Half a Dozen Rules for Investing in Early-Stage Supply Chain Technology — REFASHIOND Ventures

Brian Laung Aoaeh, CFA
17 min readSep 20, 2022

Originally published at https://www.refashiond.com on September 20, 2022.

About the Authors

Brian Aoaeh and Lisa Morales-Hellebo are the Founders and Managing General Partners of REFASHIOND Ventures , a venture capital firm investing in early-stage supply chain technology startups. They are also the founders and co-organizers of The New York Supply Chain Meetup and The Worldwide Supply Chain Federation . They are Fund Leads for REFASHIOND Seed , the world’s first supply chain technology rolling fund on AngelList designed for accredited individual investors.

Abstract: Early-stage technology innovations in supply chain technology are becoming more important as the world grapples with the simultaneously occurring and self-reinforcing supra-macro trends of heightening geopolitical tensions, the worsening Climate Crisis, and increasingly demanding consumer behavior. This creates an opportunity for investors to profit from the transformation of global supply chains that has just started unfolding. We outline 6 rules that any investor must observe to invest successfully in early-stage supply chain technology.


We have each been developing our supply chain technology investment thesis since 2015. We met in June 2016, and immediately started collaborating closely with each other after it became clear that we shared the same worldview about the investment opportunity presented by early-stage technological innovations in global supply chains.

We launched The Worldwide Supply Chain Federation in August 2017, starting with The New York Supply Chain Meetup. The Worldwide Supply Chain Federation is a collaborative, and mutually supportive coalition of grassroots-driven communities focused on technology and innovation in the global supply chain industry. The New York Supply Chain Meetup is its founding chapter. As of the writing of this blog post, we have more than 4500+ members of our community on Meetup.com, dispersed all over the world. Our community on Clubhouse grew to 10,800 members after we launched it in early 2021.

We launched REFASHIOND Seed in July 2021. REFASHIOND Seed is the world’s first supply chain technology rolling fund. We made our first investment in early September 2021, and we have made 22 investments so far.

REFASHIOND Seed is REFASHIOND Ventures’ investment vehicle designed primarily for accredited individual investors. We established it as a first but core step towards building an institutional venture franchise.

Investment Thesis: REFASHIOND Ventures champions and invests in startups reinventing global, industrial supply chains through scalable networks, platforms, ecosystems, and information infrastructure; Defensible through economic moats.

Why is news about supply chains suddenly everywhere?

It seems as if supply chains have gone from being a topic only a vanishingly small sliver of people could possibly care about to being the most important topic everyone must care about, all the time; Just tune into the news for 5 minutes — In the United States, there are supply chain disruptions affecting semiconductor chips, popcorn, beer, tampons, sriracha hot sauce, and infant formula.

Why has this happened?

Anything you can touch, see, smell, taste, or hear exists because of an underlying mechanism that brings it into existence, in a form and at a time and place that is accessible and convenient for you, at a price that makes economic sense.

Supply chains are the mechanisms that enable the production, distribution, and consumption of anything that is man-made, harvested, or extracted from the Earth. Supply chain technology is the operating system for business, commerce, and trade. Supply chains are platforms for production, distribution, and consumption.

If you are alive, you are intimately familiar with supply chains. They are the complex combination of technology, innovation, systems, processes, organizations, regulations, and people that convert the factors of production into tangible goods and services.

This is why news about supply chains is everywhere, and top of mind for all of us. When supply chains collapse life becomes more difficult and society collapses. The pandemic served as a preview of a future in which supply chains are not as reliable as they used to be, ensuring that most people can no longer ignore them.

In 2016 when we started developing what has become REFASHIOND Ventures’ early-stage supply chain technology investment thesis, it was in recognition of the high likelihood that increasingly large and inescapable disruptions of global supply chains would become the norm. We believed this would happen because of increasing geopolitical tensions, the worsening effects of the Climate Crisis leading to a significant increase in extreme weather events all over the world, and increasingly demanding consumer expectations — inescapable macro forces that are very difficult to curtail or circumvent.

Events since March 2020 have proven that we were correctly forecasting the future. More recently, an entire chapter is devoted to supply chains in the installment of the Economic Report of the President — an annual report prepared by the United State President’s Council of Economic Advisors. The report also includes a chapter on energy, which obviously powers supply chains, and the economy. That followed Executive Order on America’s Supply Chains (February 2021) and FACT SHEET: Biden-⁠Harris Administration Announces Supply Chain Disruptions Task Force to Address Short-Term Supply Chain Discontinuities (June 2021), among other initiatives by the White House focused on supply chains in the United States, and The CHIPS and Science Act as well as The Inflation Reduction Act of 2022 , both of which feature significant investments designed to strengthen, modernize, and upgrade domestic supply chains.

Events abroad during the course of 2022 have further confirmed our guesses. Moreover, existing indicators suggest that supply chains will remain top of mind for people at every stratum of society for the foreseeable future.

Every crisis presents an opportunity. So how should early-stage technology investors think about the opportunities that arise as we adjust to this new state of the world in which the operating system that drives the world economy faces increasingly frequent and large upheavals?

What is a Startup?

A startup is a temporary organization built to search for the solution to a problem, and in the process to find a repeatable, scalable and profitable business model that is designed for incredibly fast growth.

The defining characteristic of a startup is that of experimentation — in order to have a chance of survival every startup has to be good at rapidly performing the experiments that are necessary for the discovery of a successful business model.

The preceding discussion is based on a mashup of definitions by Steve Blank and Paul Graham.

A startup becomes a company once it has successfully navigated the discovery phase of its lifecycle. As early stage investors it is our responsibility to assist the startups in which REFASHIOND Ventures is an investor to successfully make the transition from being a startup to becoming a company.

Rule #1: Do Your Homework

There is a tendency for early-stage software technology investors to underestimate or dismiss the inherent complexity of traditional or legacy industries. This is a mistake, but it is understandable given that it is a mistake the general public makes as well. This can result in misunderstandings and even conflict between startup founders and their investors. In the worst case scenarios it can result in investors giving the wrong advice about where an early-stage startup should invest its scarce time and resources. In every industry, supply chains are formed from a complex and interconnected network of social, environmental, and economic systems. It is important to understand how these relationships might impact one’s investments.

In doing their homework, most people study precedents, and the “best-of-breed” of existing innovations and use cases.

While this can be helpful, during periods of fundamental technology-led transformations, this only provides a partial understanding of what has occurred in the past. It is not likely to help one understand how the future might unfold.


We are living through what Carlota Perez describes in her book, Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages (2003), as the Age of Information Technology and Telecommunications (ICT).

Thanks to advances in information technology and telecommunications, industrial supply chains are being digitized for the first time in history. And, as Carlota Perez states: “When a technological revolution irrupts in the scene, it does not just add some dynamic new industries to the previous production structure. It provides the means for modernizing all the existing industries and activities.”

As a result, we argue that we are entering a Golden Age of Supply Chain Innovation & Technology during which transformations in the market will be driven by sell-side innovations that are driven by fundamental changes to the technological architecture and foundations by which large, important, and legacy industries deliver value to the market, rather than by buy-side innovations that are driven by customers’ needs for less complexity.

This refashioning of global supply chains will require design and systems thinking to get at the root causes of the problems that the world is currently facing, and the patience to formulate hypotheses about how those problems may be solved systemically, and at scale.

Rule #2: Think in Broad Categories

To capture the full breadth of early-stage technology investment opportunities in supply chain technology, it is important to think broadly first.

As a reminder: REFASHIOND Ventures champions and invests in startups reinventing global, industrial supply chains through scalable networks, platforms, ecosystems, and information infrastructure; Defensible through economic moats.

Given our investment thesis, these are the 4 categories we start with;

  • Data & Decision Analytics: Using data, information, and computational technologies to make better decisions in the face of uncertainty by harnessing the best of human creativity AND computational power.
  • Advanced Materials: Using advancements in computational technology AND materials science to reduce waste through the creation of circular, regenerative, and sustainable supply chains. And, applied research aimed at developing new materials with performance characteristics that can make the existing alternatives obsolete once production scales.
  • Advanced Manufacturing: Using advancements in computational technology AND materials science, manufacturing processes, and industrial engineering to shift towards manufacturing that fulfills actual demand AND away from manufacturing for anticipated or forecasted demand which may never actually materialize.
  • Next Generation Logistics: Using software and computational technology to improve how society manages the infrastructure, equipment, and networks that facilitate the storage, transportation, and distribution of physical goods AND in the process to reduce harmful emissions and waste, while making logistics businesses more sustainable.

Every industry has an underlying supply chain. Therefore, we use the categories listed above as our primary approach to classifying investment opportunities. Only then do we think about the specific industry that a particular investment opportunity might apply to.

Four observations;

  • First; Notice that there’s a large overlap between Data & Decision Analytics and the other three categories. This is because one source of the innovation happening in supply chains is around the use of computational technologies to solve problems through modeling and simulation before testing and implementing solutions in the real world.
  • Second; After this broad categorization, the next step could be to identify whether an innovation is tailored for a specific industry like agriculture or construction, or if it is an innovation that is intended to be broadly applicable across industry verticals. This matters because, as supply chain technology generalists we believe in partnering with other investors who may have deeper, more relevant and nuanced knowledge of industries like energy, healthcare, pharmaceuticals, and education — industries notorious for gnarly regulations and unique characteristics that are not obvious to outsiders.
  • Third; Data & Decision Analytics is as much about the capture, storage, security, transmission, and flow of information as it is about the flow of money and capital. In this discussion on Twitter , Ryan Petersen, CEO and Founder of Flexport, points out that “Goods are just money that has taken another form for a period of time until they are delivered.” Furthermore, in that same discussion, Rick Zullo, Cofounder and General Partner at Equal Ventures points out that, “Given supply chain delays and lean margin structure, timing/flow of funds ends up being mission critical to SURVIVAL, not just success.”
  • Fourth; Supply chains are about much more than logistics and transportation. Even though supply chains are the mechanisms and platforms that enable production, distribution, and consumption, many early-stage investors who describe themselves as supply chain technology investors often focus primarily on logistics and transportation. We believe this artificially narrows the scale and scope of the opportunity.

Rule #3: Identify What Form of Innovation is Most Likely To Succeed

We are deliberately using the term innovation rather than disruption. Most supply chain technology startups eventually land on some version of a business-to-business business model. When you’re selling software that you want supply chain and operations executives to adopt it is a good idea to avoid using words like “disruption.”

We have written about sell-side and buy-side disruptions in the past: Notes on Strategy; Where Does Disruption Come From? (Aoaeh, July 2015), Where Will Technological Disruption in The Fashion Supply Chain Come From? (Aoaeh and Morales-Hellebo, October 2018), and Is disruption finally underway in the freight brokerage industry? (Aoaeh, May 2019).

The distinction is important because the strategies and tactics that make sense as an early-stage supply chain technology startup conducts its search for a repeatable, scalable, and profitable business model will differ depending on the nature of the innovation it is bringing to market.

For a buy-side innovation where market entry is driven by the needs of a customer segment that is poorly served by overly complex and expensive incumbent alternatives, early sales and marketing efforts ought to be relatively straightforward. Tried and tested go-to-market approaches that have worked for existing incumbents ought to work for the new entrants as well.

For a sell-side innovation where market entry is driven by a proprietary architectural innovation in the way value is created and delivered to the market, early sales and marketing efforts may not be so straightforward. Since this is an architectural innovation, the startup may need to think through its go-to-market motions a bit more carefully.

Rule #4: Identify What Team Structure is Most Likely To Succeed

This is related to Rule #1, and it matters most when the startup is still developing its product and has not yet put that product in customers’ hands to determine if the startup’s value hypothesis is correct. It is also related to the tendency of early-stage startup investors and startup founders to underestimate the technical difficulty of the problems they purport to solve.

In certain cases, a sell-side innovation, for example, the team will need to be the technically strongest team one can assemble to tackle the problem — and this should be reflected in the core team of founders and cofounders, and any other people that form part of the early team. In other cases where the technical superiority is of secondary or tertiary importance, buy-side innovations, for example, the early team may not need the same technical depth as would be required in the sell-side scenario.

This is an important point for non-technical founders to pay attention to because it will influence how they think about recruiting.

Rule #5: Identify If and How Invisible Barriers to Adoption May be Overcome

Quoting from Updates — Industry Study: Freight Trucking (#Startups) (Aoaeh, December 2016): “Based on her years of experience with technology innovation in the freight trucking market Debra T. Johnson of Eco-Edge discusses what she calls the “invisible barriers to innovation” that impede the success of startups in this market. She groups them under; Product, Customer, and Sales. Overcoming all of these invisible barriers to innovation requires founding teams that have; strong technical experience in order to build a product that works for this market, AND sufficient industry experience in order to build trust, and win credibility with potential customers.”

Let’s tackle these one at a time.

  • Product: The primary question here is, “Does the product work and does it solve an important and acute problem in a way that is relatively easy for customers to adopt?”
  • Customer: The primary question here is, “Is the value proposition and value exchange such that the presumed customer is willing to adopt, and pay for, the product?”
  • Sales: The primary question here is, “Does the team have a good idea how to identify, communicate with, and sell to the right individuals at the right target customer organizations?”

It is important to think through how these issues might affect a supply chain technology startup’s prospects to jump from acceptance by innovators and early adopters — who are motivated to adopt and pay for a new product that solves a problem, to the mainstream market — where buyers need to first trust that adoption of a new product will not create even more headaches or possibly even ruin their business. This is why in the early days, supply chain technology startups are better served taking a measured approach to growth. Generally speaking, popular growth hacking playbooks do not apply in this space and could lead to death by opportunity.

We are fans of investment syndicates that include participation by one or more corporate venture capital firms, particularly those firms that prioritize BOTH strategic outcomes AND financial returns. The specifics of how such an investment syndicate might be structured is beyond the scope of this article, and we recognize that not all corporate venture capital firms are created equal. Nevertheless, the experience and insights such coinvestors bring to the table can prove to be invaluable if the syndicate is structured right.

Another strategy for overcoming invisible barriers to innovation is what we have learned through our community building efforts at The New York Supply Chain Meetup and The Worldwide Supply Chain Federation. In the spirit of Margaret Mead, who said: “Never doubt that a small group of thoughtful, committed, citizens can change the world. Indeed, it is the only thing that ever has,” we started in New York City, but our ambition is to create a global movement; the largest community on the planet of people who like supply chain technology, and are building new products, startups, and companies, while learning from each other.

The knowledge, connections, and networks that develop as a result of grassroots-driven communities like ours can help early-stage supply chain technology startups identify and overcome some of the hidden barriers that can prevent them from gaining the early traction and adoption that is so critical for their success.

Rule #6: Think About Which Economic Moats Matter Most

In his series of 6 articles published between September 2014 and August 2016, Economic Moats — For Early-Stage Tech Startups , Brian Aoaeh developed this definition of an Economic Moat; An Economic Moat is a structural feature of a startup’s business model that protects it from competition in the present but enhances its competitive position in the future.

We believe it is important for early-stage investors to understand how the elements that comprise an economic moat might evolve for any startup in which they invest because a failure to do so can lead to capital destruction. Early-stage investing is about harnessing uncertainty, and seeking to profit from it before other investors identify the opportunity.

Doing so necessitates accepting unusually high probabilities of loss and failure. However, we do not think that means investing in startups pursuing business models that have no prospect of attractive economics as the startups grow and start to scale.

What do we mean exactly? Here are two examples that could have been described by some investors as falling under the headings of supply chain logistics, last-mile logistics, urban mobility, or something else along those lines.

First; A pre-seed or seed-stage investor who performed a pre-investment analysis of Efficient Scale & Cost Advantages in the last-mile logistics business might have ultimately chosen to stay away from investing in the numerous 15-Minute delivery startups that are the protagonist in The 15-Minute Ultrafast Delivery Craze Slams Into Reality (Bloomberg Businessweek, April 8, 2022).

Second; In VCs Squandered Billions On Scooter Startups. Markets Think They’re Worth A Pittance (Crunchbase, July 29, 2022), Joanna Glasner notes that, “Today, a scooter rental ride hardly seems like a bargain. At typical rates, which include an upfront and per-minute fee, a 20-minute ride would cost about $6. That’s more than a quick bus or subway ride in places that offer those options.”

In Venture capital’s silent crash: when the tech boom met reality (Financial Times, August 1, 2022), Richard Waters highlights other examples of some of the issues that investors who are just beginning to dabble in supply chain technology might want to take into consideration.

In supply chain technology, it is particularly important for startups to be “Impatient for profits, but patient for growth,” as the late Clayton Christensen admonished in his book, The Innovator’s Solution. This is often not immediately obvious to investors dabbling in the area for the first time, and that can result in startup founders being poorly served by the advice such investors offer them.

Supply Chain Technology startups fall into what Steve Case describes as Third Wave startups in his book, The Third Wave: An Entrepreneur’s Vision of the Future. Quoting from Why you should be rooting for startups like Uber (Aoaeh, May 2019): “The Third Wave extends from 2016. This is the era of ubiquitous connectivity and pervasive computing, enabling entrepreneurs to use digital technologies to transform real-world sectors of the global economy. This is the era during which software — made up of bits, and physical products — made up of atoms, intersect and collide. This era is driven by people, products, platforms, partnerships, policy and perseverance.”

As a result, it is important for early-stage investors to understand the ways in which supply chain technology investments may differ from pure-play software, SaaS, AdTech, MarTech, FinTech, and Digital Media startups. These differences will vary by industry vertical and by the specific function within the supply chain and operations organization from which the startup will draw its users — certain user types are slower to adopt new technology than others.

Although we advocate thinking about how economic moats might develop and evolve, we do not mean to suggest that such moats should be present for an early-stage supply chain technology startup. Rather, it is the potential for economic moats to develop as the startup grows that is important, and this is what we seek to understand in our analysis leading up to any investment. Obviously, at the stage at which we typically invest this is an entirely qualitative judgment that we expect to revisit from time to time.


All $104 Trillion of global GDP projected for the end of 2022 is dependent on man-made supply chains; The opportunity in supply chain technology is massive, but that does not mean that every opportunity is appropriate for an investor seeking the risk and return profile of early-stage venture capital. This is why we suggest investors who are new to supply chain technology proceed with caution. It is also important that investors who understand supply chains but who are new to early-stage technology and venture capital also proceed with caution, because there are aspects of early-stage venture investing that are counterintuitive.

Climate change and supply chains are opposite sides of the same coin. Therefore, we are in the early-stages of the largest sector-driven investment opportunity of our lifetime — the technology-driven refashioning of global supply chains in order to confront the climate crisis. Our only hope is to invest aggressively in the technologies that will enable us to refashion man-made supply chains such that we cause less harm to the environment.

There’s no bigger investment opportunity.

The goal of supply chain innovation and technology is to move us closer to a more secure, adaptable, and resilient future. Resilient supply chains can quickly adapt to and recover from unexpected disruptions. This is the goal that the President’s Council of Economic Advisors have set for the Federal Government, but it requires that the White House and Congress create conditions that encourage private investors to fund the innovations required to bring us closer to that reality.

We expect these rules to change as the world changes and technology advances. We’re always eager to delve into this topic in more detail. Don’t hesitate to reach out to us if you’d like to discuss this in more depth.

Originally published at https://www.refashiond.com on September 20, 2022.



Brian Laung Aoaeh, CFA

Early-stage VC — Supply Chain Tech at REFASHIOND Ventures. #TWSCF. NYUTandon. Research. | I’m not afraid to be different. Blog @ www.innovationfootprints.com.