Chunxiao invests $16m in China agri e-commerce player

The company, which has a network of more than 300 service centers and 25,000 village service stations across 13 provinces, serving 3 million hectares of land, previously received $10 million from Legend Holdings. It wants to add to a customer base that already numbers nearly one million, further integrate upstream and downstream operations, and ultimately access the capital markets.

Cloud Farm describes itself as an "agriculture 3.0" business, bringing internet-enabled services to rural China. This in keeping with government policy, with the State Council having emphasized the need to develop rural e-commerce as part of efforts to improve supply chain efficiency, enhance agricultural mechanization and access to fertilizers, pesticides, seeds and related technologies.

To this end, Cloud Farm has created what it claims to be China's largest online agricultural shopping mall, which features more than 2,800 products from 400 companies. The platform also extends into overseas markets, giving local companies access to products from the US, the Netherlands and Israel. Cloud Farm says farmers can buy products at a 15-45% discount on its platform compared to traditional channels.

In addition, there are plans to create an agriculture-focused incubation program as well as a series of platforms targeting professional services, peer-to-peer logistics and rural finance.

"Agriculture and the agricultural products supply chain suffer from information asymmetries and inefficient cash flow. The internet can lead developments in these areas," Wen He, a venture partner at Chunxiao, said in a statement.

Private equity investors are active all the way along China's food value chain, from agricultural inputs through processing and manufacturing, logistics and retail to consumer goods. They are not only seeking to leverage rising middle class demand for food that meets international quality and safety standards, but also looking for ways to improve supply chain efficiency.

This is part of the investment thesis for Hosen Capital, which wants to raise $400 million for its second US dollar-denominated food and agriculture fund.

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