Before reading this article, please read our full disclaimer found here and at the bottom of this page. This Paid Story is brought to you by eHarvestHub.
The Produce Distribution Platform
Introduction
eHarvestHub is a California-based company, that enables small farmers to sell their produce to grocers directly and hire truckers for transportation in an open marketplace. This would enable them to sell their produce immediately, without a middleman. The company has been interviewing over 100 farmers and has been developing their platform for over 3 years.
Their pre-ICO is looking to sell 64.8M of their own EHH Tokens for 12,960 ETH (4.28M USD) throughout 8 days. The proceeds will go towards Initiating their Blockchain protocol, hiring developers, starting programs in Nicaragua, Mexico, Colombia, and continue growing their footprint in the US. Their token is used as a currency for their marketplace.
eHarvestHub will pre-ICO this November 21st at 12am UTC.
The Idea
eHarvestHub aims to eliminate middlemen from the food supply-chain, through an open marketplace. The biggest reason that farmers require a middleman, is to help them distribute their produce among hundreds of grocers in multiple regions. In order to solve the transportation problem, the platform also incorporates a reward system for truckers, to move the produce.
The way it works is simple, farmers can list their produce, which grocers can purchase, once a route is created. Both can look at available truckers, and select a reasonable delivery price. Both growers and truckers set their own price, establishing a free market, and giving them independence.
The system rates every purchase to keep everyone honest. They also employ government officials to inspect food, making sure it complies with food safety regulations.
The reality of the problem is that the network required to distribute produce is incredibly complex, as described by their white paper. Each step on the vast web of interactions reduces the margins of the produce for the farmers, and increases the price for the consumers.
Produce Supply Chain, image from page 8 of eHarvestHub whitepaper
What’s interesting about the idea is that if they are successful, both consumers and farmers will be able to get better prices and margins. The consumer will also know exactly where their food comes from, and who they are supporting. Transparency and knowledge are incredibly important in today’s purchase decision making.
The Token
The token is called the EHH token (eHarvestHub token), however there is minimal information about the implementation aspects of this token in the whitepaper itself. The team has since clarified that it will be a standard implementation as an ERC20 token. It will be used as a payment token initially which is a simple Ethereum contract.
For the next stage they will have to invest in properly implementing P2P payment channels if they do not want a slowdown in payment transfer times (something like Raiden based payments) as that is a rather large problem within the Blockchain ecosystem right now.
It is also stated in the whitepaper that this token can be used to settle funds quicker than banking routes due to cross country regulation etc. This is definitely true and is a very good use of a cryptocurrency.
Use of Funds
The Whitepaper by eHarvestHub provides some information about how the funds will be used on page 27 of their white paper. Very general statements about development and hiring are given, without explaining why they need to raise over $4M during their Pre-ICO and over $15M during the ICO.
Their intent is to collect information during the pre-ICO to be able to create a more thorough breakdown of use of funds for their ICO. eHarvestHub’s CEO, Alvaro Ramirez has mentioned that more details will be provided between now and and May 2018. For now, the only information regarding the use of funds is the following picture on page 29.
Token Distribution
The company will create 900M tokens and they will be distributed as follows:
- 48% Sold during ICO
- 20% Kept by the company
- 15% Given as Customer Rewards
- 12% Sold Pre-ICO
- 5% Given to advisors
This means 60% of the currency will be purchased by users through their Pre-ICO and ICO events at a discount. This currency will be used to replace the fiat money in the platform. The idea is that the currency will be purchased at a discount, so the token holders will then trade the token at a higher price with the marketplace and exchanges.
The most complex part of their token distribution is how they give the tokens within the company. They follow formulas to determine the value of each member based on things such as rank and other measurements. The company does this to emulate stock options on a shareholder’s agreement, but we found it to make it difficult to quickly assess reward.
Furthermore they do have escrow holdings in place (as any good ICO should) to release funds only once investors see that the company is progressing as required.
Image: Taken from eHarvestHub white paper, page 19
Pre-ICO
During the Pre-ICO the company will sell each 5,000 EHH tokens for 1 ETH.
The minimum amount allowed to participate is 0.166667 ETH which translates to roughly $55 USD at the moment of writing. Participants will receive over 50% bonus for purchasing the token the first day.
The Blockchain Test
While transparency is mentioned as a prime motivator for the use of a Blockchain, there are many unanswered questions in how the implementation can actually lead to real transparency.
Yes, timestamped transactions can show when purchase orders were made and can keep some accountability for when various transactions in the supply chain exchanged money.
What is not included in the whitepaper but clarified by the team is that audits are performed by EHH employees, to ensure data that is input into the Blockchain is accurate. Further to that they also conduct audits with third parties like PrimusLab to ensure the food safety data is accurate. This can still be easily done with a traditional system that is non-decentralized with a software service hosted by the company, so there is no real advantage of using a Blockchain for this specific part of their use-case. However it does speak to the expertise of the team in the mediation of any buyer-seller disputes, and they have a sound business strategy to audit and settle any such issues.
Traction
One of the most interesting aspects about this ICO, is the fact that the team has been working on multiple aspects of the idea since November 2011. Making it one of the few ICOs we’ve seen where testing, implementation, and experience are very well detailed. The platform as a Management system has existed since 2014. By January of 2015 they had already tracked over 4 million cases of fresh produce.
eHarvestHub also raised $1M in VC Funding in March 2016. The round was led by Tim Draper, the famous VC that purchased Bitcoins seized by the US government in 2016. The marketplace inventory and management systems were completed by December 2016, by February of 2017 the Transportation system was also finished, under the name “eHarvestHaul”. During an interview, we discovered that since January 2017, the company has been able to track over $27M USD in produce.
Team
The team at eHarvestHub has been involved in the farming and trucking industry for several years. Their CEO, Alvaro Ramirez, has experience in building companies, and was able to successfully raise $1M in funds for eHarvestHub, Alvaro also witnessed and experienced the difficulties that both truckers, and farmers, experience, and has been personally affected by the problem. They have two more executives with two decades of experience and their technical team is mostly based in Nicaragua.
Transparency
We believe that the use of Blockchain for this company enables the platform to become a transparent marketplace, where prices, tariffs and rewards can be tracked with transparency and without the possibility of tampering with data that has already been recorded.
Another important aspect of the platform is their ability to demonstrate the origin of the produce sold. The initial verification process is performed by the eHarvestHub team itself. This solution will not scale, as they plan to grow into multiple markets. Their plan is to utilize their parties in different markets, in order to keep up with the supply.
The company is also planning to keep track on the supply generated by farmers, and investigate whenever the supply changes suddenly. We asked them about how they guarantee food safety and their CEO responded:
“In the end our market participants are rating each other and whomever is not being compliant with food safety regulations and Good Agricultural Practices (GAP) and/or has poor performance rating and not willing to improve will not be allowed to participate in our marketplace.”— Alvaro Ramirez, CEO, eHarvestHub
Conclusion
eHarvestHub is a story 5 years in the making, with cofounders that have deep understanding of farming, transportation, and the grocery industries. This type of knowledge is necessary to build a triple-sided market.
The company promises to reduce costs of food and increase margins by creating a system of trust and removing the middleman through decentralization of goods and services. The platform has a lot of potential, but there are also a lot of questions that we wish were answered through the white paper. The team has clarified a lot of these questions and in this review we have included those answers, however we still recommend that most if not all of these details are included in the whitepaper before the ICO.
While some aspects of why they chose to have a Blockchain based platform are clear (such as allowing quick initial cross-country payments), others such as enabling transparency do not really benefit from using a Blockchain and can be emulated by a centralized stack with much quicker verification times.
The team at eHarvestHub seems to have a really good understanding of their market, and they have demonstrated domain expertise, and positive traction. Their CEO has also been able to raise $1M previously, which demonstrates their ability to convince investors and manage expectations.
We are looking forward to seeing the development, as this company ICO’s in May.
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