon - A Strategic Move?

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