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Thursday, Dec 7, 2023

ProducePay Raises $43 Million to Build Ag Trading Exchange

Downtown-based ProducePay Inc., a fintech-like business that has created a privately run commodity trading exchange to sell perishable fruits and vegetables, has raised $43 million in a Series C round.

The round was led by Silicon Valley-based G2VP. 

Two international backers for developing countries also contributed: International Finance Corp., which offers investment services to encourage private-sector development; and IDB Invest, part of the Inter-American Development Bank and the largest source of financing for Latin America and the Caribbean.

Other participants included current investors Amsterdam-based Anterra Capital and New York-based tech investor CoVenture, and new investors Brussels-based Astanor Ventures, Mexico City-based IGNIA, and San Diego-based Finistere Ventures.

The funding brings ProducePay to more than $300 million raised in debt and equity funding since its founding in 2014, said Pablo Borquez Schwarzbeck, the 35-year old who came up with the idea to form the company as part of his MBA project at Cornell University in Ithaca, N.Y.

With a $100,000 grant from Cornell for coming up with the best entrepreneur proposal, he moved to L.A. in 2015 and went to work investing in a network of 400 farms to buy produce ahead of delivery. He estimates that 75% of the farms are located outside of the United States, including in Mexico, Chile and Peru.

“We invested in eight farms last week. We’ll easily hit 800 farms this year,” said Borquez Schwarzbeck, who grew up in Ciudad Obregon in northern Mexico hearing stories about how the Mexican government took his father’s farmland and home in the mid-1970s.

“My father was one of my biggest inspirations in life,” said Borquez Schwarzbeck, whose father in later years bought back the farm and added more than 5,000 acres of planted asparagus, grapes, avocados, celery, broccoli and cauliflower.

ProducePay sets itself up as a middleman between distributors, growers and grocers.

The company makes an investment in a farm and helps farmers find buyers. ProducePay earns a 2% commission on the crops it invests in, according to Borquez Schwarzbeck.

The company doesn’t just underwrite the farming risk, but the trading risk, which involves weather, logistics and the trustworthiness of the counterparties — both the farming side and the buyers’ side, he explained.

All the produce the company funds is destined to enter the U.S. consumption market, Borquez Schwarzbeck said.

ProducePay also has developed an interactive online platform that tracks the market prices of hundreds of perishable fruit and vegetables, Borquez Schwarzbeck said.  

The $43 million raise will help ProducePay boost by 50% the size of its 100-person workforce at its downtown office by adding engineers, financial analysts and marketing representatives over the next year, he explained.

ProducePay is essentially an underwriter of produce, he said. 

ProducePay has financed more than $3 billon of produce across a dozen countries since its inception, but undertook $1 billion just last year due to the global pandemic and more people eating healthy.

“We are moving more towards a marketplace,” said Borquez Schwarzbeck of his company’s mission.

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