How European Startups are Shaping the Future of the Circular Economy, Business-Model-First.
Next week’s Supply Chain Meetup in NYC is focused on Circular Economy ventures, and I’ll be introducing leading-edge circular startups that I’ve met and interacted with across the EU.
While NYC’s startup ecosystem leads in many sectors, we’re a bit behind when it comes to circular startups, Sustainable Development Goals, and imagining a future with no waste.
I think we’re going to have a hard time seeing circular supply chains in this city when we’re walking by all of this trash which we outsource to other states and countries. So let’s take a European vacation to get inspired for how to reshape NYC as a circular system.
The clue: circular startups are not just leading with changes to materials flows. They are leading with customer-centric business models that pull behavior change forward. This marks two fundamental shifts that some like to call the Fourth Industrial Revolution.
There is the shift from Linear to Circular material flows and supply chains, a concept first described as the Performance Economy by architects like Walter Stahel and popularized by William McDonough, and then the Circular Economy by the Ellen MacArthur Foundation.
Then there is the less understood shift from standard linear industrial business models to more complex digital services models, often called the Platform Revolution.
It starts from older industrial models that gained an advantage through economies of scale and well-managed supply chain.
A shift to servitization was further strengthened through digital as-a-service models, and companies such as Adobe, Netflix, Microsoft, and Apple have started a major transformation from selling licenses and sending DVDs to continuously deliver value to customers through as-a-service models. Customer centricity is a better foundation for circular flows to and from the end customer to the rest of the supply chain.
Once a company has built a strong continuous delivery model, it can begin to add on complementary businesses that plug-and-play onto platform architecture, providing opportunities to all types of partners throughout the supply and demand chain.
The final state: ecosystem leaders that are able to generate multiple business models, and serve as the primary source of demand for an entire category. They are able to expand the boundaries of the firm and in some cases to create substantial value for partners. While we do not yet see the dominant US-based ecosystem leaders today initiate major moves in the circular economy, we can imagine a future where this might be true. Let’s look to Europe for some good ideas.
As we tour these ventures, keep on eye on the business model as the primary tool for shaping circular supply chains.
The EU has fast-growing circular startups that are raising fairly large amounts of capital (for Europe), and they will sound very European.
Business Model: Product Service Subscription
I start with a student project: TU Delft students wondered why they couldn’t “Spotfiy” a bike, so they bought 40 used bikes off of the Dutch version of Ebay, and rented them out to students on a monthly basis. In the Netherlands, almost every city dweller rides bicycles and relies on them. When bikes are stolen or broken, it’s a major hassle to get repairs or to save up the cash for a new bike. Swapfiets offered a full service: monthly bike rental with an iconic blue front tire, repairs and replacements for stolen bikes included, and replacements delivered within a day.
Swapfiets raised €12 MM from a Dutch Family-owned VC, Poonac Ventures, and has since expanded to Denmark, Belgium, and Germany, and are choosing their next cities based on a number of parameters such as bike lanes and commitment to bicycle transport, with potential moves to Portland Oregon in the US.
Business Model: Product with Repairs, Fair Trade Supply Chain
Fairphone is an ethically made smartphone, fully repairable, with a conflict-free and fair trade supply chain. We’ve all noticed that smartphone innovation has stalled. Why not think more critically about the promise and perils of buying the next shiny thing and instead buy a phone built to last, and be repaired.
The biggest differentiation is the ease of repair. Fairphone comes with a tiny screwdriver included in the box that allows you to take the phone apart in pieces so you can swap out individual modules in case they break or fail. Fairphone sells replacements via a spare parts section of its website. The company has met challenges supporting a fully repairable phone with available parts and has tapped into grants, venture funding, project crowdfunding, equity funding, and debt to finance their multiple stages of growth.
Business Model: Product Service Subscription
A former energy manager for utility company, Marcel Peters learned of the immense waste caused by the use phase of appliances, and how sustainably-made appliances from brands like Mieile outperform poorly made low-quality appliances. He started Bundles to provide high quality eco performance appliances on a rental basis, with free delivery, installation, and maintenance. They are early on and have raised est. €400k to continue their expansion.
For each of these companies, circularly is affected by business model choice. The value proposition has been reconfigured to deliver far more value than the product alone could provide, and the value chain has been reconfigured to be responsible for the entire cycle of use, reuse, and repair.
Now on to our next sector: food waste startups.
Business Model: Circular Logistics
Phenix operates a digital platform that connects distributors (firms that generate unsold food items) with various organizations that receive these flows (food banks, associations or the animal feed industry). They targeted the biggest players in food retailing, whose unsold food items are valued at between €500 and €2,000 daily per retail outlet.
Supported by recent government incentives to combat food waste, the Phenix platform is, therefore, gaining a foothold as an intermediary that can enable connections in real time between supply (unsold items) and demand (food needs) by structuring the way exchanges are carried out between two different worlds. Phenix has received over 15 MM Eu in venture funding and most recently an investment from Danone Manifesto Ventures.
Too Good to Go
Business Models: Multi-Sided Marketplace
Started in Copenhagen and run by Endomondo founder Mette Lykke, Too Good to Go partners with food and retail establishments to connect consumers with lift over food and a time-slot for collection, promoting end-of-day food at a discount. Too Good to Go has raised €6 MM and operates in 16 countries with 18 MM users.
We’ve seen similar startups in here recently – Food for All and GoMkt, who will now be competing with the Danish company who just expanded to Boston and New York.
Zero Waste Biotech Limited
Hardware Service and Removal Service
Zero Waste Biotech provides washing machine-sized aerobic digesters that convert food waste into a high-energy fuel source. In Norway, residential and commercial organic waste must be separated into brown bins, and all of that organic matter puts a strain on waste streams.
Zero Waste generates revenue streams: a monthly fee for the benefits of the aerobic digester, and then for the removal of waste, as biomass fuel can be sold to energy producers.
While there are many new supply chain data and SaaS startup, the EU versions are shaped by local demand to comply with heightened regulations, and end-consumer demand for traceability.
Business Model: SaaS, Data-as-a-Service Aggregator
Shippeo is a supply chain visibility platform that enables large companies to track road transport flows in real-time. Shippeo gives Amazon-like visibility for their customers to proactively communicate with their end-customers about delays or delivery issues. Focused on the data aggregation from different transport parties to provide a unified view of the shipments to the shippers.
Carriers benefit as well since the platform connects to their customers’ transport management systems, enabling automatic data interchange, giving these fragmented companies productivity and service gains. Founded in 2014, Shippeo tracks more than 40,000 deliveries per month throughout Europe for market-leading customers such as Leroy Merlin, Saint-Gobain, and Faurecia, and connects to more than 600 carriers and has recently raised €32 MM.
Traxens provides trackers at the container level in sea, road, and freight rail operations around the globe. The wireless IoT devices and solutions allow for the local interconnection of different devices, to better monitor and improve overall operations.
Traxens has raised over €20M and recently partnered with shipping giant Maersk, who ordered 50,000 devices. The company is also expanding into Asia and providing greater value to shipper using digital freight.- guaranteeing real-time data and on-time deliveries.
MOST provides a real-time monitoring solution for controlling the conditions of goods during transportation. A combination of hardware and software provides monitoring from the farm or factory to distribution centers and has provided their solution in four continents after launching in 2015.
MOST delivers data to its clients about the position, temperature, humidity, shock and light of shipments through the company’s online platform, or straight to the client’s own monitoring system via APIs.
What can you see in all of these startups? Regulation shapes demand, but companies step up to envision the possibility space and generate new revenue streams and new business models. And there’s more – stay tuned for my favorite business model: industrial symbiosis – which I’ll present next week and update this post.
If you want more to come at the NY Supply Chain NY Meetup next Thursday at Microsoft’s offices in Times Square. I look forward to seeing you there.