It’s only Tuesday and already it has been a busy week for Farmstead, the startup that uses a combination of machine learning and small food hubs to enable home grocery delivery. On Monday, the company announced it had raised a $2 million seed round, and today, Farmstead opened up its FreshAI predictive analytics software platform to external food companies.
Farmstead is trying to create an entirely new model for grocery stores by limiting its physical footprint and using AI to intelligently curate its inventory. If successful, Farmstead Co-Founder and CEO, Pradeep Elankumaran, believes his company can drastically reduce the huge food waste problem in this country (where 40 percent of our food is never eaten).
Traditional grocery stores are massive buildings stocked to the gills to provide shoppers with a ton of options. Farmstead, on the other hand, uses food “microhubs” that are only about two to three thousand square feet and carry only about 1,000 items across all shopping categories.
It can get away with carrying such a small inventory because its AI platform predicts the items customers will want and orders just the right amount. To do this, Farmstead combines historical sales data and current trend data with consumer recommendations and external factors, such as holidays and product sell-by dates. Its machine learning processes these data points to assess which items to carry and how many it should stock at any given time.
“The system gives us a very fine prediction for stock,” Farmstead Co-Founder and CEO, Pradeep Elankumaran told me. “We want to have just enough on the shelves so no new customers walk away disappointed, but not so much that product gets wasted.”
Because Farmstead microhubs are small, they can be implemented closer to residential neighborhoods rather than warehouse districts to facilitate faster home delivery. Farmstead currently operates in the Bay Area and offers one-hour delivery from 8:00 a.m. to 9:30 p.m. for people in San Francisco, as well as rolling delivery hours during the morning, afternoon and evening for those in the elsewhere in the Bay. You can also drive to the Farmstead hub in San Francisco or San Mateo and a worker will run out and put your groceries in the car.
Elankumaran said that Farmstead is now making 1,500 – 1,600 deliveries per week. With this $2 million round, Farmstead has raised a total of $4.8 million so far. It will use the new money to scale its delivery service and expand beyond the Bay Area and will build out its core AI technology.
Which brings us back to today’s news about FreshAI. Farmstead is opening up its predictive analytics platform to supermarkets, cafeterias, restaurant chains and other companies that work with food at scale, allowing them to use Farmstead’s automated inventory management system. Farmstead says that using FreshAI has reduced its perishable food waste to sub ten percent as opposed to “35 – 40 percent average perishable food waste for typical supermarkets.”
For now, FreshAI is a pilot program, and companies can apply to take part on Farmstead’s site. If accepted, companies will upload operations data, and Fresh AI will provide daily and weekly order recommendations.
Farmstead is part of a new generation of startups such as Spoiler Alert, Ovie, and LeanPath that are using technology to combat food waste. It’s also reminiscent of CommonSense Robotics, which is using a combination of robots and micro-fulfillment centers. But Elankumaran said Farmstead is still a ways from using robots in their hubs or to fulfill deliveries. Instead, he said that they’re focusing on getting the best possible customer experience.
If Farmstead can deliver on that experience as it scales out, the busy weeks won’t be ending anytime soon for Elankumaran or his company.