Farmigo Shuts Down Operations Amid Pullback in Food E-Commerce Investment

July 12, 2016

Farmigo, the farm-to-consumer food delivery platform, last week announced it was closing down operations after five years. The Brooklyn-based company posted a note on its website to inform users that this week would be its last.

Farmigo Shuts Down Delivery Operations

“Despite everyone’s best efforts, Farmigo can no longer continue operations sustainably, and unfortunately, next week will be our last delivery,” reads the post. “Thank you to everyone, from our dedicated Organizers and members to our incredible farmers and food makers! We believe that where food comes from, who’s making it, and how it gets to us all matter just as much as how tasty it is.”

The news will come as a shock to many Farmigo users and observers of the market as Farmigo was seen as one of the more successful and established food e-commerce startups after first launching in 2011 in San Francisco, before moving to Brooklyn in 2013. It also looks like the decision was a surprise internally too.

In an email to stakeholders, Benzi Ronen, CEO of the company, said: “We understand that this news is abrupt, and wish we could have given you more notice, but we only found out today, and necessity has pushed us to act quickly.”

Farmigo To Continue Software Business

It is understood that Farmigo will now focus on its farm software business, but we will be speaking to Ronen next week to get more information so watch out for an interview with him on AgFunderNews.

The news comes as food e-commerce startups continue to raise funding, albeit at a slightly slower rate that before. In 2015, AgFunder reported the sector raised a whopping $1.65 billion from venture capital investors — around $1 billion in the second half alone — but funding to the segment for the first half of 2016 is closer to $400 million.

This pullback hasn’t deterred some investors. This week, healthy food delivery startup Freshly raised $21 million in Series B funding from investors including Insight Venture Partners, Slow Ventures, and Highland Capital Partners. Last week Thrive Market raised $111 million for its health food and products delivery service, and Farm Hill, another healthy meal delivery service, raised $3 million. There are also still a great number of food e-commerce businesses in Asia — especially India — that are getting funded, despite a series of closures this year.

Farmigo is not the first food e-commerce business in the US to shut up shop; Good Eggs, one of the first e-grocers in the country, closed down operations in New York, Los Angeles and New Orleans to focus on San Francisco last year.

The main challenges that startups in this segment have met include the cost of acquiring and retaining customers and drivers, competition from big delivery incumbents like AmazonFresh, unscalable logistic solutions across locations, and raising enough funding to build the business over several years.

Farmigo was successful in the funding arena, last raising $16 million in Series B funding in October from investors including Benchmark Capital, Formation 8, Sherbrooke Capital, and Hadi Partovi. That took its total funding to $26 million.

The company hopes that its customers will continue to purchase food from its suppliers and has published lists of its farmers and food makers on its blog here.

Watch for our interview with Ronen next week.

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