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Daily news and analysis about the food tech revolution

Farmstead

Farmstead Raises $7.9M to Expand it Online Grocery Business

Online grocer Farmstead announced today that it has raised a $7.9 million Series A round of funding. The new financing was led by Aidenlair Capital with participation from Y Combinator, Gelt VC, Duro, Maple VC, Heron Rock, 19 York, Red Dog Capital and others. This brings the total amount raised by Farmstead to $14.5 million.

According to the press announcement, the new funding will go towards Farmstead’s national expansion. The San Francisco Bay Area-based company recently added its first service areas outside of California by expanding to Charlotte and Raleigh-Durham, North Carolina.

Farmstead is a pioneer in the so-called dark grocery store space, eschewing a physical store that customers shop in for a delivery-only experience. The company makes use of data and AI to create a just-enough inventory system. The company’s goal is to have the right amount of stock to avoid product outages, but not so much that they are left with unsold inventory.

To help other grocers transition to this type of e-commerce-forward model, Farmstead launched its Grocery OS in September of this year, which, the company says is already being used by a “top 3 U.S. grocer.” As we wrote at the time of that announcement:

Farmstead’s pitch is that Grocery OS can help traditional grocers migrate from physical stores to online, working up through dark stores and into warehouse-only formats. In doing so, Farmstead says Grocery OS will also provide more delivery capacity and get retailers more e-commerce revenue.

Farmstead’s expansion comes on the heels of record online grocery shopping, thanks to the pandemic. Grocery e-commerce is projected to be 21.5 percent of total grocery sales by 2025, hitting $250 billion. Farmstead has seen its own business increase dramatically this year. When we last checked in with the company in September, it had experienced 6x revenue growth over a four month period and grew its team by 3x, moving into a 17,000 sq. ft. warehouse facility.

Of course, Farmstead will need this bolstered warchest as established retail giants make their own moves to grab more grocery dollars. Amazon has opened up its own dark store as well as its own chain of supermarkets that will facilitate delivery, and also added an in-garage grocery delivery option in select cities. Grocery giant Walmart has added Instacart for delivery, launched its own Walmart+ subscription service which includes grocery delivery, and even started experimenting with grocery delivery by drone and autonomous car.

Farmstead Launches Grocery OS to Help Other Grocers Get Those Online Dollars

Online grocer Farmstead announced today that it is making its in-house grocery delivery software, Grocery OS, available to other national and regional grocers.

Farmstead’s pitch is that Grocery OS can help traditional grocers migrate from physical stores to online, working up through dark stores and into warehouse-only formats. In doing so, Farmstead says Grocery OS will also provide more delivery capacity and get retailers more e-commerce revenue.

Grocery e-commerce has experienced record growth throughout the year as the COVID-19 pandemic pushed more people into online grocery shopping. According to a recent Mercatus study, online grocery shopping will continue to grow, hitting $250 and accounting for 21.5 percent of total grocery sales by 2025.

“COVID shows there is pent-up demand for online grocery,” Pradeep Elankumaran, Farmstead Co-Founder and CEO, told me during an interview this week. Of course, this pent-up demand translated at first into delayed grocery delivery windows, often needing to be scheduled weeks out, as well as waitlists and other breakdowns in the process.

Though things have calmed down and plateaued in grocery e-commerce, the trick now for traditional retailers is to build a system that can scale to meet continued demand. As Elankumaran said, however, running a digital-first store is a lot different from running a traditional store that people go in and shop at.

That’s where Farmstead claims its Grocery OS software stack can help. Grocery OS, which Farmstead uses for its own operation, promises to help traditional grocery retailers boost their delivery capacity, manage inventory, picking and packing orders, and handle marketing.

But as Elankumaran pointed out, transitioning to e-commerce isn’t just about grabbing a bigger piece of the pie. It’s also a defensive move for existing retailers. “You also have a whole bunch of pressure from Amazon and Walmart driving pickup and delivery,” he said.

Indeed, Amazon just opened up a delivery-only Whole Foods in Brooklyn and Walmart launched its Walmart+ subscription service that includes free grocery delivery.

According to the press announcement, Grocery OS is already being used by one of the “top 3” national grocers in the U.S. As noted, it’s also been used by Farmstead as that company has weathered its own pandemic growth spurt. While he wouldn’t provide specifics, Elankumaran said that Farmstead has experience 6x growth in revenue over the span of three or four months, grew its team size by 3x and moved into a 17,000 sq. ft. facility from its former 3,000 sq. ft. warehouse.

But Farmstead isn’t giving up its own grocery ambitions. Elankumaran’s goal is to build and scale Farmstead into a national retail brand. And he’ll be using Grocery OS to do it.

Online Grocer Farmstead Seeing 70 Percent Growth, Doubling Headcount to Keep Up

Farmstead has suddenly found itself on the front lines of the COVID-19 epidemic. The online grocer is based and delivers only in the Bay Area, where a shelter in place order was recently put into effect. As a result a lot of people are ordering food online and Farmstead, which has been around for a couple of years, now finds itself struggling to keep up with demand.

I spoke with Pradeep Elankumaran, Farmstead Co-Founder and CEO this morning, and he told me that back in normal non-coronavirus times, his company had at best 10 to 12 percent week over week growth. Three weeks ago, when the severity of the situation started settling in, that number jumped to 40 percent week over week growth. The following week was 50 percent wee/week growth over that. In the third week of the, should we call it a “panic?”, Farmstead’s week/week growth was 70 percent.

That is a lot of growth in a very short amount of time. Farmstead is currently doubling its headcount of pick-and-pack workers and delivery drivers to keep up, going from 70 workers to 140.

Farmstead’s hook has always been its AI-powered inventory management. The company builds microhub distribution centers in neighborhoods and uses its algorithms to make sure each one has just enough stock: not too much so that some goes to waste, and not so little that orders can’t be fulfilled.

Elankumaran said that even with the spike in demand, his software has been mostly effective at adapting and managing the situation. He attributes that success to a couple of key parameters that go into its algorithm. First, when you order from Farmstead, you don’t know if an item is out of stock until after you click on it (other online grocers will grey out an item when it’s gone so you can’t even click). While this is a wasted click for the consumer, it gives Farmstead more data on what consumers actually want, which allows the company to continue to feed its system.

Second, Elankumaran said that the sell by date for every item in the store is listed. That way they know how long each item they have will last and can prioritize distribution accordingly.

Farmstead’s system can’t totally prevent items being out of stock. During the first week of the outbreak, it sold out of pasta, for example. But because Farmstead knew everything people were trying to buy (even if they couldn’t) and how long that item lasts, they were able to adjust accordingly for the subsequent weeks.

Another side effect of the COVID-19 shopping, Elankumaran said, was that people are buying more fresh produce online through Farmstead. Buying fruits and vegetables online was something people typically didn’t do as they like to be in the store to look at and touch items before buying them. But when you are on lockdown, any safe port in a storm and all that. Plus, people may be waking up to the fact that between store workers and other shoppers, each piece of fruit could be touched by a lot of people while sitting at the store.

The fact that Farmstead doesn’t have an actual store that’s open to the public could also benefit the company. It’s a warehouse so the only people touching your food are the workers there, which is something Farmstead can exert greater control over.

As we’ve talked about before, COVID-19 is forcing new behaviors across the meal journey. While sudden demand is putting a strain on Farmstead and other grocery delivery services, these companies will adapt, and presumably work out the wrinkles in order to stay alive, and perhaps create a new normal in the way people shop for food.

Zooey Deschanel Has a New Startup Selling Hydroponic Farms for the Home

Nowadays, there’s any number of ways to have a hydroponic farm at home: wall-mounted gardens, countertop farms, and pillars that grow fresh greens. The latter is possible thanks to actress Zooey Deschanel’s new startup Lettuce Grow, through which she and her husband Jacob Pechenik launched the Farmstand, their take on a hydroponic farm.

Farmstand, which debuted at SXSW in Austin, TX in March, is a self-watering, self-fertilizing farm that grows in a pillar-like fixture made from recycled plastics. As of right now, the farms are meant for outdoors. Clocking in at a little over one foot wide and between four and six feet tall, depending on the model, the farm takes much of the guesswork out of growing by automating the watering and nutrient delivery process inside the pillar.

Image via Lettuce Grow

To set up a farm, there is a one-time fee for the hardware, then a monthly subscription fee for a grow plan that includes regular seedling deliveries along with nutrients every two weeks. If that seems like a lot, it’s because Pechenik and Deschanel are hoping you’ll use the farms every day to harvest food for regular cooking. Monthly memberships range from $49 for four growing levels to $69 per month for six growing levels. Users can choose from a number of different plans to get seedlings that best suit their needs.

Pechenik and Deschanel told INC that the idea began as a way to provide their family with fresher greens, and that going forward, their mission is to “allow people to grow at least 20 percent of their food at home.” To that end, plant varieties a customer will receive with their subscription are based on geographic location: an algorithm selects plants best suited to grow in, say, Texas weather.  An accompanying app makes recommendations about when to harvest, add nutrients and water, and offers recipes and growing advice. And if you wind up needing more grow space, each farm is easily expanded by snapping another growing level onto the top of the farm.

Right now Farmstand is a little less sophisticated than other consumer-grade models out there in the sense that the plants still need natural sunlight to grow. According to the Lettuce Grow website, lighting kits for indoor growing are in the works, along with a wifi and cellular-enabled IoT device to better monitor water, pH, and power levels in the soil.

Farmstand won’t be the only ones pushing indoor hydroponic grow systems. In fact, there are already several options on the market or taking pre-orders that make the concept easy and easy to fit within even the smallest apartments, from the wall-mounted Herbert by Ponix Systems to CityCrop’s teeny-tiny countertop device.

Lettuce Grow is currently taking pre-orders for Farmstand.

Correction: An earlier version of this story incorrectly referred to the product as “the Farmstead.”

Farmstead Raises $2.2M for its AI-Driven Grocery Retail and Delivery

Farmstead, an online grocer that uses artificial intelligence (AI) to predict product demand, today announced that it has raised $2.2 million in venture funding from ARTIS Labs, Resolute Ventures, Y Combinator, Red Dog Capital and other investors. This brings the total amount raised by the company to $7.5 million.

Farmstead‘s hook is that its stores don’t overstock and try to carry every item. Instead, their goal is to carry just enough of the items people want so that have enough to meet demand, but not so much inventory that it goes to waste. As we wrote back in March:

[Farmstead] 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.

At that time, Farmstead was focused on creating smaller micro-hubs that could be placed deeper into residential areas (because they are smaller, they could sidestep zoning restrictions). However, it seems like the company is moving away from that strategy somewhat. When I spoke with Farmstead CEO and co-founder Pradeep Elankumaran in October, he said that the company was actually using one larger facility in San Francisco.

In October, Farmstead announced that it had been running a pilot program delivering groceries via Udelv’s autonomous delivery vehicles. Udelv differs from other self-driving platforms in that it uses actual delivery vans. As we noted then, the idea of a van controlled by code is compelling for a grocery delivery company because of all the data it can collect, which can in turn be used to make delivery routes more efficient.

More than $3.5 billion has been invested in food and grocery delivery startups this year. Farmstead will need to bolster its coffers as it goes up not only against giant food retailers like Amazon and Walmart to sell you your food, but also well-funded delivery/logistics startups like Instacart, which have raised hundreds of millions of dollars to bring your groceries to your door.

AI-Powered Grocer Farmstead Running Self-Driving Delivery Pilot

Farmstead, the grocery startup that uses artificial intelligence (AI) to precisely manage its inventory, announced yesterday that it has been piloting grocery delivery via self-driving vehicles in the Bay Area.

This autonomous delivery is made possible through a partnership with fellow Bay Area startup Udelv, which makes the autonomous delivery vehicles and has been running other grocery delivery pilots in Oklahoma. The two companies began this latest pilot last month in the Bay Area.

Farmstead customers receiving their orders via self-driving vehicle are notified when their delivery has arrived and given a code via SMS. Customers use that code to open a designated compartment on the delivery van and retrieve their groceries. For now, there will be a human operator still in the delivery van for safety reasons, per California regulations.

Farmstead’s hook in the grocery world is that it has developed an AI platform that uses factors such as product popularity and expiration dates, to accurately stock its shelves without over or under-purchasing items.

Using an autonomous vehicle can extend that accuracy into routing and delivery. “We have a car that’s controlled by code,” said Farmstead CEO and co-founder Pradeep Elankumaran said during a phone interview. “That’s extremely compelling to us.” Autonomous vehicles will get more metrics along its delivery path, picking up data on things like time per stop, etc.. Using that data can help Farmstead continually refine its logistical routes.

For example, Elankumaran said, if a customer isn’t home for a delivery, rather than having a human debating whether or not to wait for the person to arrive or figure out what to do next, an autonomous vehicle can be programmed to wait X minutes and then re-engineer their route automatically to return to the house in an efficient manner.

Autonomous vehicles are becoming quite the rage in the grocery industry. Elsewhere in the Bay Area, AutoX is piloting its self-driving grocery delivery program, and in Arizona, Kroger is testing out autonomous delivery in a partnership with Nuro.

For its part, Farmstead also “farms” out its AI platform to other grocers. Elankumaran wouldn’t provide any details on how that program is proceeding, but now we’ll see if and how autonomous delivery plays into the offering as well.

Takeoff is Creating New Hybrid, Hyperlocal Robotic Grocery Fulfillment Centers

This fall, startup Takeoff will be launching its first hyperlocal grocery micro-fulfillment center powered by robots and artificial intelligence (AI). Whew! There’s a lot to unpack in that opener, mostly because Takeoff is at the center of quite a few trends we’re seeing in grocery retail.

First, a brief explainer. Takeoff partners with existing grocery retailers (the company declined to provide specifics names at this time) and builds mini-robotic fulfillment centers inside these stores. Takeoff co-founders Jose Vicente Aguerrevere and Max Pedro told me in an interview that their system requires 6,000 – 10,000 square feet, which is “an eighth or less” of the size of a typical grocery store.

As you can see in the video below, these fulfillment centers are big, automated system that shuttle around crates of products, bringing them to a human picker, who bags the items for pickup or delivery. The robots are from KNAPP, and Takeoff has built an end-to-end software solution that manages inventory, robotic fulfillment and customer delivery logistics for its system.

Depending on the partnership, customers will either order groceries through the Takeoff app, or through the retailer’s app. Once placed, the order is sent to the robot fulfillment center where it automatically grabs the selected items. After the items are sorted and bagged, customers can either pull up to a special Takeoff drive-through at the store or schedule a delivery within a two-hour window.

Because Takeoff partners with existing retail stores, it doesn’t have to manage its own inventory. Vicente Aguerrevere and Pedro said that additionally, with Takeoff being embedded in the store, they get a hyperlocal view into what products are popular in each neighborhood. With this data, Takeoff can fine tune its own stocking and fulfillment procedures to be more efficient.

While it remains to be seen what Takeoff will look like when it actually launches (location TBA), the startup is worth watching because it will sit in this nexus of so many grocery trends: microhubs, robotics, and pick-up/delivery.

At first glance, Takeoff is kind of like Farmstead, which is using AI to precisely manage inventory and deliver groceries from smaller, urban microhubs. By skipping big warehouse fulfillment centers (a la Good Eggs) and their requisite zoning requirements, Takeoff can go deeper into urban areas to facilitate faster grocery service by being closer to the customer. But where Farmstead is using humans, Takeoff is relying on robots.

This robotics approach is then similar to Common Sense Robotics, which is using robots to speed up delivery in its own microhubs. Robots can move quickly and accurately, and operate heavy loads without a break. But Common Sense builds its own bespoke micro warehouses to re-shape the supply chain. Takeoff is working within existing supply chains in grocery stores, leveraging supermarket infrastructures and neighborhood locations.

Hooking up with grocery stores doesn’t just help Takeoff leverage someone else’s inventory — it also helps with the last mile. Because Takeoff functions inside grocery stores, which are already close to where people live, customers can either pick up their groceries while running errands or let Takeoff’s software coordinate a drop-off through various delivery services.

Takeoff plans to make money through revenue sharing with potentially no up-front cost for the store, depending on the arrangement. Takeoff is based in Waltham, MA, has 75 employees and recently closed a $15 million Series B round, bringing its total fundraising to $37 million.

There is definitely a lot to unpack with Takeoff, now we’ll just see if retailers bring them on board to pack more of their groceries.

Six Suggestions for Alphabet X’s Agriculture Ambitions

Alphabet X (part of Google family of companies), said that it is exploring ways to use AI to improve food production. During the MIT EmTech Digital event in San Francisco yesterday, Astro Teller, the head of X didn’t provide many details other than they may be looking at combining machine learning with drones and robotics for farming.

X is Alphabet’s ambitious “Moonshot Factory,” whose mission is to take on projects that they “hope could someday make the world a radically better place.” As the MIT Technology Review writes:

To be worthy of X’s attention, a project must fulfill three criteria: it has to potentially solve a problem that affects millions or billions of people; it has to involve an audacious, sci-fi-sounding technology; and there has to be at least a glimmer of hope it’s achievable within five to 10 years.

I understand that there are a lot of smart people working at Alphabet, and X’s mission is to invent and launch these world saving technologies. But we cover the intersection of AI and Ag here at The Spoon, and we’d love to put a few early stage startups on X’s radar.

First, let’s assume X is already looking in its own backyard. Sister Alphabet company, Google Ventures, has put money into companies like Abundant Robotics, Skycatch, and Farmers Business Network. And I’m sure Alphabet isn’t above synergizing across platforms to effectuate paradigm improvements throughout their stack.

But after that bit of corporate introspection, X can look outward, and we’re here to help. These are some startups we’ve covered that are intelligently using artificial intelligence or robots to improve food production and reduce food waste, and could make a radical impact at scale:

AgShift uses computer vision and machine learning to create objective food quality assessments throughout the supply chain. Using just a mobile phone app, inspectors can make nationwide food distribution more efficient and effective.

SomaDetect combines old light scattering detection tech with modern AI to determine the quality of milk and early spotting of Mastitis, a serious udder infection that is common–and deadly–among cows.

Farmstead is a grocery delivery startup, but it’s AI facilitates optimized inventory stocking in stores to decrease over-ordering (and subsequent spoilage and waste) as well as increased purchases from local sources.

ImpactVision applies its machine learning to hyperspectral images of food to assess quality and freshness to generate more transparency in the food chain.

Augean Robotics built the Burro, an autonomous worker robot that can carry food or tools and follow farm workers around with no beacon, remote or GPS required. Burro also maps routes to become a mobile conveyor belt for more efficient harvesting.

Huxley creates “plant vision” for farmers and growers. Through a combination of AI and augmented reality glasses, information about the types of plants and their various stages of growth can be quickly surfaced in a heads up display.

Of course, if X wants a deeper look into the future of food, we’re hosting our Smart Kitchen Summit Europe in June. Advances in AgTech are sure to be on the agenda.

Farmstead Raises $2M, Releases FreshAI for Retail Food Management

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.