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Government-backed fund takes stake in last-mile delivery tech start-up

June 9, 2022

A government-backed growth fund has snapped up a stake in a technology-driven start-up focused on last-mile delivery logistics for retailers which allows shoppers to pick up parcels at other locations such as local 7-Eleven stores or BP service stations.

Hubbed has created a national pick-up, drop-off network of more than 2000 locations across Australia. This consumer collections model allows more choice for carriers and retailers, and shoppers an alternative delivery service outside the home.

Its proprietary technology integrates with carriers, aggregators, marketplaces and other e-commerce platforms. Hubbed’s customers are some of the world’s biggest carriers, including Couriers Please, DHL, eBay, FedEx, Sendle, TOLL, TNT and UPS.

The public-private partnership known as the Australian Business Growth Fund (ABGF) was established to assist small to medium growth companies that were regarded as too big for venture capital but not big enough for private equity.

The fund has invested $12 million in Hubbed and will control a 30 per cent stake and garner a board seat.

ABGF chief executive Anthony Healy was attracted to the integrated technology and Hubbed management who came up with an innovative solution to address a gap in the e-commerce market.

“They are really addressing a key pain point when it comes to last-mile logistics in the area of parcel delivery,” he said.

“You put all that together with a huge addressable market, the large and growing new commerce space and the options that retailers have today are limited. Australia Post is a huge player, but we can see there was an opportunity here and the model that Hubbed got to market is really innovative.”

Hubbed founder David McLean told The Australian Financial Review the fresh funds would allow it to scale up collection points to 3000 nationwide, including into more regional locations.

“Everybody wants fast delivery, but they want fast at the cost of slow. You cannot have fast at the cost of slow,” he said.

“Therefore, you have to create different versions of fast, so you can actually get a parcel to a collection point a lot faster than you can get a parcel delivered to home at the right cost differential.”

According to Pitney Bowes Parcel Shipping Index, Australia last year passed the 1 billion mark for business-to-consumer parcel delivery.

The online shopping boom has created a bigger delivery market. Delivery to home in the last mile is expensive and inefficient, so carriers are investigating options for reducing the cost of delivery, and to increase capacity, while retailers are focused on providing more services and returning customers.

More eco-friendly

Mr McLean, who spent 14 years at Microsoft selling products such as Windows and X Box before striking out on his own in 2014, said delivery via the Hubbed network was also more eco-friendly since trucks spent less time on the roads delivering to a collection point over a home. That saved about 0.47 kilograms of carbon emissions, according to the Carbon Reduction Institute of Australia.

Five years later Hubbed expanded into New Zealand. There are further expansion plans this year in the Middle East, UK and the United States.

National Australia Bank is a founding member of ABGF.

Andrew Irvine, NAB group executive for business and private banking, said the fund was about supporting SMEs accessing long-term equity capital while retaining control of their company.

“Initiatives like this are a powerful way to support entrepreneurs,” he said.

ABGF has $540 million of funds under management and just under $60 million has been deployed across a range of investments in lithium-ion batteries, healthcare and dental, and software as a service. Hubbed is its fifth investment.