Fresh Nation gets $1M to bring farmer's markets to your door with crowdsourced, same day deliveries

By Michael Carney , written on June 3, 2014

From The News Desk

America’s relationship with food is changing. Never before have more people shopped organic, local, and with an eye toward healthfulness. So too is the process of grocery shopping changing, as consumers are readily turning to the Web for ecommerce and box of the month offerings, many of which offer same day or next day delivery.

But no one has managed to bridge the two trends on a large scale, offering fresh, local food – think fresh produce and meat – delivered to your door at a reasonable price. For all its logistical prowess, not even Amazon Fresh has solved this problem in all markets – and that's before considering its high price point. It’s little surprise given the logistical challenges of holding inventory, storing, and transporting such limited shelf-life products.

Fresh Nation is a new food delivery startup launching today in Los Angeles with designs on changing America’s access to fresh food. Rather than build out its own infrastructure – farmer relationships and warehousing – the company is instead tapping into a massive existing network: farmers markets.

“Fresh, local produce is the only food category that’s so inconvenient you can’t have it delivered to your home,” says Fresh Nation founder and CEO Antony Lee. “It’s virtually impossible to find fresher tasting, better food than at a farmers market. We want to digitize farmers markets and make them available to a wider audience.”

There are 2,000 US cities that fall within a 200 square mile area (approximately 7.9 miles in any direction) from a local farmers market. Fresh Nation has already mapped out this nationwide network and plans to develop relationships with each farmers market, offering customer acquisition, order management, and home delivery as a service to these small, local merchants. For many consumers, there may be multiple markets within this range, meaning delivery is possible several times per week. For others, the options may be more limited. But there’s not much of the country that can’t be served using this system.

The key to the service is that it doesn’t cannibalize existing farmers market business. This is because all orders are submitted by noon the day before each farmers market and merchants simply bring the necessary quantity of excess merchandise, in bulk for Fresh Nation to pick up, parse out, and deliver. Consumers receive their deliveries a day after ordering, which ends up being just hours after the product arrived at the farmers market. And while some farmers market regulars may choose to order home delivery rather than show up in person, Lee expects this to be the exception, not the rule.

“People who go to farmers markets really love it and go as much for the experience as for the access to products,” he says. “We’re targeting the consumer who would love to go in person but for whatever reason can’t – we expect our business to be additive. Existing farmers markets typically last for a few hours, once weekly, and occur during the workday. There are plenty of people for whom attending simply isn’t an option.”

Fresh Nation conducted a small pilot in Stamford, Conn. last Summer, which Lee called a major success. The trial allowed the company to validate demand, refine assumptions, and establish systems. The company’s three constituents -- consumers, merchants, and farmers market operators  -- were all pleased and became regular, repeat customers and partners.

Now the company is taking these learnings and fleeing the seasonal constraints Connecticut instead focusing on Los Angeles, a year-round market with a massively health conscious population. Fresh Nation currently has 20 personal shoppers in LA and will serve the Downtown and Westside areas, before expanding to the Valley, Orange County, and the Inland Empire. From there, the plan is to expand throughout California and then nationwide over time.

Unlike other food delivery businesses, Fresh Nation is actually incredibly capital efficient. The company doesn’t need to invest in storage or purchase product in advance and should see little to no spoilage. It’s also managed to outsource much of its delivery expense to a fleet of commission-based personal shoppers who will drive their own vehicles, a la Uber, Postmates, or TaskRabbit. The company pays its personal shoppers an undisclosed commission on every order and charges consumers a $5 delivery fee on orders below $75. Other than that, consumers get access to merchandise at market prices and merchants sell their products at only a small wholesale discount.

With limited need for capital, Fresh Nation raised just a $1 million seed round led by Lightspeed Venture Partners, with participation from Lerer Ventures* and individual angels. “This should be plenty of capital to get the business to a position where we’ve proven it scales quickly and easily, then we’ll look at raising more to drive growth.”

Counter to expectations, the biggest challenge to date has not been finding and training personal shoppers, according to Lee. “We’ve tapped into a highly passionate group of people who are eager to spend time in and around farmers markets,” he says. “These people are current and former chefs, nutritionists, moms, and other people who would be there anyway, and thus see this as a fun and easy supplemental activity.”

In fact, the biggest challenge has been to build out its product catalog, which consists of the widely varying selection of each local merchant. For example, local strawberries may be available one month, but not the next. Fresh Nation needs to know and account for this variability within each product line and from market to market. The process is still a manual one, but there are a number of things that can (and will, hopefully) be automated going forward, Lee says.

Fresh Nation is, at its core, a marketplace with crowdsourced delivery. Merchants are invited to list their products, while the company takes no inventory risk. It return, fresh nation drives customers to the marketplace and matches the merchants and customers with independent contractor delivery people, which it has trained and vetted. Fresh Nation’s only employees will be its core operations staff at headquarters, and regional managers across the country as it expands to new markets.

Lee knows a thing or two about ecommerce and fulfillment, previously founding Accretive Commerce (fka, NewRoads), an ecommerce, customer care, and fulfillment & logistics software platform acquired by GSI Commerce in 2007. For the next several years, he launched a series of farmers markets across the northeast called “Elite Farmers Markets,” before turning his attention to Fresh Nation. Collectively, the company’s investors could not ask for a more tailor made resume to tackle this complex market.

“Farm to table is becoming more and more popular,” says Lightspeed partner Barry Eggers. “There are lots of companies trying to innovate in this space, but none have figured out a model that works as efficiently as Fresh Nation’s. They’ve got a lot of core IP in their database of markets, merchants, and products and how they manage orders and fulfillment. I think it will be very difficult to duplicate.”

That won’t stop others from trying. A quick Google search turns up a half dozen competitors including Farm Fresh to You (SF), FarmboxLA (Los Angeles), Marketcrate (St. Louis), Byproduce (NC), and Farmigo (SF and NY). Each is limited in their geographic coverage and applies a unique twist on the model, be it taking inventory or offering pre-selected produce bundles.

“We really liked that they bootstrapped and proved out the economics of the model on a small scale on the East Coast,” Eggers says. “The best part is that it doesn’t add any cost to farmers and isn’t competitive to the farmers markets.”

With its outsourced delivery model, Fresh Nation is the rare food delivery startup that isn’t wildly capital inefficient, a reality that has caused many meal and ingredients delivery services to go belly up. But even with the logistics handled, the company will face other challenges. Chief among them is liability, including putting independent contractor drivers on the road – ask Uber how that’s working out – and the risk associated with food handling. But these are problems that can be solved.

Fresh Nation has a lot going in its favor. The company is tapping into a powerful trend of healthy local eating, and appears to have a savvy founder with relevant experience looking to unlock this otherwise scarce inventory for a wider audience of consumers. There’s plenty left to prove from an execution and scaling standpoint, but at least initially, there’s reason to be optimistic.

By connecting the best of Postmates and farmers markets, Fresh Nation can keep local farmers in business while helping Americans live healthier lives. It’s the kind of win-win that you can’t help but root for.

[*Disclosure: Lerer Ventures is an investor in Pando.]