Niklas Zennström, the cofounder and former CEO of Skype, has backed fresh produce delivery startup Farmdrop in a £7 million round through his Atomico fund.
New investors included SwiftKey CEO and cofounder Jon Reynolds, and Saracens Rugby club chairman Nigel Wray. ASOS cofounder Quentin Griffith, a previous backer, also participated in the round.
Farmdrop lets you buy fresh groceries from producers close to you, defining close as “within 150 miles.” It competes directly with supermarkets and hands producers a bigger cut than if you bought the same product from a supermarket. The startup said it pays producers a 75% cut, “roughly double” what supermarkets pay. It also claims its food is fresher, because produce is only harvested once a customer’s put in an order.
The food costs a little more — six large, free-range Farmdrop eggs cost £1.90, versus £1.60 from Tesco, but the target is ethical consumers who might be willing to pay that premium.
Food retail is a tough business — just look at the state of the UK’s supermarkets — but Farmdrop founder Ben Pugh told Business Insider his company can compete because its overheads are so much lower.
For example, a supermarket has to maintain a network of physical stores all over the country. Farmdrop has its main office in south London, and a drop-off hub where local producers bring their food. A fleet of drivers deliver the goods in lower-cost electric vans, rather than large diesel lorries.
All of this is only possible because of Farmdrop’s mobile tech, which lets producers manage orders.
“We’ve just tried very hard to use mobile technology to remove all of the cost bases that would be there in a conventional chain,” said Pugh. “It unlocks this extremely cost-efficient method of moving food between producers and consumers. In turn, producers get a better deal while consumers get better price points on local produce.”
Pugh has had some time to work out a more efficient food delivery model. He previously worked at Morgan Stanley, and said he was involved with Ocado’s IPO. “I spent a lot of time looking at food retailers,” he said.
The company only operates in London currently, but will use the funding to expand to Bristol in September.
Zennström said in a statement: “Atomico likes to invest in companies looking to tackle some of the bigger sustainability challenges our planet is facing. That is why we’re incredibly proud to have led Farmdrop’s second investment round.
“They are deploying innovative technology to simplify the food chain and meet the growing demand for more sustainably sourced, local food.”