Deal focus: EdenFarm rethinks Indonesian agriculture

Climate change has not been good for farming, especially crops like chilis and shallots, which are sensitive to overwatering and can see rapid price fluctuations of more than 1,000% due to failed harvests.

In Indonesia, increased rainfall and humidity is drowning farmers’ livelihoods. For chilis and shallots, the fix is a simple as pruning the leaves after two consecutive days of rain and refraining from adding fertilizer. But this is hardly common knowledge out in the fields.

“Now, because you cannot predict when the rainy season will end or when it will start, the way you farm is different to what it was 10 years ago,” said David Gunawan, co-founder and CEO of local agriculture technology start-up EdenFarm. “If farmers simply follow our daily to-do list – which they can find on the app – they can get at least 2-3x more yield than with the traditional methods.”

In addition to agricultural advice, EdenFarm connects 5,500 farmers with 50,000 culinary businesses on Java and organises logistics (trucking is outsourced). The oversight is said to improve pricing and financial outcomes for all counterparties through increased efficiencies and product quality.

Gunawan said the company has grown 60x in the past 40 months and is on track to achieve profitability in the next quarter, having found a product-market fit that straddles the value chain. He estimates the company has a less than 1% market share currently but could reach 50% as it expands outside Java and into other verticals such as seafood.

Last week, EdenFarm confirmed a USD 13.5m pre-Series B round led by TMI Ventures, an arm of local telecoms operator Telkomsel, with support from AppWorks, AC Ventures, and Capria Ventures. It brings total funding since the company’s inception in 2017 to USD 34.5m and sets up an imminent Series B that will address the medium-term expansion agenda.

In the meantime, the idea is to leverage Telkomsel’s ecosystem, including financial technology start-ups that can support the EdenFarm network and companies such as an internet-of-things provider that can provide sensors to improve the advisory service.

There will also be a focus on making the on-app network more of a community, where users access various related services. Part of this effort will include added physical services as simple as peeling and cutting vegetables prior to delivery such that kitchens can increase efficiencies and reduce their staffing needs.

“I’m focusing on that kind of service infrastructure because today start-ups have to focus more on profitability than top line growth,” Gunawan said. “I want to improve LTV [lifetime value] numbers. I want to improve the retention and the NPS [net promoter score] of my company.”

Much of the attraction of EdenFarm is in its sustainability credentials, with the company claiming to operate at nearly 0% food waste. Basically, this means it can acquire product from farmers’ entire crop across every grade of quality, sell the best stuff as-is, and convert the leftovers into fertilizer or, more lucratively, seasonings.

This was an important selling point for Capria, a global impact investor looking to increase its exposure to Southeast Asia. Capria liked EdenFarm’s B2B focus, observing that many similar businesses were ill advised to branch into B2C business lines. This is because they are subject to less predictable demand and costly waste related to dealing with patchy cold chain infrastructure.

“We think sustainability is actually a smart way of doing things. It isn’t just a good-for-the-environment or good-for-climate type of benefit. It’s also just a smart way of doing business,” said Dave Richards, a co-founder and managing partner at Capria.

“EdenFarm has done a lot of learning. There’s a lot of nuance to this – it’s a very heavily operational business. So, you’ve got to have a team that really can continue to explore and refine the model and do that in a sustainable way.”

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• Topics
• Southeast Asia
• Support services
• Consumer
• Industrials
• Early-stage
• Indonesia
• AppWorks Ventures
• AC Ventures
• Food
• Agriculture
• Logistics
• Impact investment