Startup Street: How A  Farm Produce Marketplace Dealt With The World’s Largest Lockdown

This week on Startup Street, we have a business-to-business startup that is cutting often-exploitative middlemen out of India’s agricultural supply chain. Amid the world’s largest lockdown to contain the new coronavirus outbreak, BloombergQuint spoke with Puneet Sethi, co-founder of Farmpal, to gauge how the pandemic has affected business, lives and future prospects.

Shortage Of Workers, Lost Business And A New Opportunity

Farmpal Techlogi Pvt Ltd. relies on casual workers, both directly and indirectly. Manual hands are required in every part of the process for the Pune-based startup to procure the produce from more than a thousand farmers, segregate it by quality and then transport to supermarkets, hotels, restaurants, and kirana stores

But the country-wide lockdown imposed to contain the corornavirus outbreak has caused a manpower crunch. “Most farmers use hired labour for harvesting and these largely come from other states such as Uttar Pradesh, and they have gone back,” Sethi told BloombergQuint. “There are not enough hands on the field and harvest is just wasting.”

Of the 50 people employed by the firm, 20 working at their warehouse have returned to their villages with no contact, he said over the phone. “We haven’t laid off anyone but we haven’t had to. Many of them have left and we are facing a shortage.”

India is facing a mass exodus of migrant workers from cities after being laid off during the lockdown. Hundreds of thousands of those who had migrated from villages to India’s its megacities were left with little choice but to start walking home, in many cases hundreds of kilometres, as train and bus services were suspended.

Farmpal itself cut salaries by 20-50 percent for backend employees working remotely, depending on their contribution. “We have always believed in running a lean business and while our revenue might not have been impacted like other non-essential services, it still puts pressure on our ability to pay salaries.”

Farmpal lost revenue from hotels and restaurants as they remain nearly shut. Demand from supermarkets, including Big Basket, also tapered over time. Retail demand, however, has grown three to fourfold, according to Sethi.

“In March, we were selling 12-15 tonnes per day, which has now dropped to 6-7 tonnes a day, but all of this demand is solely from the retail side,” he said, referring to kirana stores and vendors as consumers stay at homes.

“The retail segment has the highest margins for us and sales there have increased,” he said. "So revenue-wise we have dropped only 20 percent,” Sethi said, adding that he expects the top line to go back to pre-Covid numbers by June.

New Opportunity

The crisis has brought an opportunity for Farmpal.

Amid the lockdown, housing societies are now connecting directly with farms or business-to-business platforms to procure vegetables. “We have received at least 25 inquiry calls from housing societies in Pune and we did try that once or twice but we realised that we’ll have to send at least two men with every delivery and that was just not feasible,” he said.

"We are also unable to keep up with the demand, so we chose to refocus on business-to-business deals. Also because we are low on manpower, we have made a decision to operate only in areas where we have max demand and customers.”

The startup has already collaborated with Dunzo to deliver groceries within a city. They are also in talks with Swiggy, which launched ‘Swiggy Genie’ service for deliveries during the lockdown, and are targeting Zomato.

Sethi, however, doesn’t expect the rise in retail sales to sustain once the pandemic ebbs.

While apps are likely to provide new business, the rise in retail demand is expected to normalise to pre-Covid level by next year, he said. Even as demand from supermarkets and hotels return, it is difficult to predict the quantum as “we are yet to see if the lockdown has led to any permanent behavioral change”.

Government’s Intent Vs Execution

The government’s intent is good but execution is not sharp, Sethi said when asked if he sees the startups benefiting from any of the measures announced by Finance Minister Nirmala Sitharaman under the Rs 20 lakh crore package.

“Intention and execution are two very different things. We’ve had Startup India around for the longest time but we can’t see the benefit,” he said, referring to lack of impact.

He cited the example of lockdown implementation. “I was running to every police station in a 5-kilometre radius. Everyone had different information and it was just confusion,” he said. But there was overall realisation among all the authorities that this is an essential service, which helped in attaining all permissions and passes, Sethi said.

Facebook Acquires Animated Graphics Startup Giphy

Facebook said Friday it had acquired the animated graphics startup Giphy and would integrate the company in its Instagram visual social network.

Terms of the deal were not disclosed but the news site Axios said the California-based tech giant was paying $400 million. Giphy is known for its use of stickers and other products using the graphics interchange format or GIFs.

“GIPHY, a leader in visual expression and creation, is joining the Facebook company today as part of the Instagram team,” Facebook said in a statement. “GIPHY makes everyday conversations more entertaining, and so we plan to further integrate their GIF library into Instagram and our other apps so that people can find just the right way to express themselves.”

Source: AFP Via PTI

Stimulus Measures For MSMEs Evoke Mixed Reactions From Startups

The government’s booster measures for MSMEs drew a mixed response from the startup community.

“The startup category was not covered,” Raman Roy, co-founder of Indian Angel Network and founder of Quattro, said. “We hope that the government will take note soon and announce the necessary steps aimed at enabling startups to survive and continue operating in these challenge times,” he said, adding that the startup ecosystem comprises the key to unlocking the Prime Minister’s vision of a self-reliant India.

Bhavin Turakhia, CEO and co-founder of Zeta, agreed. “Startups will have an important role to play in this difficult journey and we are hopeful that the announcements that will follow over the next few days will address this constituent with the same generosity,” he said.

But Apoorva Ranjan Sharma, co-founder of Venture Catalysts, said the amendment of the old and archaic definition of MSMEs was a long- pending demand from different industry bodies and bringing in a new definition will aid in the growth of these enterprises.

“...Since start-ups are a part of the MSME segment, we’re optimistic that entrepreneurs will benefit directly or indirectly from these measures,” he added.

The government also introduced measures aimed at helping MSMEs by providing collateral-free automatic loans and equity infusion via a Fund of Funds for such businesses, as well as revision in the definition of such enterprises.

Asked if the measures announced on Wednesday will have a direct bearing on startups, Nirupama Soundararajan, senior fellow and head of research at policy think tank Pahle India Foundation, said: “Not necessarily as MSMEs and startups are two different categories of business. However, startups will benefit from the TDS-related announcement today as it will free up more cash for them for working capital.”

Industry observers said the funding route availed by startups and MSMEs are different. While MSMEs access funds from banks and financial institutions, startups usually go to venture capitalists or angel investors who have a greater risk appetite.

Kunal Bahl, co-founder of Snapdeal, which has many small businesses on its platform as sellers, tweeted that MSMEs are India’s backbone and the measures announced by the finance minister will help them get back on their feet.

Sandip Chhettri, chief operating office at TradeIndia.com (an online business-to-business marketplace) said collateral-free loans will provide the much-needed boost to the already struggling MSMEs, and help fulfil the government’s mission to be “vocal for local”, encouraging manufacturing and lessen reliance on imports.

Source: PTI