It's been months since there was an ICO worth mentioning. After a year of massive ICO hype, usually followed by disappointing results, I still initially cringe when I see the words "ICO coming soon".
That's why I found this one refreshing, when I picked it apart I found an idea that makes sense, and a real world application for blockchain technology.
It meets my 4 standards for a legitimate project:
● Real world application: improves upon a large, existing industry. It's not about re-inventing anything, it's about making something that already exists better and more efficient.
● "Blockchain" isn't thrown in as a buzz word: it's essential.
● The industry it targets would see immediate benefits: existing profits increase after implementing it, so there's a real reason for people to use it.
● It has real backing: Tim Draper, the billionaire famous in the crypto scene for buying Silk Road's sized bitcoins from the US Government, and graduate of both Harvard and Stanford is their main investor. He's been called "the creator of viral marketing" and credited with helping in both Skype and Hotmail's success.
The company is
eHarvestHub, and they have a way to streamline the process of how food gets from a farmer, to our grocery store.
I interviewed the founder and CEO, Alvaro Ramirez to learn more about the project.
- Honestly, i'm among the 99% of Americans who really have no idea what goes on behind the scenes of the process of food getting from a farm, to a market. So with that being said, help myself and our readers understand the problem, and how blockchain tech is the solution.
Farmer grows, harvest and packs product, often with no pre-arranged sale, because he doesn’t have enough volume to sell directly to retailers, sells to the multiple middlemen who aggregate volume and arrange transportation – using a transportation broker. The product can zig-zag 7 to 10 times before it makes it to the retailer’s warehouse. Often farmers don’t know who the end buyer is because middlemen won’t disclose it. Prices are negotiated on every order however if the buyer finds the product cheaper the order will be canceled. In the event the product has already been shipped the buyer will find a reason why not to accept the product and will haggle the farmer for a discount or the farmer has to find someone else to sell the product. Because of the multiple layers of middlemen farmers’ profits are as low as 4%. While visiting one of our farmers, I purchased a case of cantaloupes – 17 in the box for $5.69, that’s $.33 cents for each cantaloupe yet at the store you can pay up to $3.00 for one cantaloupe. Our food supply chain is FUBR.
Hauling fresh food is mostly done by independent truckers who depend on a transportation broker, but these are truckers who saved money and took out loans to buy the trucks to be independent business owners. Brokers charge retail prices for freight and put it up for a bid among his network of truckers. Lowest bid wins the load. If the truck is not full and can pick up a second load the broker will pay up to $100 + the extra miles for the second load yet charging retail prices. The trucker however, once product is loaded, takes ownership and assumes all responsibilities of the load. Transportation brokers don’t always know whether or not products can be transported together – chemical reactions and temperatures can affect the quality of the product potentially causing losses. In the end, everyone one wants their cut but along the way the farmer and trucker who work the hardest to get us our food make the least amount of money and consumers are left paying higher prices for their fresh food.
The layers of middlemen give retailers zero visibility to farmers inventory and food traceability difficult and food fraud easier. Unable to track shipments, farmers invoice the moment they ship because they don’t know when the product will be received. Some middlemen who offer to help farmers sell their product will charge up to 15% fees that even when they fail at selling the product or the buyer refuses to pay, the farmer must pay the middleman.
Truckers must have a singed BOL to receive payment, sometimes having to wait up to 30 days to get paid. If a trucker wants to get pay sooner some brokers will charge a fee of the already negotiated prices. In other countries truckers often purchase the load from the farmer – not always paying the farmer upfront but after they sell the product.
Blockchain is the perfect tech for the food industry, I will even say, is the only technology that can truly change the industry. The current traceability standard is just a standard on the “minimum” everyone agreed on, it doesn’t truly provide transparency. With Blockchain we can log and time stamp every step our food takes providing true transparency from seed to table which lowers potential illness from food borne pathogens and minimizes the financial risks to market participants.
Smart contracts help guarantee farmers and truckers get paid with their job is done. Buyers buy commercial quality product– a standard set by USDA. Buyers trust the product they are purchasing is under this standard although they have no way to verify this until the product reaches their warehouse. Blockchain’s transparency helps the buyer verify the quality before purchase and it’s therefore set as part of the contract. The smart contract helps buyer, farmer and trucker come to a consensus on quality before and during transport as well as pickup and delivery times.
- Lets do a "before and after blockchain" comparison. Tell me how the process works currently (with no blockchain tech), the farm grows the food - then what:
Farmer growers and packs product, conducts a manual inventory count which is seldom accurate. then lets buyers (all) he can know he has product available. Orders are often received by multiple people without access to inventory count causing overselling or underselling of product.
On the buyer side: Retailers let their buyers (employees) know how much they need and the price they need to purchase at. Middlemen start getting orders from retailers and begin calling farmers and other middlemen to see who has product available and how much and begin negotiating on prices. Once the order is verbally confirmed – a purchase order is faxed or emailed to the shipper (seller).
Transportation broker is contacted and price negotiated on delivery– broker puts load up for a bid – lowest bid wins and the trucker goes to pick order up.
Product is loaded (not always on time caused by the trucker being late to pick up or the shipper not having product ready– this can cause a missed delivery time for which the trucker is charged – up to $100/hr). Shipper and trucker sign the Lading (BOL); trucker takes ownership of the load and gets on the road.
At the delivery warehouse – if on time the truck is asked move to the unloading zone and is unloaded. If the trucker missed his delivery window he must wait sometimes having to wait until next day.
- Now, tell me what that process looks like using eHarvestHub's blockchain tech:
Farmer logs all the food safety, labeling product with 128 barcode which is recorded, each barcode is unique to each case, this creates an accurate real-time inventory which is then surfaced on our marketplace.
Buyers are able to search on our marketplace for product and can have access to all the food safety records of the farmer, FOB and Delivered product pricing and who are the available truckers for the delivery. This is all part of the smart contract. Once the delivery date, the smart contracts algorithm calculates when product must be picked up based on various data points.
Cost of transportation can be lowered because the system is constantly looking at recent contracts, active contracts or near future contracts to identify those loads that could be combined.
Once the product has been delivered and the bill of lading (BOL) is signed by the consignee, the trucker and farmer have successfully met their obligations and funds can be sent to them.
- It sounds like success hinges on two groups adopting the technology - farm owners, and independent truckers. What's the main reasons each of these groups should want to adopt this tech?
This may look like a very complicated chain but it really isn’t. All we need to do is help the farmer first. We help them meet food transparency and safety – accurately manage their inventory, the retailers will come. A major retailer said to us “If you can aggreagate the volume directly from small farmers, you solved two major issues for us. Aggregation and food transparency. You do that, we will come shop”.
You have to have the right business model, many competitors if they are not charging an expensive licensing fee they are charging percentages of the orders – nothing new, they are just the new middlemen. We truly want to help farmers and truckers so we charge flat fees. The Farmer pays us a small flat fee of $3 (in the US) per order and the trucker pays $100 for ach load delivered. The US along can generate over 100M transactions, globally 480M farmers can generate over 9 billion transactions.
- Maybe it's a misconception I have, but I view both the farming and trucking industry as relativity "low tech", do you worry at all that even if the concept is sound, there may be some fear or skepticism in adopting it?
Truckers because they are on the road, they carry smart phones and laptops so introducing a transportation app would not be unfamiliar to them. Many of the already belong to one or many bidding platforms run by brokers. Farmers on the other hand tend to shy away from technology for too main reasons – Complicated tech and it’s expensive. We make sure our tech is user-friendly and intuitive. When we first introduced the traceability solution, it took employees at the farms just a few minutes to learn how to use it and were up and running the same day. We solved the price issue as well; we invoice farmers when they invoice. You have to take the baby steps with farmers, when they see you really care about them and their farms, they adopt your tech.
- Are there any upsides for the average end consumer as well?
There is a tremendous upside to consumers. Eliminating the middlemen means less hands touching the product, this lowers potential risks for food borne illness and prices drop. Blockchain provides consumers with a clear view of where their food comes and how their money impacts small farmers around the world. That is tremendous power put back in the hands of consumers. With our cryptocurrency, a consumer in the US could contribute to a farmer across the world, much like when someone contributes to an ICO. An impact that can help farmers turn to more sustainable practices. This is an impact that removes the grip conglomerates have on our food system.
- Tell us a bit about your team, and who else is currently supporting the project?
I have the best team; my development team is based in Nicaragua. I chose to have my developers there not only because that is where I was born but I wanted them to experience working at a startup based out of Silicon Valley. One of my greatest rewards, a few years after eHarvestHub has matured would be to hear them say, “Alvaro, I had a blast at eHarvestHub and have loved everything we have done but I want to go and start my own project.” It would be great to go see them create opportunities for others like we are doing at eHarvestHub. They are a young team always willing to do the impossible to make our technology great and more importantly user-friendly. Francisco Rojas, our head of Sales and Operations has the right background for what we are building at eHarvestHub. Quency Phillips “Q” as we call him, is an amazing person that lives and breathes marketing and public relations and has the heart and compassion to understand we are bout improving the social-economics of small farmers and truckers.
- What's been accomplished so far, and what's your timeline look like into the future?
I raised a little more than $1.1M to build the tech. We were able to complete all the initial technology – a fully integrated platform that allows farmers, retailers and truckers to communicate directly.
Order Management System..
Inventory Management System.
Traceability system – that enables farmers to manage potential recalls.
Marketplace .
Transportation Management system.
We have farmers already using our platform and continue to add more of them. So far, our farmers have tracked more than 4 million cases of food and can generate over 30,000 orders that will need to be delivered.
We are excited about the future – adding Blockchain to our tech and using smart contracts for our customers to conduct business and incorporating the use of cryptocurrency that will help decentralize the food supply chain.
We are equally excited about our preICO because it is our first step to involve the global community. Some have asked why our ICO is not right after our preICO like others have done. We want to raise a small amount to implement blockchian into our platform and conduct pilot programs in Mexico, Colombia and Nicaragua to show that what we are doing works. The funds we raise in the preICO will be held in a multi-signature account requiring two signatures from our advisors Stephen Mc Namara and Heather Richman. They will ensure funds are release only when milestones set in our white paper are met.
The Pre-ICO begins in just a few days, Nov 21st at
www.ehhICO.com
