As Amazon introduces free, two-hour delivery of Whole Foods groceries in the Bay Area for Prime customers — and converts sections of local Whole Foods stores into mini-Amazon fulfillment centers in the process — a Bay Area food delivery startup called Farmstead is testing a different grocery delivery model. The company, which just announced $2 million in funding from Resolute Ventures and Social Capital, bringing its seed funding total to $4.8 million, is placing its stock (quite literally) in artificial intelligence.
Company CEO and co-founder Pradeep Elankumaran says Farmstead’s edge lies in its ability to accurately predict consumer habits: Farmstead’s computer programs study inventory and sales data to come to their own conclusions, leaving Farmstead to place orders from producers like Cowgirl Creamery and Acme Bread accordingly. From there, the company stocks micro-hubs, or small delivery way-stations, and sends out couriers on optimized routes to customers. The sales pitch: $5 or less for delivery in under 60 minutes and prices that match local supermarkets with no minimum order.
Farmstead launched this fall and has completed over 40,000 deliveries as of this week. It’s a drop in the overall bucket, but it’s a bucket that could get pretty big: The grocery delivery market is expected to reach $100 billion in annual sales nationally by 2025, encompassing 20% of groceries at that time according to some estimates.
Elankumaran’s founder origin story for Farmstead involves a young daughter who was drinking a “shocking” amount of milk. “I would be working, dead tired, and my wife would say, ‘dude, you have to pick up more milk,” he recalls to Eater SF. After returning to the grocery store for the third or fourth trip in a week, he remembers thinking, “I’m an engineer... how can I solve this?”
Elankumaran jokingly refers to the supermarket model as “a big fridge in the middle of nowhere.” It’s a way of doing business, he says that “needs to be somewhat remodeled,” and as a consumer, he wasn’t satisfied by Instacart or other delivery options.
Another reason to reevaluate the supermarket system is sheer wastefulness. “As a technology company, we were somewhat shocked with the amount of waste in the grocery industry,” he says, suggesting that “one out of 8 truckloads is totally wasted.”
If, as Elankumaran believes, “that’s primarily because supermarkets don’t know how much to order” (they “know their baseline, but wind up overbuying”) Farmstead could stand to radically reduce food waste with its process. And in its first year of business, according to a company representative, it’s done just that, wasting under 10 percent of its perishable food so far.