Deal focus: Iron Pillar demonstrates conviction in FreshToHome

Iron Pillar raised a top-up to its maiden fund earlier in May so it could double down on companies that are performing well. FreshToHome, an Indian food delivery platform, represents a triple down. Iron Pillar put $9 million into the Series B round last year. Its share of the company’s recent $121 million Series C is $39 million – $19 million from the fund and $20 million in LP co-investment.

“We see a massive opportunity for this to become a multi-billion-dollar company, the sort of investment that returns our entire fund,” says Anand Prasanna, a managing partner at Iron Pillar. He expects FreshToHome to achieve unicorn status by the time of its Series D.

Unsurprisingly, there is a COVID-19 angle. The company’s farm-to-fork offering – an integrated fish and meat supply chain, product quality guarantees, doorstep delivery – has proven popular amidst lockdowns and social distancing. Annualized revenue is now $85 million, having increased nearly 12-fold over the past 12 months. In February, it was at 25% of the current level.

FreshToHome has gone from 420,000 orders a month from B2C customers to more than 1.5 million, but the spike in COVID-19-related demand was not anticipated and capacity is insufficient. The Series C proceeds will go towards ramping up coverage within India, where the company has a presence in seven major cities and is eying expansion into Calcutta and perhaps one more.

FreshToHome claims to be the largest fully integrated online brand in fresh fish and meat e-commerce globally, a status it has achieved partly through necessity. Especially for fish, which accounts for 60% of the business, wholesale and retail are separate in most markets. This creates a quality problem in India because the wholesale players, as well as the fisherman and farmers they source from, are small-scale middlemen.

Shan Kadavil (pictured), previously country manager for India at Zynga, teamed up with Mathew Joseph, a food export industry veteran, to provide a solution. While the goal is to bring producers closer to consumers, FreshToHome sells goods under its own brand rather than facilitating transactions between third parties. “We take control of the inventory when it is harvested, or the fish comes on land, and then we do the cleaning, packaging and delivery,” Prasanna says.

In this sense, the company differs from marketplace operators like Amazon Fresh, Flipkart, and Bigbasket. Licious, which has raised several rounds of VC funding, is the nearest like-for-like business model, but it focuses on chicken more than fish. According to Prasanna, there is no sizeable online rival in the fish space.

FreshToHome is also expanding its business in the United Arab Emirates (UAE), hence the participation of Investment Corporation of Dubai – owner of Emirates Airlines – and other local investors in the Series C. The UAE is responsible for 20% of the company’s revenue, principally through Dubai and Abu Dhabi, and there are plans to enter other parts of the Middle East.

It is not just a matter of tapping into the similar consumption habits of a region with a large South Asian population. India is a major exporter of seafood – it is the world’s leading supplier of frozen shrimp – and FreshToHome’s cold chain operation has made fresh produce more accessible. The company already flies seafood from the southern state of Kerala to New Delhi, a journey of three hours; it takes 30 minutes longer to reach Dubai and produce sells for three times the price.

Fish is attractive because it is relatively high margin. As such, FreshToHome is careful about entering other verticals. “We are expanding into vegetables in UAE, but this is tougher to do in India because the average order value is one third that of the Middle East,” Prasanna adds. “We are running a brand, not a marketplace, so we have to make money on transactions. There has to be a strong strategic reason to get into other things.”

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• Topics
• South Asia
• MENA
• Consumer
• Technology
• Expansion
• India
• Iron Pillar
• TMT