It’s estimated that sea-based shipping accounts for 3% of all human-produced greenhouse gas emissions. If left unchecked, shipping will account for 17% of all emissions by 2050. Some experts peg the inefficiency on legacy structures that impact the entire supply chain. In ocean shipping, ships leave port at high speeds only to slow down before reaching their destination, resulting in fuel waste and excess emissions as well as lost capital for shipowners and charterers.

Aiming to tackle the problem with technology, shippers are investing in startups offering software that’s designed to optimize routes in a way that minimizes carbon emissions. For example, Mitsui, one of the largest shipping companies in the world, is collaborating with Silicon Valley-based Bearing.ai on a “smart” routing engine for ships. Another startup, Windward, has shipping customers that use its AI platform to monitor fuel and emissions.

Another vendor in the over $2.5 billion route optimization segment is Nautilus Labs, which today announced that it raised $34 million in a series B round co-led by Microsoft Climate Innovation Fund and M12 (Microsoft’s venture arm). The capital, which brings the startup’s total raised to over $48 million, will be put toward developing new product capabilities, hiring talent, and expanding offices in “key shipping hubs” worldwide.

Optimizing ship routing

New York-based Nautilus was founded in 2016 by Anthony DiMare and Brian O’Clair. O’Clair was previously a software engineer at Google, where he worked on the tech giant’s ad-serving Doubleclick platform.

Nautilus claims its software considers a client’s commercial goals in addition to internet of things sensor readings, arrival and departure times, and weather forecasts, capitalizing on the weather to generate fast routes. Its AI-informed recommendations — which include suggested on-ship generator settings — are sent daily and updated as factors change during a voyage, with the goal of improving fuel efficiency and reducing engine hours.

Nautilus CEO Matt Heider says he sees a large addressable market for Nautilus’ technology. Around 90% of traded goods are carried over the waves, and in the U.S. alone, marine shipping is the transportation method for 53% of imports and 38% of exports.

“Economic efficiency and environmental efficiency are best solved in unison. Today, we’re able to empower ocean shipping companies with a path to creating the most profitable business — that at the same time helps them reduce carbon intensity immediately,” Heider said in a press release. “The firms winning in the market are mobilizing resources now to adopt a collaborative, data-driven approach to transforming their voyages. By focusing on the underlying economics, they’re stripping wasted fuel and time out of their operations.”

Future growth

The International Maritime Organization, the United Nations agency responsible for regulating shipping, has set in place carbon intensity standards that go into effect in 2023. Meanwhile, the European Union (EU) Emissions Trading Scheme — which aims to incentivize firms to reduce their emissions — will cover ocean commerce starting next year. Both could motivate shippers to invest in solutions like Nautilus’ routing software.

As AI Multiple’s Cem Dilemgani notes, AI models help businesses to analyze existing routing and track route optimization, using “shortest path” algorithms to identify the most efficient route for vessels. “ AI systems can schedule the transportation, organize pipelines for cargo, assign and manage various employees to particular stations, and track packages in the warehouse,” he wrote in a blog post. “Route optimizers are also effective tools for reducing corporate carbon footprint.”

Even before the pandemic, ocean freight was undergoing something of a digital transformation. A 2018 iContainers survey found that 75% of shippers believe that digital ocean freight services will become the norm within the next five years, while 67% said that they’ve begun to see signs that the sector has started its technological evolution.

NSS Advisors, SystemIQ, Root Ventures, Quiet Capital, TMV, and Amplifier also participated in Nautilus’ series B. The startup partners with companies including TotalEnergies, Eastern Pacific Shipping, and Emirates Shipping Line, and recently announced the addition of London to its hubs in Singapore and Paris.