Agriculture blockchain startup AgriDigital closes $5.5 million raise with plans for integrated digital currency
Wednesday, February 28, 2018/
Australian agriculture blockchain startup AgriDigital has successfully finalised a $5.5 million Series A capital raise, which will see the company begin to investigate its own digital currency, along with soft launches into international markets.
The startup offers users on all points of the “paddock to plate” grain supply chain a way to verify and transact all deals across that chain, hoping to mitigate risks for farmers and increase efficiency.
Founded by former farmers Emma Weston, Bob McKay, and Ben Reid, the inspiration for AgriDigital came from real-world experience in the Australian farming space, with the founders witnessing first hand the difficulties and inefficiencies of the system.
The company uses blockchain technology to track produce across the grain supply chain and provide growers and buyers a way to receive compensation for, or to purchase, goods. Though this is a main remit of the AgriDigital platform, Weston says the startup is “not just a blockchain company”, and is hoping to solve a vast number of problems in the farming space, both on and off chain.
“For farmers, the counterparty risks they take on can be reasonably extreme, so we’re looking at ways to remove or mitigate that risk. We’re coming at it from a problem-first space, rather than a tech-first space,” Weston told StartupSmart.
AgriDigital is also hoping to solve problems for buyers and financiers of growers by giving them an easily accessible and verifiable window into farmers inventory and contract positions, and also providing farmers a way to easily track their cash flow.
Finding the right partners
Closing the raise officially at the end of last year, Weston says it was the first time she and her two co-founders had raised venture capital, and says she “took her time” finding the right partners to get on board.
“We’re not only deeply involved in AgriDigital, we’re farmers ourselves. We wanted long term partners around the board table who would be prepared to go on a journey with us, and not a lot of the investment community understands agricultural supply chains,” she says.
However, the startup found a partner in Square Peg Capital, which led the $5.5 million round alongside a private family investment office. Speaking to StartupSmart, Square Peg partner Tony Holt says the firm was keen to back AgriDigital as it’s led by a team “with massive experience in an area that’s crying out for a new solution”.
“Supply chain tracking is a massive opportunity in not just Australia, but globally. They’re looking to take the business internationally, and we have a whole lot of support in our networks and expansion experience that can help with that,” Holt says.
The funding injection will, in part, be used for international expansion, alongside a consolidation and finalisation of the AgriDigital platform for a “global perspective”, says Weston. The platform has almost 1400 active “observer” users, which it does not charge subscription fees for, and around 20 paid subscribers on the grower side.
Nearly 1.7 million tons of grain has been transacted on the platform since the company completed its first transaction on the platform in December 2016.
Integrated currency in the works
A number of Australian startups of late have raised, or attempted to raise, millions through initial coin offerings (ICOs), letting users cough up cryptocurrencies such as Bitcoin or Ethereum in return for some of the company’s own unique cryptocurrencies, usually in the assumption those “tokens” will increase in value.
The use cases of those tokens in companies’ platforms have been hit and miss, and Weston, while not opposed to ICOs outright, does question how helpful their “hype-y” nature has been to the technical work being done in the blockchain space.
That’s why AgriDigital’s token won’t, at this point, be following an ICO structure. Instead, Weston explains it will be a “true token” functioning within the blockchain as a way for farmers and buyers to complete real-time payments, stopping either party from paying or being paid days late.
“We put a proof of concept for this in our commercial pilot as a way of looking how to get real-time payments done through the blockchain. We minted our own coin that was representative of the Australian dollar, and when buyers received that coin in their digital wallet, it would create a message to the bank to make a payment in fiat to the grower,” she says.
“This was a clunky way to do it, so we’re looking at ways to get around that.”
This is why Weston, amongst others, has been a vocal advocate for a government-issued digital Australian dollar, which the Reserve Bank of Australia began to consider arguments for in December last year.
In the meantime, AgriDigital has taken things into its own hands through a partnership with agriculture-focused bank Rabobank to pilot a bank-backed token, which Weston says gets the startup “one step closer” to an integrated digital currency in the platform.
Over the next 12 months, AgriDigital wants to position itself as a significant player in the local market and become the platform of choice for the grains market, with a plan to expand into the cotton market later this year.