Success runs in Pablo Borquez Schwarzbeck’s family. The Campos Borquez agricultural produce farms owned by his father, Pablo Borquez Almada, is in the northwestern Mexican state of Sonora. It won the 2021 “Supplier of the Year” award from Amazon-owned grocery chain Whole Foods Market, along with two other suppliers.
How ProducePay started
Pablo Borquez Schwarzbeck has come a long way from Sonora. And he’s had his share of success, raising significant capital for a start-up business. He’s raised $80 million for his ecommerce marketplace and finance company, Produce Pay Inc., which he launched in 2014 after conceiving it at Cornell University, where he was studying for his MBA. His idea caught the attention of business publisher Forbes, which in 2018 named ProducePay one of its 25 “Most Innovative AgTech Startups.”
Branded ProducePay, the marketplace shows how a new internet venture can address challenges and open up opportunities for a traditional industry that has long been restricted by the complexities of cross-border commerce, lack of business services, and an opaque and complicated supply chain.
“There is an opacity or lack of transparency in the market,” says Borquez, ProducePay’s CEO. He learned the produce trade on the family farms and at The Guimarra Companies, a big Los Angeles distributor where he worked after college.
ProducePay is out to change that, he adds. The marketplace matches produce farmers, mostly in Latin America but some in the United States, with U.S. distributors and other buyers. The idea is to open cross-border trade to more farmers and speed up procurements, eliminating as many middlemen as possible in what ProducePay views as a convoluted traditional supply chain. The company says the average produce item in the U.S. travels 1,600 miles, is handled four to eight times, rebranded twice, and marked up anywhere from three to six times, making it nearly untraceable.
Long-term success is not guaranteed, of course, but ProducePay claims more than 800 customers in nine countries on the grower side. Borquez says his goal is “bringing the traditional industry of my father into the 21st Century.”
ProducePay is doing that through an ecommerce site, ProducePay.com. It enables farmers to prospect for buyers directly, get market reports, and procure financing. In a complementary fashion, ProducePay’s platform helps wholesalers and distributors find vetted suppliers.
Los Angeles-based ProducePay developed the ecommerce platform from scratch, though it leveraged some of its technology from various providers, including Amazon Web Services. The company employs about 30 people in its engineering and product and design teams.
Financing options for growers
As in the U.S., many Latin American farmers toil in fields far from urban centers and thus could face Internet connection issues. But getting online hasn’t been much of a problem.
“Internet connectivity doesn’t tend to be a challenge,” Borquez says. “Sometimes it’s harder to get electricity than it is to get internet.”
ProducePay’s financing options for growers include seasonal funding of $200,000 to $20 million or more for seeds, fertilizer, and other agricultural inputs. It also offers transaction-based funding through its new Quick-Pay and Quick-Pay+ services that provide anywhere from 50% to 96% of a shipment’s value to the farmer within 24 hours after the buyer confirms reception via ProducePay’s marketplace system. The vast majority of transactions are in U.S. dollars.
Funding comes from a number of partners. They include Netherlands-based Rabobank, the World Bank, and Silicon Valley venture-capital firms, according to Borquez. But ProducePay itself isn’t a lender. The company buys the crops and in turn sells them to the wholesalers and distributors.
“We’re not lending to any of these farms,” Borquez says. “By buying ahead of time … we become a co-seller of that crop.”
Assuring that suppliers are bona fide
For buyers, ProducePay’s platform facilitates requests for proposals and searches for providers in what ProducePay calls its “preferred network.” The company assures that its suppliers are bona fide by deploying a team of about 30 staff members based in five countries. These inspectors visit farmers and check for production capacity, export history, and financial health.
“There’s nothing like looking at a farmer eye to eye,” Borquez says. “It can be scary buying from a farmer in a country you’ve never been in.”
ProducePay’s system has facilitated sales for about 100 types of produce. The leading commodity is table grapes, followed by blueberries and avocados, respectively, Borquez says.
Pricing for all of ProducePay’s services is commission-based, but the company didn’t disclose rates. With the Marketplace and Quick-Pay services coming online in 2021 and this year, respectively, ProducePay is amid a growth surge. Volume in the recent trailing 12 months has more than quadrupled to $3.5 billion.
“We’ve been hard at work …. we’re seeing this explosive growth,” Borquez says.
Borquez says the company has a “unique view” of its growers, who in the main have proven sound.
“We’re shifting the counter-party risk from buyers to ProducePay,” he says. “We have learned how to bet on … the farmers. Ultimately, ProducePay is becoming a provider of trust.”