Here’s a brutal truth: too many agtech founders think great tech is the whole game. It’s not.
After watching hundreds of startups succeed and fail, I’ve noticed a pattern: value in agtech comes in three distinct phases. The companies that win don’t just build breakthrough tech—they learn how to navigate the messy transitions between identifying value, creating it in-market, and actually getting paid.
The others? They stall out. Sometimes spectacularly.
Most founders live in “value identification.” Here, innovation drives success. Technology is great at finding efficiencies– better, faster, cheaper ways of achieving an outcome.
Satellites and big data provide new crop insights. Modular bioreactors can use algae or bacteria to produce inputs and ingredients. It’s exciting, tangible, and intellectually rewarding.
But it’s also a trap.
When your prototype delivers perfect results in the lab or pilot field, it’s easy to believe you’ve made it. That rush of validation—the dopamine hit from working tech and great pilot data—can cloud what comes next.
A breakthrough technology that clearly demonstrates value in controlled conditions marks the end of Phase 1. But many founders make a critical mistake in assuming that proven value automatically translates to market success.
Remember Webvan? Perfect technology, wrong time.
Or Google Glass? Revolutionary product, tone-deaf market fit.
Unfortunately, many agtech products are no different.
For value to actually be created, products must move from objective (“it works”) to subjective (“I like it”). And others have to agree– not just a few tech-forward early adopters, but a significant segment of a connected, prospective customer pipeline. Where Phase 1 is about technology and execution, Phase 2 is about market conditions, macroeconomics, and shifting public sentiment.
Advanced satellites and well-trained models can identify how a farmer might save water by irrigating less. But if water is effectively free and crop prices are high, try convincing a farmer to pay for water efficiency. The math simply won't work - until government policy or market pressures change the equation.
More technological advancement won't change those settings, so what can companies do?
Faced with the conundrum of a product that works but very few customers who are willing to pay, startups often lower their prices, thinking that price is the barrier to acceptance. In reality, this sends the opposite signal: it reinforces the lack of value creation and greatly harms the company in terms of future prosperity.
Instead, smart agtech companies anticipate this challenge by:
Think of value creation like farming– you can have the best seeds in the world, but if the conditions aren't right, nothing grows.
Even if the market recognizes that value has been created, there's still one final challenge: capturing it. There’s no point creating value for others if your startup can’t claim a fair share—especially in today’s market. Value capture is what drives positive unit economics and long-term viability.
Want to know why most agtech startups struggle with revenue? They're trying to harvest value from the wrong field.
Success in value capture always comes down to business model design. Agricultural value chains are complex. Where value is identified isn’t always where it’s created—and it’s rarely where it can be captured. We’ve said before: the user is often not the beneficiary.
Often, downstream players in the value chain benefit far more than the farmers who actually generate the data or change the practice. Think carbon credits: the real value isn’t in the practice change—it’s in the verified outcome that corporations are willing to pay for. And because ag value chains are asymmetric, small upstream changes often accrue to concentrated downstream gains.
To design a business model that truly captures value, agtech companies must answer three key questions:
Here’s the question that kills most agtech business models: Are you capturing value from the people who benefit most from your solution—or just from the people who use it?
The companies that thrive are the ones that build with all three phases in mind. They understand that identifying value through technology is just the beginning. The real work lies in navigating the messy transitions—from identification to creation, and from creation to capture—within the complex reality of agricultural markets.
Miss those transitions, and you’ll join the graveyard of great technologies that never found their market.