What went wrong, and what lessons can we learn from this cautionary tale of ambition and mismanagement?
The rise of eFishery
Founded in Indonesia in 2013 by Gibran Huzaifah and Chrisna Aditya, eFishery quickly gained fame across Southeast Asia. The company offered small-scale farmers automated feeding systems (its proprietary eFeeder), affordable feed, financing solutions, and access to markets - all through an innovative app-based platform. This out-of-the-box approach resulted in substantial interest and investment from well-respected investors from Europe, Asia, and the Middle East.
By mid-2024, at the height of its popularity, eFishery had raised a total of $294 million in nine funding rounds, achieving a peak valuation of $1.4 billion and thereby earning its place as the first aquaculture “unicorn”.
As an aquaculture advisor and auditor with over a decade of experience in Southeast Asia, I have followed eFishery’s journey closely and was really impressed by its rapid rise and even more puzzled by its quick demise. How could this happen to such a strongly backed startup with such great potential?
The allegations
The interim results of an internal investigation commissioned by eFishery’s shareholders recently made their way to Bloomberg and seem to portray a reasonably clear picture of what happened. The most significant revelation is that the company’s reported revenue for the first nine months of 2024 was inflated by 75 percent —$157 million in actual revenue as opposed to the $752 million reported. This $595 million discrepancy turned what was presented as a $16 million profit into a $35.4 million loss.
Further scrutiny revealed unorthodox accounting practices where losses from farms provided with loans and unsold eFeeders were classified as assets. While the company claimed to have sold and distributed over 400,000 active units, the investigation found only 24,000 units in operation. Alarmingly, one of the company’s early investors explained that these creative book-keeping practices started as early as 2018.
When pressure leads to deception
This case is not unique and I have seen it happen more than once that entrepreneurs feel pressured to meet the high expectations set by their investors and resort to inflating production numbers. However, once you go down this path it quickly becomes a slippery slope with no way back. Each following accounting year requires further adjustments, which creates a snowball effect that can lead to dramatic downfalls like the one currently unfolding at eFishery.
What surprises me the most is how this could happen with so many experienced and reputable investors onboard.
The importance of strong oversight and mentoring
Startups, especially those led by young and ambitious founders with limited experience, often struggle with the immense pressure to deliver results. Without proper mentorship and mental support, even well-intentioned entrepreneurs can make poor decisions. Investors should learn protect the people they invest in against themselves.
How could the company pass its annual external accounting controls for the past six years? Why is that other managers in the company did not sound the alarm earlier? If there really are such big discrepancies between the real and reported turnover and feeder sales, other team members in leadership positions, and sharp investors, must have noticed something was off?
I believe that this case clearly demonstrates a systemic failure in accounting, oversight, governance, and due diligence and hopefully this tragedy serves as a reminder to investors that they have a responsibility to ensure that strong governance and oversight mechanisms are in place.
Damage limitation
Despite the slim chances, I truly hope that eFishery will be able to survive this huge challenge, as the company's concept seem to be solid. Its dedicated employees and the farmers that are part of the eFishery family deserve a second chance.
Moreover, the fallout from the company’s deceptions hopefully won’t overshadow the wider progress being made in Southeast Asia’s aquaculture sector. The region is home to many promising innovators who are working to improve the sustainable and profitable production of seafood and they play a vital role in feeding the world. They need our continued support.
