Why There Are No Farm-To-Table Unicorns

November 17, 2015, 12:00 PM UTC
Courtesy of Farmigo

It’s a great time in history to be an inept cook in America.

As Fortune recently reported, 88 companies in the U.S. offer some form of e-food delivery—either meal kits, meal delivery, food e-commerce, online grocery shopping, or online ordering—according to consulting firm Rosenheim Advisors.

And the money has followed. Rosenheim estimates that $733 million has flooded into such businesses over the past six months from U.S. private investors. Compare that to $697 million for all of last year.

The result? Lots of startups with valuations of at least $1 billion, those much beloved unicorns, in the food delivery sector. But there’s one area of the market that has yet to have a billion-dollar company: farm-to-table grocery delivery.

That’s because farm-to-table is a “slower-to-move sector,” says Benzi Ronen, CEO and founder of Farmigo, which sells produce and other products like milk and cheese purchased directly from farmers. Farmigo is trying to replace “the entire supply chain,” he says, while other food-tech delivery companies are focused on just a slice of the system. Instacart, for example, handles the delivery component and sources from grocery stores. Meal kit startups, such as Blue Apron, are also for the most part tapping into the traditional supply chain and sourcing.

“It’s the same food,” he says of those services. “We’re going after the customer saying that the food is not good enough. They want something fresher coming direct from harvest.”

Ronen has had to sacrifice convenience to make the model viable. Rather than receive door-to-door delivery, Farmigo customers pick up their food at community hubs during an appointed window. “It’s what enables us to make the economics work,” he says.

Farm-to-table services like Good Eggs and Grub Market, which offer door-to-door delivery and have had to reduce their operations in recent months, are a case in point. “Half a year ago I was asked how they’re doing it,” Ronen said. “I didn’t know how they were doing it. It was an uncomfortable situation for me to be in.”

For its own part, Farmigo announced in September that it had raised $16 million in a Series B round, bringing its total investment to $26 million to date. And in October it launched in its fourth market (Seattle-Tacoma).

The company is also moving closer to Ronen’s goal of offering a breadth of food that would rival a supermarket. Customers’ average basket size increased from $20 last year to $65 today.

Read More

Great ResignationInflationSupply ChainsLeadership