Deal focus: WayCool Foods pursues scale

A $32 million equity and debt investment, is unusually large for an Indian agricultural technology start-up. But Prashant Mehta, a partner at Lightbox Ventures – which led the round – believes it is warranted. “It is a big funding round,” he says. “But they control their food supply chain.”

The recipient, WayCool Foods, is a four-year-old fresh food supplier to customers such as restaurants, supermarkets, and small retailers. The company’s selling point is that it has direct control over the procurement, processing and distribution of produce, thereby guaranteeing quality. It claims to have established long-term relationships with 40,000 farmers in south India and seeks to assume the role of the middleman who is often blamed for food wastage.

Karthik Jayaraman, a founding team member at WayCool Foods, says the company utilizes practices commonly found in other mechanized sectors like fast-moving consumer goods – fresh produce is bagged and tagged with barcodes as soon as they are sourced and processed on conveyor belts. It claims to have created a closed-loop ecosystem so that farms can theoretically work to meet anticipated demand instead of competing on the open market. Dedicated relationship managers liaise with farmers and seek to build a relationship based on commercial and educational interactions. 

“Establishing that relationship with the farmer takes time,” Jayarman explains. “As the relationship expands over a couple of annual cycles, we have been able to share our demand plan and suggest a cultivation package so there’s continual revenue from the plot.”

WayCool Foods is unable to be the main buyer for a farm’s total output but Jayarman believes the start-up can eventually get there. In the meantime, visibility into future demand patterns reduces costs as laborers are hired at different stages of the year to focus on different crops. At present, many farmers gamble by only growing high-margin crops, supplementing household income by working as migrants in cities for the rest of the year.

While the company is not yet profitable, Jayarman claims it will get there soon. The new funding will go towards further supply chain automation. WayCool-owned warehouses may not be teeming with robots moving goods, but gains can be made by employing machines whenever possible. The company has carried out frugal engineering to build a supply chain that works in the Indian context.

It is also benefiting from macro developments. Improved rural roads, faster communication networks and better access to agricultural finance now present an opportunity to modernize the distribution system in India’s oldest industry.

“To be perfectly honest, this isn’t a greenfield sector,” Jayaraman concedes. “India has been feeding itself for 8,000 years. There are enough large birlas or middlemen or equivalents who have been performing this service. The real question is whether they’re efficient.”

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• Topics
• South Asia
• Early-stage
• Technology
• India
• Agriculture
• Lightbox