A London-based food startup to buy directly from small farmers has announced closing operations after generating pre-seed and seed rounds from Charlotte Street Capital and Sustainable Ventures, respectively.
Why did they fail?
The company, as explained by its founder, couldn’t find a distribution model for a farm-to-table supply chain that met customer and farmer needs while also being profitable, or having a route to becoming profitable. There are a few underlying issues behind this.
Food is a tough, unforgiving industry
Food is probably the hardest industry for logistics. Maintaining freshness and quality across hundreds of product types, each requiring slightly different conditions is no easy task. They thought they could overcome this with the freshness of their products and the shortness of supply chains by harvesting products to order and shipping them overnight.
However, they still faced challenges around packaging, maintaining the cold chain for chilled products, and ensuring the products arrived in good condition. Getting the right products to the right place at the right time in the right condition is difficult.
Combine this with the low margins that are inherent within the industry due to customer expectations and years of driving down costs by supermarkets (the UK has some of the lowest spending on food as a percentage of its income in the world, most of which is due to farmers being squeezed and the environment being degraded as a result), and it is a recipe for a difficult time.
Additionally, customers have high expectations when it comes to food. Global supply chains mean there is an expectation for almost all products, all year round, with little regard for seasonality. This is changing, but customers will sacrifice their diet, particularly in the winter months, in order to eat more sustainably.
The sustainable abundance mindset of energy applies to food as well. They need to find ways to meet demands for food through sustainable means rather than cutting back.
Didn’t remove steps from the value chain
Furrow fell into the working smarter camp (sort of, and even this may be a bit of a stretch). They’re rearranging the activities of the value chain to be done by different participants.
Before wholesalers and other Participants would do the steps of packing and distributing the produce; now they’re asking farmers to do this instead. Sure, they’re giving them more money, but their work is increasing too.
They still had to do the same number of steps in the value chain to get products to customers, and there are still costs associated with them. The overall amount of work that needed to be done was the same, so they weren’t stripping costs out of the system.
Didn’t have a 10X product
Not removing steps from the value chain meant they didn’t actually have a 10x better product. They’re 10x better than going to a farmers market and possibly going to a supermarket, but they aren’t 10x better than Ocado, Tesco.com, etc. Consumers ultimately care about convenience, price, quality, and selection.
Provenance is nice to have and something that some consumers want, but they ultimately care about the other points. To reach real scale, you need to improve the criteria above, and they aren’t doing that.
Paraphrasing Dalton Caldwell, “a weak signal from the market is the most dangerous.” If it was a strong signal, you’d know and have the makings of product-market fit. If there was no signal, you know your idea is a dud.
But a weak signal gives you false hope that maybe there is something there with a few twists and turns. Founders can risk wasting years of their lives on this “false hope.”
Furrow probably fell under the “weak signal” risk. People recognized there was a problem and were willing to do something about it, but they didn’t have to give what they wanted.
Having said that, there is enough customer signal that if you can fix the operating model to remove steps from the value chain and achieve a cheaper price, better or more.
Didn’t understand suppliers well enough
They didn’t chat with farmers enough to really understand the issues they were facing. being motivated by the consumer side since this was a problem that needed to be fixed and the farmers would fall in line.
This meant the new operating model, despite paying them, didn’t go well, and they’d either have to reconsider it to make it better for the farmers or pay them far more, which would impact already tight margins.
They might have been able to solve this problem by starting with farmers who were more interested in making money, but I think they would have had to prove a business model with smaller producers first before they could work with larger farms. These small producers are typically lifestyle farmers.
Execution
In addition to the structural issues with Furrow, we also didn’t help ourselves with execution. While there was a lot they got right, there are several things I would have changed if I had to start over.
- Didn’t prioritize effectively and ruthlessly enough
This resulted in wasted time and money as I got bogged down too much on unnecessary things that I thought that’s important.
This was particularly the case around a culture where I was so determined to make sure. They had it set up from the start that I got paralyzed choosing the ideal company wiki software and writing culture and communication documents, rather than doing the things that actually set the culture like effectively executing. - A solo founder that didn’t have the right setup and support network around me
Starting a company on my own remotely, and then running it remotely first once They had employees, was incredibly lonely and isolating – They all need face-to-face human connection and this is something the remote vs in-office debate often misses. - Build a larger team around me so They can move faster
They could have moved faster if They had a bigger team that had the skills to quickly test a lot of what They wanted to do (for example, The founder had reasonable tech skills but he was no software developer), but that also had the risk of higher burn while They figured things out.
Ultimately this would have been worth the tradeoff as startups are all about momentum and investors don’t look at ‘momentum per employee’, but rather overall momentum (within reason, usual internet blog caveats apply). Having a bigger team would also mean They could spend more time growing the business, rather than running it. - Reliance on 3rd parties
Whether this should be a separate point outside of execution, They had a lot of challenges relying on third parties. From spending time managing the relationship and chasing lost deliveries to being unable to implement ideal processes at a partner hub, third parties are a blessing and a curse. They didn’t have to build out those capabilities, but being small fish meant they had very little bargaining power.
The world is moving from pipelines to platforms and protocols. They’ve seen this in many industries as gatekeepers have been removed and they’ve moved towards coordinated decentralization. This has mostly happened in the digital world, with things like Substack in journalism and Maven in education, but it has also happened in the physical world, with things like residential solar and batteries.
People buy from people, and the current first wave of eCommerce has lost that.
Closing Thoughts
They wanted to fix this once they’d sorted out the base operating model by bringing in social features such as farmers hosting live streams and posting photos and videos of life on the farm. If you can bring the connection, intimacy, and community of a farmers market to an online browsing experience, customers will have a great time.
A farm-to-table or platform-based food supply chain will happen. Someone just needs to identify the operating model that works. This may not be possible with current logistics technology, but as it continues to improve, it will become feasible.
