Hello dear reader,
It’s Thursday and we’re discussing Banyu, a seaweed company based in Indonesia. It recently raised $1.25 million in a financing round led by Intudo.
The Product
Banyu has an ambitious positioning as a technology solution that aims to streamline Indonesia's fragmented seaweed supply chain and create a more cohesive seaweed ecosystem.
Banyu plans to achieve this through five key mechanisms:
Improving Farmers' Yields – Providing high-quality inputs, starting with superior seedlings.
Advancing Farming Practices – Offering training and on-the-ground assistance to enhance cultivation techniques.
Integrating IoT and Automation – Implementing sensors and automated seedling planting to improve efficiency.
Enhancing Transparency with Blockchain – Aggregating the nine key actors in the supply chain to improve pricing and visibility.
Providing Financing – Utilizing the Grameen model to offer funding options for farmers.
Currently in its early growth phase, Banyu is focused on improving seedling production, increasing yields by 20%, training farmers, and developing its IoT prototype.
The Business Model
Banyu operates under a Farming-as-a-Service (FaaS) model, covering everything from seed provision and cultivation management to post-harvest processing and industry-specific product delivery. Target industries include FMCG, biotechnology, and textiles.
Initially, Banyu appears to be following a profit-sharing model, which makes strategic sense:
By providing superior seedlings, they generate additional revenue and profit.
Their training efforts position them as on-site coaches and consultants, directly improving farm efficiency and output.
This model lowers the barrier to entry for farmers, who don’t need to invest upfront capital or wait long to see results. For Banyu, it simplifies market entry in a traditionally conservative industry. Farmers' downside is limited, and Banyu’s potential market includes all seaweed farmers—not just those with capital to spare.
The company will start in Sulawesi and later expand into other seaweed production areas, including Nusa Tenggara, Lampung, Maluku, and Papua.
The Local Angle
Indonesia’s Role in Seaweed Farming: Indonesia accounts for 29% of global seaweed production, second only to China (57%). The industry has been expanding rapidly, with production growing at 9.3% annually from 2010 to 2020. Over a million Indonesians are engaged in seaweed farming, though only 5% do so full-time.
A Vast Market with Little Competition: Most farms are small-scale, and due to an underdeveloped processing industry, there are few vertically integrated players. This allows Banyu to operate in an open field with minimal competition. Additionally, inefficiencies in the industry have even pushed some farmers to switch occupations entirely.
Plenty of Challenges for Banyu to Address: Farmers face both internal and external hurdles.
Internal: They rely on the same seeds year-round, leading to lower yields, struggle with labor costs, and are slow to adopt new technologies. UNIDO projects have shown that better seedlings, improved spacing, and optimized farming cycles can boost production by 28.8% and generate €1.53 million in economic gains.
External: A complex supply chain leaves farmers without bargaining power or clarity on end customers. Additionally, limited financing options hinder expansion and technological adoption.
The Roadblocks
A Difficult Market to Penetrate: As noted in an interview with co-founder Dodon Yamin on the Indo Tekno Podcast, the host Alan Halliwell summarized the challenges perfectly:
Aren't there innumerable challenges in building a model around seaweed farmers? I assume they tend to be very small scale. I assume pretty confidently they're somewhat technologically challenged, if not illiterate. And they thus must not be heavy spenders on technology. Moreover, they're dispersed and quite independent and hard to reach, no?
And all that does sound daunting. Banyu is entering an extremely fragmented and low-margin industry. To generate meaningful returns, they’ll need to capture a significant portion of the market and influence multiple points in the supply chain—requiring substantial capital investment.
Potential Export Ban: The Indonesian government is considering a nationwide ban on unprocessed seaweed exports. A similar ban has already been implemented at the provincial level. The likely result? Lower seaweed prices, as only one-third of processing happens locally. Foreign processors—mainly Chinese—are on average four times larger than Indonesian ones. As local supply diminishes, these players could absorb what remains, discouraging domestic processors and ultimately harming both farmers and producers.
Price Volatility: Like many commodities, seaweed is highly volatile, and extreme climate events exacerbate the issue. Climate change is already impacting seaweed farming: bacterial infestations triggered by temperature fluctuations can cause seaweed whitening and hardening. Given Banyu’s profit-sharing model, this unpredictability presents a major financial risk that’s difficult to mitigate.
The Takeaway
You rarely see an industry with this kind of starting point: your addressable market is a third of the global market, and you have basically zero competition.
But there’s a reason for that—an incredibly fragmented and underdeveloped industry that would take a lot of capital to transform.
Let’s hope Banyu figures it out.
