Ofek Lavian, 29, led Instacart’s payments team and grew it from five to fifty before becoming CEO of Forage earlier this year.
Each year, 42 million Americans receive food stamps — now known as SNAP benefits — that they can use at 250,000 retailers. But despite the rise of e-commerce and grocery delivery since the beginning of the Covid-19 pandemic, there are only about 100 retailers where you can use SNAP benefits to pay for online grocery delivery today.
Forage, a 17-person San Francisco fintech startup founded in 2019, is trying to solve this problem with software that helps grocers accept online SNAP payments. The company has raised $22 million in Series A funding led by NYCA Partners. PayPal Ventures, EO Ventures and angel investors like Instacart founder Apoorv Mehta also invested, valuing Forage at around $100 million.
Three years ago, Anthony Grullon, who grew up in Paterson, New Jersey, receiving SNAP benefits, came up with the idea for a consumer-facing app that would provide low-income consumers with discounts on groceries. While a Wharton MBA student, he founded Forage with entrepreneur Justin Intal and software engineer Victor Fimbres. But in the summer of 2020, Grullon left Forage after being involved in a car accident, during a period when he struggled with mental health issues.
As Covid gripped the country and many Americans opted to get groceries delivered instead of going to the grocery store, Intal and Fimbres discovered a bigger problem than food discounts that needed solving: few merchants accepted SNAP payments for online delivery. They turned the business around, looking to become a kind of Stripe for SNAP payments. Intal left Forage in the spring of 2022 after deciding he wasn’t the right person to lead the company, while Fimbres stayed on as chief technology officer.
Around the same time, Ofek Lavian joined Forage and became its new CEO. Prior to Forage, Lavian was a consultant at Deloitte and led Instacart’s payments team. He grew Instacart’s payments group from five people to fifty and oversaw a project to enable grocers who partnered with Instacart for online delivery to accept SNAP payments. He saw firsthand how difficult it was, as it took Instacart nine months to complete the process for retailers like Aldi and Publix. As the grandson of two Holocaust survivor parents who grew up below the poverty line, Lavian, 29, says the SNAP project is his proudest Instacart accomplishment.
Forage relaunched in May 2022 with Laviano as CEO and partnered with e-commerce giant Shopify to enable Shopify merchants to accept SNAP payments. So far, Forage has acquired 30 customers, including discount grocery site Flashfood and grocery delivery site Farmstead.
There is a strong demand for online delivery among SNAP benefit recipients, says Jimmy Chen, an investor in Forage and CEO of Propel. Propel has a popular app called Providers that is used by five million SNAP beneficiaries and allows them to see their SNAP balance. “There’s a misconception that low-income Americans don’t have money, but they have tons of time—they just sit around doing nothing all day,” Chen says. “But over the years we’ve found that to be largely untrue … they don’t have as much time as they do money. And that’s because they’re running back and forth between two or three different part-time jobs, they have to pick up the kids, they’re in a single parent household.”
Today, few grocery stores accept online SNAP payments because they are difficult to set up. Payments made by the government go through its own Electronic Benefits Transfer (EBT) rails, which requires its own technical integration, and until 2019 EBT did not support any online payments. Payments giant Fiserv made online EBT payments available for the first time in 2020.
Another hurdle is that merchants must obtain separate government approval to accept online SNAP payments. The U.S. Department of Agriculture has strict rules that prohibit people from using SNAP benefits for anything but food, so grocers must go through the entire catalog and electronically label all their food items, making sure that cleaning supplies, toiletries and other non-food produce goods ineligible for SNAP payments.
Lavian says that with Forage’s software and knowledge of the regulatory approval process, the startup can get a retailer up and running accepting online SNAP payments in 90 days.
Forage’s business model is almost identical to Stripe’s – it charges a fee of 2.9% plus 30 cents per transaction. So far, it has processed less than $10 million in payments. Each year, the U.S. government pays out $120 billion in SNAP benefits, and Lavian expects Forage to process billions of dollars in transactions “over the next several years.”
As it launches, Forage faces a number of challenges. Low-income customers are more sensitive to the cost of shipping. Retailers may take longer than expected to receive government approval. And a bigger player like Stripe could enter the market.
Lavian believes that specializing in the SNAP payment niche will help Forage overcome those obstacles. “Our mission at Forage is to democratize access to government benefits,” he says. “This is our main focus.”
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