Former CEO of his company explains how he made his own investors lose $300 million

Image from Bloomberg

Former founder Gibran Huzaifah of E-Fishery was an Indonesian-founded startup that caused investors to go through a $300 million meltdown. In short, it all stemmed from a prototype that helped farmers feed their animals to an over 2,000-employee agricultural company. To an investor’s eye, this company was the ideal company to invest in for the long term. The numbers made investors exultant, as they saw significant progress, but was the actual progress happening in real life as well, or just on paper?

In reality, at this point, E-Fishery was on the brink of going into debt within 3 months. The story originates from the starting decision to plug in fake numbers into the company’s financial report. Although Gibran was hesitant at first, sure that investors would catch him, he did what a company couldn’t do in half a decade. He made his company a winner, at least in the financial reports and in the eyes of investors. That was when, in late 2018, investors were blindly putting their money into what seemed like a long-term gain, but it would eventually cost them hundreds of millions of dollars. Soon enough, his brand image was known for its market value worth $1.4 billion, and its auto fish feeders were boosting agricultural productivity and efficiency.

All this started when Gibran was raised in the slums of East Jakarta, his family was the usual: a father who was a construction worker and a stay-at-home mother. He was enrolled at the Institute Teknologi, which was known as the “MIT of Indonesia,” the Institute Teknologi of Bandung. But when Gibran learned his family was going through financial struggles, as an underage kid, he had to be independent of his family. That’s where he enrolled in a fish farming course, and he was inspired to buy fish ponds. He developed an interest in the agricultural world, but it was a tough world to survive in. The allocation and birthing of spawned eggs were hard enough because they wasted a lot of money and produced excess algae. In the agricultural market, prices also fluctuated frequently. However, if Gibran was able to make E-fishery, I bet you could tell this guy was determined to thrive in this business world.

Gibran had created small eateries and managed over 70 ponds. In addition, he had also made his seafood fast-food chain. Following this was one warning that Gibran would never forget in his life. The one warning that would turn everything around for him. A local farmer warned him that with expansion in the agricultural business, it could get tedious and tiring to feed so many fish. What followed was the prototype of his auto fish feeder. He believed it was “more scalable and helps more people,” which drove his motivation to make this work as a new startup. He grew awareness of his latest startup by traveling all over Indonesia’s rutted roads and village paths to market this newfound product in the market. As more and more farmers bought his prototypes and provided credible testimonials of their positive experiences, he looked to expand the business — the dream of every company. The more pitches and business models he had to present, the more he eventually got his first investor, Aqua-Spark, in 2015. Aqua-Spark is a Netherlands-based investment firm focused on sustainable aquaculture, and it initially funded $750,000.

However, as the company grew, Gabrin saw the costs range from $400 to $600 over time, depending on size and discounts. He was not in a position to charge higher prices because 10% of Indonesians lived in poverty. So he thought of instead of farmers buying his product, he would allow farmers to rent out his auto fish feeders. Despite this innovative approach, he had to deploy more and more of his products into the market quickly to cover the costs of all the products he had made in previous years. At the time, he had to pay upfront for his expenses, so he was quite literally burning through cash. That’s when Aqua-Spark came up with the extra funding of $1.5 million and the last $500,000 would only come if he added more investors.

With the time he had, Gibran was having a hard time finding investors who believed in him like how Aqua-Spark did. As his sole motivation was that he would only get $1 million instead of the $1.5 million he could potentially have under his lap. So Gibran went to go ask other farmers how he could manage to get investors interested. Their advice was to “massage the numbers,” and that “[he] knew it was wrong, but when everyone is doing it and they’re still doing it, you question if it’s really wrong.” At that moment, he had raised $4 million in funds and secured a significant amount of capital from Singapore and Southeast Asia as a whole. The pandemic gave him the perfect chance to cover all of his costs, and by then, he didn’t need any more money. So at that point when he didn’t need the money anymore, he thought numbers would go down. However, the business was doing genuine good numbers. And to his usual faltering money growth approach, where he inflated 20-30% of his numbers, hoping to catch up to the real numbers with this extra money lying around.

You would think that things were going so good for E-Fishery. When did it all go wrong? Eventually, his luck will run out, and his karma will catch up with him. At the back of his mind, he knew the deceit was bad, but he believed he had made an impact in the agricultural world. Gabrin was focusing his moral compass on the “trolley problem”: Sacrificing one person from dying, or let five people die because of his route. He couldn’t stop, as globally well-known investors were pressuring the company's growth. Despite his exultant numbers and motivation to keep going, there were red flags that became apparent in hindsight. When asked for annual reports from the Singapore holding company, they had coincidentally had the 2020 year report not filed until 2024. According to Bloomberg, E-Fishery also claimed to have 300,00 feeding units and more than 44,000 fish and shrimp farmers were buying from them. This is an impressive number, but this would have a disastrous impact on the economy in general, if it were true.

Other red flags that were ignored were that one investor wanted to connect E-Fishery with another company that was a feed producer. This partnership would have been a clear win-win for both parties. However, Gibran reportedly had ghosted them both —the investor and the feed producers. Another had said that Gibran would OFTEN be 3 months late in giving basic numbers on his financial report. Other feed producers’ senior executives also mentioned that it was unusual due to the “total lack of change in their sales.”

Image from the Business Times

The breaking point came on December 6th, when a whistleblower sent the company's board documents revealing discrepancies between reported revenue and the actual number of products farmers were using. Apparently, external money managers were receiving different numbers than the internal money managers, and these individuals were concerned about why their numbers looked so different. The following night, he was the most scared he had ever been in his whole life, and he was deeply reflecting on what he had done. On December 9th, Gibran attended a meeting with the board members and explained what had happened. Some board members were aware of the inflated numbers, while others were not. On December 11th, Gibran came clean to the co-founder of Aqua-Spark, Novogratz. Imagine the feeling of coming clean to his first investor and how disappointed Novogratz had felt, especially when Gibran considered her his mentor. On December 13th, Gibran was called to another meeting with the E-Fishery Steering Board. He was introduced to the new interim chief executive and chief financial officer, and they were going to take over the company from that day on, especially the bank accounts. That was the day when Gabrin’s chapter ended with his beloved creation.

There was an upset among loads of people who knew about E-Fishery. One person on LinkedIn had expressed concern that this happening is a disgrace to the Founder and the AgriTech business world, especially in Indonesia, as it is a disrespect to investment as well, because these are built on trust and relationships. It is a well-rounded thought that this has hurt the over 40 million smallholder farmers who are the backbone of Indonesia. This event had affected the social ladder for Founders who don’t come from family businesses and the community of farmers.