Facebook, Uber investors smell an opportunity in India's fish market
In March this year, an early investor in Facebook and an early investor in Uber, along with six others, wrote the first cheque for Freshtohome.com Pvt. Ltd, an online fish delivery startup set up just a few months before.
Freshtohome co-founder and CEO Shan Kadavil would not reveal the exact amount of funding the startup received, but said it was in "single-digit million dollars".
The investment came from Mark Pincus, co-founder of NASDAQ-listed social gaming company Zynga, Google Ventures CEO David Krane, Google India head Rajan Anandan, former SoftBank director Pavan Ongole, Silicon Valley venture capitalists Pete Briger and Walter Kortschak, and former Zynga executives Cadir Lee and Alex Garden. Pincus is an angel investor in Facebook and Krane is the person behind Google's investment in Uber.
That three of the eight investors have a Zynga connection is no surprise. For, Kadavil was the India country head of Zynga before founding Freshtohome. And he has also worked with and co-founded a number of startups in the San Francisco Bay Area, which explains his other Silicon Valley connections.
But that is not the only reason why tech stars from Silicon Valley have come together to seed fund this fish- and meat-ordering startup.
Freshtohome differentiates itself from other food-delivery startups with its full control of the supply chain, starting from procurement. At the back end, it runs an app-based marketplace to buy directly from fishermen. Around 1,000 fishermen along the coast of Kerala use the app to participate in auctions daily at 4 am, when they return to shore with their catch. The fishermen enter their prices against the icons or images of the fish on the app. "The app eliminates middlemen and keeps our procurement cost down," Kadavil said.
This helps Freshtohome create its unique selling proposition; it delivers sea fish home within 24 hours from the time it reaches shores. Sea fish available in the market in non-coastal locations are three to four days old and are preserved using chemicals, he said. "The fish we get in places such as Bengaluru is kept in cold storage and preserved in ammonia and formalin. They pose health hazards and lack their original taste," he said. Formalin is carcinogenic.
Kadavil said the firm neither uses chemicals nor keeps fish in cold storage. It transports the fish in ice to its processing centre on the outskirts of the city. The centre has 300 workmen and delivers fish on order. The company can deliver in four to six hours after an order is placed, he said. Similarly, the startup procures chicken, ensures they are free of antibiotics, processes it and sells. "We are not a hyperlocal startup; we are hyper-fresh," said Kadavil.
Jumping into the entrepreneurial ocean Kadavil, who spent most of his career in cities in India and abroad, had neither a network among fisher folk nor a knowledge of the fish market. His entry into the fish sale business was rather unplanned. He was running Zynga's 500-strong Bengaluru office, its largest engineering force outside the US, before starting this venture.
Like any true blue Malayali, Kadavil loved his fish. He used to order fish from seatohome.com, one of the earliest ventures in online delivery of fish. Seatohome.com founder Mathew Joseph, a veteran who also runs a seafood exporting business, had wound up his experiment with online fish sales as he felt e-commerce was not his forte. This prompted Kadavil, a loyal customer, to reach out to Joseph.
Kadavil's technological knowledge and experience of running tech companies combined with Joseph's knowledge of seafood industry and operational expertise in the field gave birth to Freshtohome. "Our direct procurement and delivery help us offer better price to our vendors while selling at lower than the market price to the end customer," claimed Kadavil. "We share our gain from eliminating the middlemen with both the vendor and the customer."
For instance, the Indian mackerel fish, popularly known as Bangda, costs Rs 210 a kg in Bengaluru; Freshtohome sells it at Rs 195. The website shows that prices of fish and meat items are lower by around 10% while processed meat and fish on order generally charge a premium.
The startup's efforts at ensuring fresh and chemical-free fish and meat at competitive prices helped it gain traction with a limited Facebook campaign. It claims to have added 65,000 customers in Bengaluru within a year and delivers 2,000 orders a day, with 65% customers making repeat orders.
Kadavil said the company doesn't sell on discount and makes a profit per unit. He said the hyperlocal model with just 6-7% margin will have inherent weaknesses while an online sale with a fully controlled back end will ensure 30% margins.
Freshtohome recently began a pilot project in Delhi by air-shipping fish from Kochi. The company has decided to expand in Delhi and eventually start procuring fish from Gujarat or Bengal coasts. Besides Bengaluru, it sells in Kochi and Thiruvananthapuram now.
Kadavil is confident about disrupting the domestic seafood market, which accounts for 1% of gross domestic product and employs 14 million people. "I tell my investors it is bigger than Hollywood. Its total size is $50 billion, Hollywood is $49 billion," Kadavil said.
Perhaps, Pincus, Krane and Anandan, with their nose for opportunities, did not miss the waft from the Indian fish market.
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