Tips from eFishery founder Gibran Huzaifah on running a profitable start-up

Indonesian Gibran Huzaifah Amsi El Farizy is no stranger to the world of start-ups.

While still a student, Farizy started his own fish farming business – and by the time he graduated in 2012, he was managing 76 ponds.

Now 33, Farizy runs Indonesia-based startup eFishery, which has developed products such as automatic feeders that help local seafood farmers save costs and improve productivity.

Today, eFishery serves nearly 60,000 farmers and around 280,000 ponds, making it one of the largest startups in the industry.

A new idea came to Farizy while taking an aquaculture course in his third year of college at the Bandung Institute of Technology in Indonesia, where he majored in biology.

He admitted that he only signed up for that class because he was “guaranteed an ‘A’ as long as you stay in the class” and he really needed it to get his GPA up.

Aquaculture involves the cultivation of not only fish, but also crustaceans and aquatic plants.

During the class, he learned that the dory fish is one of the most consumed freshwater fish in the US and Europe.

“My professor mentioned that in the next five to 10 years, five-star hotels and restaurants are going to (serve) fish or catfish, whether you participate in it or not,” he told CNBC Make It.

That’s when he decided to switch to increasing sleep.

Shortly after this class, Farizy rented out his first catfish pond to supplement his income.

But he was unhappy with the small profit he made from selling his catch to middlemen. This prompted him to start selling catfish fillets and fish nuggets, which he processed and sold of a food cart at his university.

“I tried to create my own demand by having a value-added product,” Farizy said, adding that he skipped classes to operate his farm and food business — which eventually grew to seven food carts .

In Indonesia, pangasius catfish – a type of fish popular among low- and middle-income earners – are processed into high-quality frozen fillets and marketed as “pangasius dory fish” to increase their appeal and price.

Seeing the opportunity, he began to breed catfish and realized that feeding costs were substantial − consisting of 70% to 90% of total costs. He then built a prototype for an automatic feeder in 2012, before launching it a year later.

Automatic feeders eliminate the problems of manual feeding, which could lead to overfeeding or underfeeding. By detecting the hunger levels of the fish and shrimp through their movements, the automatic feeders then release the optimal amount of food into the ponds accordingly.

Farizy claims its feeders can reduce feeding costs by 28%.

“What a lot of companies got wrong is they never focused on unit economics from day one,” Farizy told CNBC. He said the automatic feeders were sold for profit right from the start.

ePishery is operationally profitable, according to Farizy.

Last January, eFishery secured what it claimed was the world’s largest funding round by a seafood farming technology startup — $90 million in Series C funding. This round financing was jointly led by Temasek, SoftBank Vision Fund 2 and Sequoia Capital India.

Here are three tips for running a successful company, according to Farizy.

Many startups focus on skyrocketing growth, which usually means a high cash burn rate.

Asked how he runs a successful company, he said, “We don’t burn cash unnecessarily.” He added that his company is very cautious with their spending.

“In many cases, the reason they raise their costs is because they need to increase their burn rate to then raise their valuation and raise more money for the next round of funding,” Farizy said. “For us, we don’t play that game.”

Cash burn refers to a company spending its cash reserves when it is not yet generating profit.

In addition, eFishery was not in a position to raise money easily in the early stage because investors did not believe in the technology business model for seafood farming back then.

But even for other companies that aren’t burning cash for growth, they don’t have enough control over costs, Farizy said.

For example, they may not have an appropriate salary qualification for the talent, which can lead to companies overpaying for the talent. Thus, putting processes and a system in place is important, he said.

“We’ve tended to be very careful and careful with our spending, including our talent sourcing,” Farizy said.

Farizy knew that allowing users to use their product for free was not the way to go. Many startups do this in the beginning to expand their customer base.

“We didn’t sell the feeders for free. We sold them at a markup from our cost,” Farizy said.

“I remember very well that we tried to give the feeder away for free. Even though we tried to pay farmers to use it, they didn’t want to use it simply because they’ve been farming for 20 to 30 years and they’re not convinced to use this technology,” Farizy said.

His big success came when a farmer who owned about 1,000 ponds saw potential in the feeders and allowed eFishery to install them in some of his ponds.

As one of the first, eFishery “wasn’t pushed to grow faster than our own pace.”

“For the first six to seven years, we focused on helping farmers and implementing our technology,” Farizy said, adding that they started building the value chain when they were ready.

But they might not have that time if there were big competitors who can raise billions to grow, Farizy acknowledged.

His advice for founders? Focus on serving customers.

“Don’t listen to investors, because the investors who asked you to increase your energy consumption rate five years ago are asking for profitability today,” Farizy said.

“But customers who wanted a good quality product five years ago will demand the same thing today.”

“If you keep focusing on the core customers, you can build a good business with a strong retention rate, a strong margin, and eventually the investors will come,” Farizy said.

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