Is Agrifintech the next big thing?

ProducePay raises $14m to build new look farming funding system.

Many of the most interesting ideas within the alternative finance space have been focused on innovative solutions for businesses with working capital problems. Supply chain finance in all its various incarnations has seen rapid growth in recent years but arguably there are huge differences in the requirements of different business sectors.

What works for construction businesses for instance is very different from the challenges facing restaurants – the latter industry frequently has very short term requirements whereas most builders have long lead times requiring immediate upfront payments for large scale projects many months from completion.

Agriculture presents its own fairly unique challenges – long time scales, sometimes global finance chains and the impact of weather can all serve to make the farmer's lot a very difficult one.

A series of agrifintech businesses have started to spring up to cater to this global niche market. Los Angeles based business ProducePay looks like its about to charge to the front of the pack with news of a recent mammoth Series B funding round worth $14m or £11m. The funding was led by Anterra Capital, with participation from Rabo Frontier Ventures (Rabobank strategic investment fund), Coventure, Social Leverage, FJ Labs, Greenhouse Capital, Moonshots Capital and Tribeca Angels.

ProducePay is currently focused on a range of supply chain solutions, designed to connect buyers with (fresh) produce sellers. Options currently offered by the business include solutions focused preseason packages where the grower/farmer can get an initial advance of upto 10 per cent and then get help when the produce is ready to ship.

Another option called Pick and Pack, which focuses on farmers shipping on the ‘day’, and getting “paid tomorrow”, with funding up to 50 per cent of the value of the crop. The last product is a more typical invoice funding solution where the grower/farmer gets 80 per cent immediately after shipping. In this last option ProducePay pays for product the day after it is shipped, rather than the typical 30-to-45-day waiting period.

The company says it experienced “significant growth in 2017, in which the company financed $400m of produce, up from $17m in 2015”. Founded in 2015, ProducePay has provided liquidity to over 600 growers and distributors in six countries, financing over $850m of produce in under four years.

Pablo Borquez Schwarzbeck, CEO, ProducePay, said in a statement: "We have spent the last three years reinventing how the produce industry accesses short term cash needs and the transparency of their supply chain. To date, ProducePay has helped move over $850m of produce.”

The backing of Rabobank (and its related business Anterra) is seen by many as a crucial plus for the deal - the Dutch bank is one of the world’s leading agricultural specialists.  According to Harrie Vollaard, Head of Rabo Frontier Ventures at Rabobank, the ProducePay service “addresses a significant pain point in the fresh produce value chain. The platform enables farmers to connect to food retailers in a more cost efficient and less risky way, of which all involved parties in the food value chain will benefit.”