Startup Profile: Software Strengthens Bond Between Farm and Community
May 18, 2011 | Robert Puro
“In order for a sustainable farm to exist you need to have a sustainable business.” - Benzi Ronen, CEO and Founder of Farmigo.
About three years ago Benzi Ronen launched Farmigo, a technology startup that develops software that allows organic farmers to more efficiently manage their Community Supported Agriculture (CSA) and Farm Direct sales operations. Ronen has a technology background and prior to Farmigo, he spent 14 years building internet systems for large multi-national companies around the world. His entrepreneurial spirit, knowledge of internet systems and his desire to create an alternative food system helped him identify a business opportunity in the agriculture technology sphere. “The internet’s done a fantastic job of enabling businesses to go direct to the consumer and basically cut out all of the middlemen” said Ronen. “Then, I saw the CSA model and how that’s exactly what they were doing by going directly to the consumer.”
At its most basic level a CSA allows a local farmer to build relationships with members of the surrounding community by offering them the opportunity to directly purchase fruits and vegetable grown on the local farm.
What puzzled Ronen was why the CSA model wasn’t more popular in the US. According to his data only ½% of households in the US currently buy directly from farms even though the CSA “is such a pure model that solves so many problems, whether it’s making organic farming profitable and scalable so that we can solve climate issues” or allowing farmers “to take hold of their own destiny without having to take huge loans from banks.”
Recognizing the potential opportunity, Ronen went in search of additional data to better define the opportunity and how he could apply his knowledge of internet and ecommerce systems to improve the CSA model. He interviewed over 100 farmers across the country and surveyed hundreds of current CSA subscribers to identify the problems that existed in the model for both farmers and consumers.
What he discovered is that if farms want to go direct they need to do everything on their own. According to Ronen, “farmers need to do the operational management, the logistical management, and have their own back office, do their own marketing, sales, distribution and packing.” Ronen realized that if he could develop a solution to solve for back office headaches, he could help ensure that that the farmer could concentrate on actually growing the produce and, in turn, a successful businesses.
After conducting this extensive research, he concluded that the CSA model, which allows a farmer to potentially make $0.80 on the dollar going direct versus $0.20 going wholesale, was missing a key element – the infrastructure.
Recognizing that these infrastructure challenges could be solved with the right technological solution, Farmigo was born.
Farmigo is an internet based system that allows farmers and CSAs to more easily manage and track member orders and deliveries. The system automatically produces individual packing lists and delivery routes, and also allows farmer to track harvest yields making it easier to match capacity with CSA demand. Check out the video below to see how the platform works.
The Farmigo Business Model
Farmigo’s business model is a revenue share model. The company takes a fee of 2% of sales generated by the farmer and, in exchange, it becomes the farmer’s dedicated technology partner. “It’s very similar to the CSA model where just like a member subscribing to the farm, a farm is basically subscribing to our technological platform” said Ronen. In addition to initial system setup and configuration, the company provides a number of ongoing services that include: on call customer service, data backup, hosting and monitoring service, and continuous software and product updates.
[pullquote]“That 50 threshold is the right time to talk to us because we’ll help you get to a much larger membership if that’s what you want.”[/pullquote]
Ronen feels that in order for a farm CSA to benefit from Farmigo, it should have at least least 40 – 50 members. “That 50 threshold is the right time to talk to us because we’ll help you get to a much larger membership if that’s what you want.”
Farmigo currently has partnerships with over 100 farmer CSAs. Ronen is quite pleased that Farmigo has been able to provide a best in class technological solution that not only helps farmers increase their profits, but also allows them to focus on what they do best, namely, producing sustainably grown produce.
The Market Opportunity
The USDA says there are nearly 12000 CSAs in the US. Ronen believes that in the next five to ten years the percentage of the population ordering directly from farms will grow from ½% t0 10%. “If you look at the food industry, which is a $1 trillion industry in the US, we’re talking about billions of dollars of food being sold from farms directly to consumers,” said Ronen. “I would not have ventured into this area if I didn’t think that there could be a huge tipping point.”
Ronen hopes to see the major organic farmers who currently sell wholesale make the switch and begin selling directly to consumers. He believes Farmigo can help them with this transition and help them “become much more profitable and get the money they deserve instead of handing it over to the wholesaler.”
Farmigo’s early success bodes well not only for the company, but also for the farmer CSA partner’s that use its system and can credibly claim that as a result their businesses are more sustainable.