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In this episode, we learn about eFishery, which became the first unicorn startup in the aquaculture industry.
Founded in 2013, eFishery is an Indonesian startup that uses IoT devices and an online platform to solve problems faced by fish farmers. The company's growth story is a great example of how specialized tech companies are proving their worth in Asia.
In 2023, eFishery raised $200 million in Series D funding from the 42X Fund. Other investors in the round included Malaysia's largest public pension fund (Kumpulan Wang Persaraan), Swiss-based asset manager KWAP, and venture capitalists such as 500 Global. The investment brings eFishery's valuation to more than $1 billion.
It is the only fisheries startup to become a unicorn. How is eFishery solving fish farmers' problems?
The startup has developed a solution that automatically adjusts feed rations through IoT devices. Its online platform offers remote management of fish farms and a feed marketplace. This online and offline solution reduces the cost of fish farming and improves water pollution issues.
According to eFishery, fish need to eat only about 4% of their body weight per day for optimal growth. If they eat too little, they grow slowly, and if they eat too much, they can be wasteful in reproduction.
Imbalance in feeding also runs the risk of water quality deteriorating quickly. Either way, your margins will be reduced. Feeding timing is also important, and it's difficult for fish farmers to keep track of this manually all the time.
eFishery offers an IoT system that can be installed in fish farms. The feeders are equipped with sensors. The sensors monitor fish farm conditions. The distributor uses sensors to detect external data, such as fish movement, and adjust the timing and amount of feed.
Moreover, it's connected to a solar panel, so it's self-powered. It's designed for fish farms that don't have access to electricity.
Indonesia is the second-largest aquaculture market after China as of 2020. It produces 5.8 million tons of fish per year. In this market, more than 70,000 small-scale fish and shrimp farmers use the service in about 280 districts in Indonesia. According to the Demographic Institute of the University of Indonesia (LDUI), in 2022, eFishery contributed 1.55% to Indonesia's gross domestic product in the aquaculture sector.
Aquaculture is not a sector that is widely recognized by the public. But eFishery has proven that it's a market with a lot of room for innovation through technology. Of course, the process hasn't been easy. It took a decade for a small Indonesian company to grow into a globally recognized and promising startup.
Gibran Huzaifah, co-founder and CEO of eFishery, was born and raised in a low-income neighborhood.
Even so, Mr. Gibran Huzaifah enrolled in Bandung Institute of Technology (ITB), Indonesia's best-known engineering school, where he studied biology. He happened to take a course on aquaculture and was fascinated by its promise. Mr. Gibran Huzaifah rented two fish farms himself to pay his tuition and get out of poverty.
The first fish he raised and sold were catfish. But catfish farming was not enough to get him out of the financial hole. The intermediate wholesalers of seafood set the prices of the products, so he looked for other options. He made catfish filets/nuggets and sold them from his university food cart. It was an attempt to add value to his aquaculture business.
The business grew, and by the time he graduated from college, Mr. Gibran Huzaifah managed 76 fish. Along the way, he learned about the realities of being a fish farmer, such as how to make a margin on feed costs, and realized that fish feed accounts for 70 to 90 percent of the total cost of farming. He decided to solve this problem with technology.
Founded in 2013, startup eFishery launched its first product model in 2014.
Despite being a small company, the founders realized they needed to invent hardware as well as software and apps. The idea was that if they could create an automated feeding solution using IoT devices, they could reduce the inconvenience for fish farmers and fundamentally improve the problem of over- or under-feeding.
Of course, developing a product that can be deployed anywhere while minimizing development costs was a challenge from the start, so in the early days, the founders traveled to fish farms to provide customer service in case of errors.
Also, they trained farmers on the basics of the internet, including how to write emails and use social media. In the early days, they focused on helping their core customers, the farmers, deploy the technology.
The migration of farmers to digital solutions wasn't easy. It took about 97 days for eFishery to get its first customer. It took nine months to get its first 10 customers. Initially, eFishery was accepted out of pity, not trust. He had to patiently wait through the entire cycle of the farming before their customers realized the usefulness of the automatic feeder and spread the word.
In an interview with Forbes, Mr. Gibran Huzaifah recalled, "For the first five to six years of our business, we were rejected by rural farmers and venture capitalists." Farmers were skeptical about utilizing digital devices and apps in ways they weren't used to. Many investors either didn't understand aquaculture or didn't believe there was value to be created in that market.
Still, by digging deep into its customers' problems, eFishery turned a profit in about four years. It is projected to have annual revenue of $263 million in 2022. It became the first Indonesian unicorn in its industry just 10 years after its founding. It goes to show that opportunities come to entrepreneurs who understand the problems of their core customers, listen to their needs, and stick with a good product.
"Times change, but the fact remains that customers want quality products. Focus on that" - eFishery founder: CEO Gibran Huzaifah
With the eFishery platform, it is possible now to get more realistic data about the fish one’s raising on a farm. This not only solves the problem of feeding methods, but also contributes to better overall fish farm management.
According to eFishery, fish farms that have implemented smart feeding systems have seen an increase in fish production of up to 35%. Based on the data, you can also predict the production and sales of farmed fish. This gives them the advantage of trading their products on time and at the right price. In fact, the solution has more than doubled the farm's net profit.
Water quality in fish farms can also be improved. This contributes to reducing carbon footprint. According to Rajendra Aryal, Indonesia and Timor Leste representative of the U.N.'s Food and Agriculture Organization, "eFishery helps farmers optimize feed usage, reduce waste and improve fish health, ultimately increasing farm productivity and profitability." (according to Forbes).
The platform is also offering data-driven financial services to lend to small-scale fish farmers. It has launched an online loan brokerage service for aquaculture expenses. As of July 2023, more than 7,000 fish farmers have secured a total of $28 million in business financing through this service. Fintech is becoming a major source of revenue for eFishery.
In several interviews, the founder of eFishery shares his vision that he is solving people's problems of poverty through this business. Therefore, he emphasizes "win-win".
For example, eFishery includes a marketplace to trade fish feed and a service to sell fish to B2B customers. This raises the question of whether the platform will create a PB product to compete on price or gain a promotional advantage on the platform.
The eFishery team is clear that they are not "building their own feed factories" and that it is more important to partner with feed producers on the platform. This decision underlines eFishery's vision of addressing inefficiencies across the aquaculture industry and growing the entire market pie. A compelling vision is the foundation for growth.
It took 10 years for eFishery to become a unicorn, and the journey was anything but smooth. According to Techcrunch, the eFishery team had to learn different dialects in different parts of Indonesia and make connections with middlemen.(Techcrunch) They disrupted the market by understanding and connecting with their core customers.
The reason the eFishery team was able to persevere is related to #1. eFishery was born out of a problem that the founder had experienced himself, and he worked hard to develop a technology platform to solve that problem from the ground up. Solving "my problem" meant solving "other people's problems. This led to a virtuous cycle of solving some of Indonesia's poverty problems.
If it's a problem that a founder is passionate about and sincerely wants to solve, he or she will persevere no matter how many obstacles they encounter. This is because it is both "your problem" and "someone else's problem". The founders themselves are often the core customers, which is why understanding the customer is the most important key for startups and growing companies.
Startups tend to focus on overall revenue or the valuation of their company through investment. However, eFishery's case shows that a business that can make a social impact and profit directly from its customers can grow in the long run.
In an interview with CNBC, eFishery CEO Gibran Huzaifah urged startups to pay attention to "unit economics". Unit economics means calculating the CAC and LTV per customer to determine the payback period. For example, if you acquire a customer for $5, consider how long it will take you to earn more than $5 in value from that customer.
In the end, this advice means that startups need to consider a roadmap to profitability, not just a strategy to get more users or grow bigger. "Don't give away your product for free," he says. This is a common strategy for early-stage platforms to give away their product for free, but his insight is that it doesn't always work.
💡 What's a problem you're obsessed with solving? How does solving that problem benefit society? If you create value, you'll have a profitable business.
Written by Jinny (underdogs)
*Read the case studies of Asian startup founders' starting point and business/growth strategy in detail.
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