Earlier this year, Renée Vassilos, Ag Economist and AgThentic Collaborator, and I set out on a ten day, whirlwind trip through the U.S. midwest. Across Nebraska, Iowa, Missouri, and Kansas we spoke with over 60 farmers, agronomists, extension agents, researchers, entrepreneurs, investors, co-ops, seed companies, equipment dealerships, and consultants all working at the intersection of ag and agtech. Our conversations ranged across topics and industries, providing insights as well as raising questions. We’ve been summarizing our insights in a series of posts- you can see the first two here and here.
Technology is not new to agriculture and it’s increasingly clear that technologies, whether electro-mechanical, digital, or biological, are rapidly changing agriculture. But is agtech really a topic of conversation outside of the startup community? Do farmers, vets, seed companies, coops, and agronomists use the word “agtech”?
In asking about the hype vs. reality, we wanted to hear the “other side” of the story- what are farmers, veterinarians, and agronomists saying that agtech entrepreneurs and investors might not be hearing. What we found are five challenges. Five areas for improvement for the agtech community as we seek to bridge the gap between the agriculture industry and the tech and investment communities. And with each, implications and opportunities for both the ag and agtech communities in overcoming them.
Oh and don’t worry: data management, connectivity, and interoperability, remain critical despite not making this list!
For agtech entrepreneurs, finding farmers as customers is a high priority. Investors want to see evidence of traction, and entrepreneurs want to get validation- in the form of revenue- that their solution is valuable.
However, farmers as customers is not the only pathway for engagement, especially in the early days. And in fact, many farmers are getting tired of, as one farmer explained it, “a new sales guy calling me or showing up every week with a new product that I have no interest in, and that’s not even fully developed.”
Of course early customer engagement and best practices of entrepreneurship, like building and testing a Minimum Viable Product (MVP) are critically important, there are other options for working with farmers. Bigger farms especially are keen to get involved earlier in the design and development process, for example as investors, advisors, and/or subject matter experts. Farmers can be much more than customers, and entrepreneurs need to be creative in how and when they start working with farmers.
As a related point, entrepreneurs need to understand their target audience. We collected the following three tips for agtech entrepreneurs:
Precision agriculture (PA) is supposed to enable farmers to move from field-level to plant-level precision. Though PA is increasingly being adopted- or at least explored- by many farmers, this has not yet come to fruition. Agtech, with advanced algorithms and more data, promises to bring us closer to this reality. But, not all farmers are thrilled about the currently available solutions, for a multitude of reasons.
One reason is the lack of digital farm management solutions that integrate with their accounting software. As one farmer told us, “It’s hard or even impossible to know the ROI on some of these [farm management] tools, when we can’t connect them to our financial systems….we literally don’t know if they’re helping us make decisions that save money.”
This is driving some (mostly larger) farmers toward less precision rather than more. Rather than field-by-field or plant-by-plant, where the total financial impact cannot be quantified, they are looking to optimize decision making for their entire operation. Scenario planning across larger farmers is an unsolved challenge. What-if analyses and playing out crisis management scenarios on paper is nearly impossible, and the tools are not yet hitting the mark.
“I get in the scenario where the tool is telling me to do something that wasn’t in our plan, but it’s not giving me any support to see how that decision will impact everything we’ve planned and budgeted for” — Iowa grain farmer
We heard this, or something like it, many times on our trip. Farmers are getting fatigued of being sold the same products over and over. Soil moisture probes and management software are particular culprits.
Yet, meanwhile, big problems are not being solved. The most common problems we heard, that farmers feel are *not* currently being well-addressed by agtech, are:
For aspiring and current entrepreneurs, there are huge opportunities in agriculture! But, beware of being a “me too” company; instead, get out there and understand the real problems. There are plenty of them!
Farmers are not getting high quality, impartial information from previously trusted sources, such as industry organizations and extension. Even more, these organizations are not usually focused on agtech solutions, especially hardware and software products.
Combined with a general shift in how farmers are getting information- from magazines and coops, to social media, podcasts, and blogs- we’re seeing confusion and frustration directed toward the agtech sector.
Some agtech companies are getting this right, though. Farmers Business Network (FBN), for example, was by far the most mentioned agtech company on our trip. In addition to a strong value proposition around price transparency (especially for smaller operations that cannot negotiate competitive prices on their own) , FBN is investing heavily in their brand and in building a community of farmers who are interested in technology. Thinking they might be well known only in tech circles because of how much money they’ve raised, we were surprised to hear that pretty much everyone had heard of them, and the vast majority of farmers we talked to have signed up as paying customers to have a look at what’s on offer.
For other agtech startups, even those with smaller budgets, investing in building a brand that’s easily recognized and trusted within the agriculture community is critical, and digital channels offer a cost-effective way to do this. Farmers are very much online, and many are keen to hear about emerging technologies and businesses.
The cropping industry especially is getting a lot of technology, but is this technology actually being used or adding value? Many people we talked to explained that relatively high adoption of technology is likely due more to the fact that it is embedded in equipment, and farmers are accustomed to purchasing new equipment regularly, rather than that it’s adding value.
This may actually be having a perverse effect, as there’s increasing frustration from farmers about paying more for equipment when it’s not adding more value. According to one farmer, “We’re getting more technology that’s not useful….it’s not helpful to move from a $400k tractor to a $500k tractor, when all it has is a bit more tech…[equipment companies] really aren’t doing what’s best for the farmer.” Another elaborated that, “a lot of people have wasted a lot of money on a lot of tech that’s doing a whole lot of nothing for them.”
Even if farmers have new technologies through equipment, they are often not getting value. “Many people own the hardware with the flashy tech, but they’re not using the data…I know I turned [my VRT] off because it kept changing rates, so I wanted to do it manually, until I realized that was what it was supposed to be doing…some haven’t figured this out yet,” one farmer explained.
Livestock, in contrast, is not getting as much attention as cropping. There are, however, big problems to be solved and this presents an exciting opportunity for the agtech community. One tactic we saw a lot throughout our trip was entrepreneurs leveraging the lucrative companion animal industry as a pathway into livestock. The companion animal industry is attractive as consumers spend more per animal (often an “emotional spend”), and because there are fewer regulations (they don’t end up on our plates).
Aspiring agtech entrepreneurs need to look for the whitespace, and there’s still plenty of it out there.
We hope you find it as valuable as we have to dig into tough questions with the people and businesses at the intersection of ag and agtech. We’d love to hear your thoughts on what we’ve learned. We have one final post to share…stay tuned!
Tenacious Ventures Management Pty Ltd (CAR 001275760), Tenacious Ventures Management Partnership, LP (CAR 001298484), Tenacious Ventures Fund II Management Partnership, LP (CAR 001298483), and Tenacious Ventures Fund II Staple Co Pty Ltd (CAR 001298487) are Corporate Authorised Representatives of Sandford Capital Pty Ltd (ABN 82 600 590 887), Australian Financial Services Licence No 461981, and are authorised to provide advisory and dealing in connection with investments to wholesale clients only.