AVCJ Awards 2020: Deal of the Year - Small Cap: TaniGroup

When Singapore’s Openspace Ventures met the team at TaniGroup in 2017, the Indonesian agricultural technology start-up wasn’t mature enough for the Series A-focused VC to invest. But it’s never too early to think about optimal positioning for future opportunities.

Openspace nurtured the connection on an informal basis for two years, providing value-add nudges here and there, including technology infrastructure advice and assistance finding financing partners for the start-up’s fintech services unit. Alpha JWC Ventures eventually led a seed round in 2018.

This approach recognizes that the playbook for developing massive tech businesses in Indonesia is still being written and requires more risk-taking at the ideation stage. It’s also business as usual for Openspace, which backed local ride-hailing platform-turned-super app Gojek in 2014, when it was a fledgling concept run out of a call center.

“We stay in close touch, and every conversation, we give some perspective on what we look for in metric developments, corporate structure, governance, customer profiles, and diversity,” Shane Chesson, a founding partner at Openspace, says. “We want to give continuous pointers on what it means to be an Openspace Series A company, and those conversations are happening on a monthly or bimonthly basis between the time we meet someone and make the investment.”

Popular target

Openspace led a larger-than-expected $10 million Series A for TaniGroup in May 2019, bringing in Golden Gate Ventures and Intudo Ventures, as well as DFS Lab, a financial technology accelerator funded by the Bill & Melinda Gates Foundation. The round quickly became competitive, and several latecomers were unable to join the syndicate.

Chesson attributes his firm’s preferred exposure to the start-up to a combination of pre-deal guidance and willingness to take the lead. Indonesia’s VC ecosystem has matured remarkably in recent years, but most investors remain wary of taking the plunge in terms of setting a price and putting down the first check.

“That’s part of the role for an investor like us when you like someone but they’re not quite there yet,” Chesson says. “Hopefully the entrepreneur builds a relationship with you such that when they are starting to show runs on the board, they’ll go with the people who have been helping them and they’re more comfortable with.”

TaniGroup is best known for its TaniHub e-commerce platform, which connects 31,000 farmers with around 400 small and medium-sized enterprises as well as over 10,000 individual customers. The idea is to secure better trading terms for agriculture industry participants through more direct communication across B2B and B2C channels. Over 60% of orders are delivered on the same day.

The service is supported by a P2P crowdfunding program called TaniFund, which has facilitated more than 88 agricultural projects with 10,000 registered lenders to date. The overall platform helps farmers improve the quality and quantity of their output through access to better materials, equipment, and training. Farmers in the network have seen their bank accounts grow by 100%, while their incomes and harvest yields have grown 60% and 30%, respectively.

Openspace put its technology team to work post-deal, helping streamline and refine the existing systems and dashboard. This reduced significant process inefficiencies, especially in inventory management. TaniGroup is now able to continuously gather supply and demand data to provide more accurate real-time forecasting models for the matching of farmers with various food service and hospitality businesses.

“When we reviewed the different teams that were focused on this agtech opportunity, we thought a lot of other people were going down the wrong path,” Chesson says. “Some were just focused on ingredients for restaurants. Others’ only business was shipping directly from farmers or co-ops to people’s tables. TaniGroup does that, but it’s only a small part of its business. What you need is to make the whole supply chain more efficient.”

Survival skills

A diversified offering has proven essential to survival amid the market disruptions of COVID-19, which have been problematic for a number of TaniGroup’s more narrowly focused competitors. Perhaps the most dramatic example here is Stoqo, a farm-to-restaurant specialist also seeded by Alpha JWC that grew 7x during 2019 but folded operations in April due to pandemic-related pressures.

“TaniGroup built this business to be quite flexible in terms of the sources of supply and demand, so they were able to ride those waves out successfully,” Chesson says. “As demand shifted from restaurants to people buying their own groceries, they could shift quickly from one customer segment to another. As people went back to work and the big employers started getting their kitchens up and running, the catering side of the business grew tremendously.”

TaniGroup claimed strong growth in the first half of 2020, with revenue jumping 104% between January and August. Openspace and Intudo duly led two bridge rounds worth about $5.5 million, and a Series B is expected in 2021. The company’s valuation is said to have increased almost 6x between early 2019 and August 2020.

Further upside is represented by the enormity of the opportunity set and problem-solving that define the TaniGroup vision. According to government statistics and the World Bank, food accounts for 22.5% of Indonesia’s exports. At the same time, 50% of fresh produce in the country is wasted due to supply-demand mismatching and logistical challenges.

“To me, that’s both an economic opportunity as well as a social opportunity,” Chesson says. “If you see a rare opportunity like that, and you find a team that’s focused on it, and you have a belief that the technology can solve the problem within an investable timeframe, you jump on it.”

Pictured: Shane Chesson of Openspace Ventures makes his video acceptance speech

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• Topics
• Southeast Asia
• Early-stage
• Technology
• Consumer
• Indonesia
• TMT
• Openspace Ventures
• Intudo
• Golden Gate Ventures
• Alpha JWC Ventures
• AVCJ Awards