Podcast: Peter Hove Hildebrandt and Sune Stilling Talk Venture Capital

Highlights from the Conversation

So you left Maersk to spearhead Project Aviato, an investment startup focused on supply chain. I like the reference to the TV show “Silicon Valley”. Tell us about this.

Sune:

• Project Aviato is the working title. Over the next couple of months we are going to launch a more formal name.
• For those who are not familiar with the TV series we got the name from, it deals with the challenges of being a startup. From trying to find your market fit, to trying to raise venture capital, to going bust, and then having your idea work, then not work, then having all of the big, evil corporates step in.

The way that show depicts startups is spot on. Each character is an archetype that I can see in my own startup experience. But let’s get to the meat of it now. Who are you and how did you both decide to get into venture capital for supply chain?

Peter:

• Sune and I have known each other since 1999. After graduating from school we got hired at Maersk.
• I stayed within the logistics division and followed a traditional Maersk career and Sune ventured off into his own thing, which I’ll let him talk about.
• I spent most of my time in different leadership roles running different divisions in different countries.
• The last six or seven years has been centered around transformation, revenue management, and optimization. I have worked on how to help Maersk’s digital transformation.
• Historically, people who know this industry know that it was very much “gut based”, where you would just make a few calls and then set the freight rates.
• Through the work in revenue management it is now a more sophisticated, data-driven decision.
• The last few years at Maersk has been centered around the overall transition from being an oil, energy, and logistics conglomerate into becoming the global integrator of container logistics.

Maersk has been around for 150 years and does most of the shipping worldwide. They are an interesting case study in longevity and how they have maintained their role as a shipping company for so long. Can you give us a high level overview of Maersk as a company?

Peter:

• Maersk is a fantastic company and it’s been around since 1904, so longevity it certainly has. It is built around several pillars. It was traditionally a shipping company and then built up to an oil conglomerate in the 1970s, including drilling activities, tanker activities on top of its container business. Back in 2016 it embarked on becoming the global integrator of container logistics.
• Maersk has proven time and time again throughout history that it is very innovative in its approach, very adaptable to changing environments, and jumping on current trends.
• As you say yourself, it’s present all around the world. You can see their containers everywhere, you can see their reach. One way you can think about it when you go down to the shop and buy something is that there is a high likelihood that the item you want was transported by Maersk.
• I have the utmost respect for Maersk. It has given me a wonderful twenty-one years.

If you think about all of the products in your daily life, Maersk has probably touched most of those. Everything in the personal consumer space has somehow come through Maersk in some way, shape, or form.

Peter:

• Maersk has global reach. There is no doubt about that.

Sune, let’s talk about your background.

Sune:

• As Peter mentioned I was at Maersk for twenty-one years and for the first ten or so years I was on a traditional career path with a lot of different jobs and different functions. I also worked all over the world in the shipping and transportation business.
• Then I made a career decision to move into positions in emerging markets and some pretty radical company turnaround situations.
• The last two companies of which I was the CEO had the mandate to go and turn the business around—one company was in Latin America and one company in the Middle East.
• When Peter and I joined Maersk it was a heavily diversified conglomerate comprised of its shipping activities and their oil and gas activities. We were also heavily involved in industrial, production, retail, and banking.
• There was a saying back then in Denmark, “You never never had to leave Maersk.” We could go to the office and do our banking and shopping. I don’t know what else you need.
• In the energy business we divested around $15B worth of revenue.
• Søren Skou became the CEO of Maersk in 2016. A few months after this he invited me to Copenhagen to have a chat about his ambition and his strategy for Maersk going forward and one of the things we spoke about was the whole area of adjacent growth. And long story short, in early 2017 I was then responsible for that growth by Maersk at the enterprise level which eventually became what today is known as Maersk Growth. This went from a period of having no right to play in the venture space to becoming the world’s most active supply chain investor.
• After a 30-month period of time we made 23 first-round financing supply chain startups in the USA and Europe and an additional ten financing rounds within those companies. In the last three years we’ve seen about a hundred global supply chain startups per month.

That’s a lot of amazing experiences that most people don’t get to have with these global behemoths. You also have a third partner who is not here: Peter Friis Ovesen. When I look at the three of you forming Project Aviato, Peter (who is here today) brings his supply chain, transformation and operational logistics to the group.

You, Sune, seem to have more of that high level CEO experience with getting your hands dirty turning companies around, and unlike a lot of venture capitalists on Sand Hill Road you actually have real experience with what it takes to turn around a company. And the other Peter has experience leading management consulting practices. When you put the three of you together, that’s a powerful team, not just investment insight and foresight, but operational experience that you can bring to your startups.

Sune:

• You’re absolutely right. When we look at how we’re trying to differentiate ourselves, there’s clearly something around our investment thesis. When we look at who’s investing in supply chain today, you have a couple of very competent early-stage investors who are investing in supply chain.
• Then you have the general name-brand investors who are investing in supply chain but generally have a low degree of expertise within the supply chain space.
• We’ve identified both a knowledge gap and a funding gap where our knowledge, our experience, and our network really comes into play. And we believe very firmly in that operator model and that particularly in supply chain, the operator model will beat the investor model.
• The three of us compliment each other very well. Peter comes in with a very strong industry view and experience having been at the cusp of industry transformation. Maersk has been the driver behind a lot of these industry transformations over the years and Peter has been participating, and driving, a lot of this transformation.
• I’ve had the benefit being in both the CEO and directive roles. Over the last four years I have been exposed to the venture industry and leading startups.
• After having seen more than three thousand startups you start to have a pretty good idea of what this could look like, in addition to getting that network, so I’ve had this outside-in view on what’s really happening at the grassroots.
• And then we have Peter who was with me at Maersk Growth. He was our head of value creation. We are very structured and process oriented. We are trying to build something that is scalable. So the three of us have seen a lot of startups.
• On top of all this we have quite a few team members who haven’t made the leap on this opportunity yet, but who complement us and our work.
• The point here is that we look at venture capital. It is typically played as a very individualistic sport where most funds and franchises are centered around a single individual. We are trying to turn venture capitalism into a team sport where we compliment each other, we leverage each other, and we believe with the right processes this team sport can become scalable.

Peter:

• The only thing you left out Sune, which I think is important, is that apart from the standing team there is also a wide variety of experts in our network that strongly compliment our experience in the supply chain space.
• When you’re a captive venture capitalist you’re sometimes limited to what, in this case, Maersk had to offer. But now we have the ability to expand that dramatically and really leverage the experts in our network. It’s important for us to get that across, that we want to drive value for the companies that we invest in. It’s really close to heart.

In one sense there’s the journey that you’ve gone through as being part of a major enterprise that opened up an investment arm and that’s a lesson unto itself because not all enterprises can make great investors.

Next is what we call the decade of supply chain. If you go back in time most of the investments have been driven by infrastructure. There are two big openings for disruption in enterprise: supply chain and finance. I think SAP owning that area is ripe for disruption in this decade because it has not changed much.

And enterprises, as we know, are really risk averse so the two things they don’t want to touch are the supply chain and finance space. We have this dichotomy where, for example, I can see where my toothbrush is along its shipping route but I can’t see where my $100M of materials are until it shows up at my front door. That gap is so wide now that it has to be addressed.

What are your experiences getting ventures going and driving innovation within large enterprises? And how did that lead you to deciding to do this on your own?

Sune:

• We don’t see finance and supply chain as being exclusive. They are an integrated part. When you look at these large commodity traders, how all the different areas are managed play a role.
• When you look at manufacturing, which is also seen as something separate from supply chain, these pieces become more and more interconnected.
• You’ve done some great write ups on digital twins. How do you start playing around with some of these ideas without factoring in some of the things at the other end of the spectrum?
• Maersk as a company has been very brave for a hundred and twenty years and very innovative on a lot of different fronts. Maersk has certainly been leading the pack within the shipping industry.
• One of the motivators for us to go out and pursue this opportunity is that we are seeing that the supply chain players, the retailers, and the brand owners are stocked with a relatively archaic infrastructure and IT backbone. If this is what you are used to and you’re heavily invested in this, it’s a pretty big decision to make a change. There’s an inherent conflict there that is difficult to solve.
• We’re talking about an industry that is so complex with so many interconnected parts that change is not done overnight. And it cannot be done by a clever app.
• Somebody might create this wonderful tech solution but there is also physical stuff that has to move. Marrying those two worlds is a really difficult challenge for the industry as a whole.

What are some of the things you learned coming out of your initial foray into enterprise investing that then made you want to get out and do this on your own? What were some of the positive aspects and constraints that led you to launching Project Aviato?

Peter:

• It’s never easy when you leave a company after twenty-one years.
• When you’re in a corporate venture capital setup and you make some good bets you want to follow through with those bets.
• Maersk decided not to pursue the growth equity space so we decided to try and enter that space ourselves.

Sune:

• The only thing that I would like to add to that is when you are a part of a captive venture setup it comes with certain constraints. We just collectively agreed that there is a big opportunity for us in this decade of supply chain.
• We’ve also been looking at some of the historical aspects of venture capitalism ranging from the hardware development in the 1980s and 1990s, then the emergence of software as a service (SaaS) thereafter.
• Then we started to see the software moving back into the physical world uniting those two worlds (the physical and the digital) and we believe that supply chain is going to be one of the major areas affected by this so the opportunity is now.
• We want to be part of this, and let me be a little less humble about it: we want to be at the center of this, both because of the impact this is going to have on the world and on an industry that we are passionate about.
• We want to correct all of the inefficiency throughout the industry while addressing environmental concerns so we thought the best way to make this happen was to become unchained, so this is essentially why we decided to pursue this opportunity on our own.

I am visualizing a chart of how technology has affected industry decade over decade. The 1980s were about hardware. The 1990s were about the Internet and its fast adoption by enthusiastic consumers. 2000 to 2010 was about the rise of the consumerization of everything. From 2010 to 2020 we doubled down on the mass consumerization of the Internet. Now the enterprises are seeing a shift toward digitalization of everything.

There’s a wonderful decade-over-decade of technology adoption. We just happen to be at the epicenter of supply chain adoption.

Let’s shift back into why supply chain, and why now? And let’s talk about Project Aviato. It’s a hybrid between traditional venture capitalism and private equity. What is it in supply chain that you guys are beginning to earmark as the thesis for the investments that you’re looking for? It could be logistics, payments, asset flows… how are you guys viewing all of this as of right now?

Sune:

• To us it really begins with the customer, with a real customer problem.
• There are too many companies out there with technology solutions looking for a problem. Or companies out there being funded to essentially make a pretty webpage. And there’s nothing wrong with that, but we really like companies that solve real problems.
• The next level for us is how the world is changing. For example, consumer behavior. How is consumer behavior changing and what impact does that have on supply chain? Like the “Amazon effect”: you want your Nike sneakers to be different from mine, you want them to be customized, and you want them tomorrow, not in three months. And then you probably want to return them. Then you want to know if these sneakers have been made under proper working conditions. And you want them to be CO2 neutral and all of these things… that puts a massive strain on a system that is already not particularly efficient and is already suffering from a lot of friction.
• Now you are adding to that complexity. We’re moving to units of one: not one shipping container but one box of shoes or one t-shirt.
• We like companies that solve real problems.
• Coming from Maersk a lot of people think that we’re going to go after that space but we’re not. They’ve already done an amazing job of optimizing that so that’s not where the battle is going to be won.
• There’s B2C vs B2B, which people used to look at as separate from a logistics perspective. That doesn’t really work out right. So manufacturing cannot be different from supply chain. And B2B supply chains cannot be different from B2C supply chains. They somehow have to communicate.

Peter:

• One of the things that we keep seeing is that colossal amount of waste that still sits in the system. There are true problems to be solved. The world has built an industry where there is no clear accountability of the end-to-end supply chain. Everyone has their own way of optimizing along the way which always results in a bad outcome.
• Then you have industry players who live off the opaqueness as a business model. And fundamentally there are some things around collaboration that we’ve spent quite some time discussing… I think we’ll start seeing that shift like you see in other industries where you start collaborating much more and creating standards.
• We’re going to see an acceleration in the area of collaboration that leads to solutions.
• Because of the lack of industry standards, subpar solutions are in place that help a little but don’t really solve the fundamental problem. This is the space that we are keen to help with.
• To use the team analogy, we need to use all of the players in the industry to make this a better space.

Sune:

• Some of the stuff that Peter and I have been working on concerns “contract compliance”: the problem where somebody will book space but maybe they’ll use it, maybe they won’t. Or if somebody books an airplane ticket but doesn’t show up.
  I’ve been heavily involved in the early stage of TradeLens which me and my team incubated. It’s the same thing. There needs to be standards about how we communicate. What kind of platforms are we using? What kind of systems?
• There are many players who have been benefiting from the lack of collaboration across the various industries and we want to change that.

Peter, you talk about standardization and centralization. Those are the missing requirements in cross-industry communication. How do you see the role of platforms in this emerging space?

Peter:

• I see platforms as one way of speeding up the transition to standardization and centralization. It’s the one place where you can funnel enough into it to enforce these standards.
• Simple accountability is required from contract to contract.
• I have a belief that we will see more platforms that will help to accelerate the accountability across contractual agreements. For example, if you buy space you use it or pay. If you buy a plane ticket, you will use it or pay.
• Standardisation takes time. Until then there needs to be a translation layer that can help translate data into a usable format.
• You also have prevalence standards, where more people start to come in and say “This is how we do things”. And when everybody starts buying into that we will see stronger unification. We are counting on that.
• We need to democratize the supply chain. Once this happens everybody can start to focus on the customer, which is the most important thing.

So what is the status of Project Aviato?

Sune:

• Peter and I left Maersk at the end of 2020 and the other Peter joined us at the end of January 2021. We are essentially one and a half months into this journey.
• We had set aside the first three months of this year for learning. We are going out and speaking with industry experts and saying, “Hey, we know this isn’t perfect. Why don’t you help us to make this idea sharper?”
• We worked in corporate for many years so we are used to beating ourselves to death and being very critical. We want to find out how we can get better.
• During January and February we have received wonderful feedback about what we’re doing. They tell us that we are addressing the right problem at the right point in time with the right team.
• We are preparing to start fundraising in the next couple of weeks and interest has been overwhelming.
• We are bringing in a pipeline of companies over from Maersk, including companies we have invested in from the past.
• We are eager to start backing some great founders.
• We would love to start hearing from companies now but we ask to be patient as our inboxes are usually very busy after a podcast so it may take a couple of days to write back, but we will write back.

I think there are a lot of enterprises trying to figure out how to invest in supply chain. You’ve got the Cargills, the Worleys, there’s a lot of money going into play with what you have going here…

Sune:

• I’d like to add to that Richard. When we look at the people who are interested in what we are doing, they see a strong potential to get great returns on their investments.
• We would also like to get a couple of strategic investors into Aviato, people who still obviously want the financial return, but who also see the value in the insights gained from working with us and we are having those discussions with some notable people and companies.

The story sells itself. It’s a simple story. You guys have direct experience with one of the biggest supply chain companies in the world, you’ve led innovation and investment, your work speaks for itself.

It’s like investing in crypto—there are a lot of people looking for experts to guide them into that space. So like with the people looking to get into supply chain, they don’t know where to go.

The traditional venture capitalists aren’t quite earmarked for this and that’s part of the reason for this podcast: the investments for supply chain are sitting somewhere between venture capitalism and private equity. It’s not the same as it used to be. It requires some operational insights and a reach into the supply chain industry.

You guys are in the right place at the right time.

Sune:

• I’m very glad to have that validated. We have been continually getting validated over the last couple of months so there must be something to what we are doing.

Peter:

• One of the things we haven’t stressed enough is that this is not a one-time thing. This is something that will be going on for years. Hopefully we’ll be talking again in ten years. It’s about building something that’s lasting, that actually makes and generates a difference.
• Sune and I said to ourselves this isn’t about making a quick buck. The challenges that we have to face would make that a bad idea. It’s because we believe, and we love this industry, and we want to make a difference.

As investors you’re not just going in to make money. You’re looking to have a social impact driving the ideas of sustainability and circularity and avoiding unethical practices.

Sune:

• The traditional investors saw a massive addressable market and then later on started to understand the complexities.
• We’ve forged some very deep relationships with some of them and they can see the complexities and how we can help. But they have capabilities that we don’t have so it is beneficial to work together to an extent.
• We can’t do this alone and conversely none of the other funds can do it alone either. It becomes possible together.

I think it’s really cool that the traditional investors, like Sand Hill Road, who don’t necessarily have the insight into enterprise supply chain investing, view you as a vehicle to get in there and get smart on this stuff.

Sune:

• I must say that one of the things that I’ve been quite overwhelmed about is that when you leave a company after so many years you have to ask about your network: is it your network, or your employer’s network?
• We’re excited about the way prominent people (the ones you read about in magazines) are saying that Project Aviato is something that we really need and that they are there to help us. It’s been overwhelming and is also validation that we’re onto something important.

More About Peter Hove Hildebrandt

Peter was instrumental in guiding the global giant Maersk in terms of their business development and transformation of operations across multiple countries for over twenty years. Before taking on the role as head of transformation, Peter was the head of revenue management for Maersk, building, implementing and executing digital pricing and optimisation solutions for Maersk.

During his most recent position, Peter led the Maersk digital transformation towards a platform operating model.

Peter holds a Graduate Diploma in Economics (HD/U) from Copenhagen Business School and an EMBA from Insead.

Connect with Peter on LinkedIn >

More About Sune Stilling

Sune has guided several $100M+ business turnarounds and divestments during his time as CEO and MD of various projects. He has also guided multibillion dollar business transformations.

Sune founded the venture arm of Maersk and over a period of two and a half years completed over thirty investment rounds with global supply chain leaders.

He has earned four graduate degrees, including an MBA from IMD with Honors and an MSc in Applied Finance from Singapore Management University.

Connect with Sune on LinkedIn >