Deal focus: Cloud Farm brings China agribusiness online

Domestic GP Chunxiao Capital is looking to steal a march on the competition, committing nearly RMB100 million ($16 million) in funding to online agricultural products shopping mall Cloud Farm. The two-year-old start-up previously received $10 million from Legend Holdings.

"Traditionally, farmers risked buying fake products from middlemen, which posed a threat to food safety," says Wen He, venture partner at Chunxiao. "We identified agricultural e-commerce as an area where we could integrate upstream and downstream operations in order to improve efficiency and information transparency."

Manufacturers typically sell agricultural products through regional agents, with farmers paying a 15%-45% mark-up. Cloud Farm, which offers more than 2,800 agricultural products, such as fertilizers, pesticides and seeds from 400 supplies, wants to cut these costs.

"To sell products to farmers, the first thing you must do is gain their trust. In the past, farmers paid distributors six months after purchase. This wasn't due to a lack of cash; they feared being sold something fake," He says.

Cloud Farm has created a network of more than 300 centers and 25,000 village service stations across 13 provinces, including core agricultural sites in the provinces of Shandong, Henan, Jiangsu and Anhui. Employees in each service station receive - relatively lower - commissions for taking orders, processing payments and making deliveries.

The platform extends into overseas markets, giving local companies access to products from the US, the Netherlands and Israel. There are also plans to create an agriculture-focused incubation program as well as a series of platforms targeting professional services and rural finance.

"Buying cheap isn't the ultimate aim. Farmers are more concerned as to whether they can sell products at higher prices. So Cloud Farm will develop an agricultural products trading platform. They will collect data on what farmers use to grow their crops and it can be shared with manufacturers and local authorities as part of efforts to improve productivity," He says.

Large, publicly-traded agricultural corporations and internet giants such as Alibaba Group and JD.com are also trying to expand into the rural internet sector. However, He says the former are generally reluctant to enter new areas where there is no guarantee of immediate profit, while the latter have little or no sector expertise.

"In the B2C sector, consumers are easily influenced by big brands, so they only go to Taobao or Tmall," He adds. "But in B2B agribusiness, farmers are very rational users. They will choose the platforms with the best services that sell products at reasonable prices."

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• Topics
• Expansion
• Greater China
• Industrials
• Venture
• Growth capital
• Venture
• Agriculture
• China