Agriculture is ripe for disruption. But there are common challenges that agtech startups around the world, and along the supply chain, are facing. To create viable solutions that solve real problems in the industry, we must overcome several challenges, starting with these six.

Accessing customers is expensive

The agriculture market, especially at the farmgate level, is fragmented across several dimensions, making it challenging and expensive for startups to acquire customers.

For example, many farms lack the infrastructure needed to utilize digital technologies. Even in developed countries like the US and Australia, regional access to the internet is a limiting factor. For startups, this may mean having to develop additional features, like offline data storage, before customers can even use their products.

And it’s not just connectivity: farmers vary in their ‘readiness’ to adopt, including their financial ability, technological literacy, and awareness of technological potential. Agtech startups, therefore, need to segment their market not only by crop and geography, but also by basic customer ‘readiness’. This too may mean expensive product additions, such as additional onboarding or implementation support, or a temptation to build an overly simple product that cannot deliver sufficient value without becoming too complicated to use and remotely support.

Accessing agtech customers at scale is also a geographical challenge, made more difficult by the highly relationship-based and brick-and-mortar nature of the industry. Physical sales channels, from mom and pop retailers to field days and conferences, are still the trusted source of agricultural advice and products. Though social media (check out #agtwitter and #agchat if you haven’t) is rapidly connecting farmers and transforming how information is shared in agriculture, distribution networks are not yet digitized. For startups looking to expand globally, the challenge can be nearly insurmountable: to reach customers, startups must navigate entirely different distribution networks with new incumbents to win over (and, probably new cropping types and measurements systems to support in their product).

Finally, though agriculture is an innovative industry filled with intelligent and ambitious people, it remains a conservative industry. Agtech startups are finding that farmers are not trusting of things that come from outside their known network, and remain skeptical of new technologies that are ubiquitous outside of agriculture.

When combined, these factors make it incredibly challenging for agtech startups to define a customer persona and subsequent value proposition, let alone implement a scalable and cost effective acquisition strategy.

Agriculture is incredibly complex, and often unfamiliar to those outside the industry.

Existing industry players are not easy to work with

Though incumbent firms along the food and agri supply chain are under threat of disruption, and often appreciate the potential of innovation and entrepreneurship, they are not leading the way in finding mutually beneficial ways to collaborate with agtech startups.

Existing firms with longstanding success in agriculture often believe that their industry expertise, credibility, and (often) deep pockets will enable them to build novel solutions themselves. Even in the absence of tech, product management, and design expertise in house, firms are more inclined to outsource development to a contract agency (even one that lacks any kind of industry expertise), than to partner with an agtech startup who has already built a full or partial solution. Yet for large firms, going it alone is often a losing proposition: it is expensive, inefficient, and often entirely ineffective for the incumbent firm.

Corporate IP policies further inhibit collaboration with agtech startups. The existing model of funding for research and R&D is highly centered on IP ownership, so incumbent firms are often uncomfortable working collaboratively with startups in the absence of ownership provisions. And ownership provisions are all too often less than founder-friendly. Coming to a commercial agreement with existing industry players is a time consuming and expensive process in the best cases. In the worst cases, firms drag out the negotiations, burning precious startup cash as they learn enough about the startup to be able to duplicate — and compete with — their product.

Agtech startups, especially those with founders who do not come from the industry or have existing relationships with corporates, also struggle to find an effective supporter inside the firm. Agriculture is incredibly complex, and often unfamiliar to those outside the industry. Yet, startups need internal champions with both the clout to get things done, as well as the appreciation for the needs and constraints of startups (e.g., timeframes; budgets). Organizational hierarchies often do not incentivize internal champions, and leaders at the top of corporate org structures rarely have experience with (or empathy for) early-stage startups.

Trials are slow

The traditional model for innovation in agriculture leverages field trials, often through universities and corporate owned farms. But these trials are expensive and time consuming. Investors may not be willing to wait, given that the pace of technology development (especially software) is much faster than year-long iterations. In the worst cases, this can lead to a lack of rigor and scientific grounding in products, further preventing adoption and raising skepticism among farmers about agtech startup solutions.

Lack of government understanding

Agriculture is highly political around the world, and increasingly so as concerns over food security increase. Further, startups must understand and work within the boundaries of the industry’s distinct characteristics, such as regulatory implications that span across departments and borders, from food safety regulations to international trade laws.

Navigating these regulations- let alone changing or influencing them- can be an uphill battle for resource-constrained agtech startups.

Solving the myriad challenges in today’s food system presents an opportunity to make money and have a lasting positive impact.

Ag is not sexy

Solving the myriad challenges in today’s food system presents an opportunity to make money and have a lasting positive impact. Yet, agtech innovation still remains a niche space that has not captivated mainstream audiences, or entrepreneurs.

Part of the problem may be that innovation in agriculture can take longer than in other industries. Combined with relatively fewer exits to date, the B2B nature of the sector, and the lack of digitization, the opportunity cost for entrepreneurs is high: they could make more money, more quickly, in other sectors.

As a result, agtech startups struggle to attract and retain top talent. And though the experienced professionals within the industry- from farmers to agribusiness executives- may be able to help in some cases, all too often they have already developed a strong bias toward the status quo that they have helped to build, or lack the entrepreneurial skill set to execute a digital disruption gameplan.

Finding experienced/aligned/patient capital

In innovation hubs like silicon valley, the investors are former entrepreneurs who bring hard earned expertise, as well as connections and capital. Though these investors can indeed help agtech startups, they lack domain expertise and connections in the agriculture industry. For agtech startups, such domain expertise is scarce across the landscape of potential investors.

Agtech startups are feeling this pain as they watch investors, especially VCs, struggle to lead funding rounds because of the effort required to build a syndicate and to perform due diligence in an unfamiliar industry. VCs too are feeling the pain of slow growth curves and unfamiliar metrics stemming from slightly altered business models (e.g., onboarding costs; usage spikes and troughs around harvest cycles).

Patient capital, for example from family offices and high net-worth individuals, is one emerging solution; yet, these investors still face the same challenges around domain expertise. Dedicated agrifoodtech resources, like accelerators and incubators, are helping to de-risk early stage agtech startups for investors, but later stage agtech startups looking to raise a Series B or C still have relatively few options for experienced and aligned capital.

How can we solve the key challenges facing agtech startups?

There is no shortage of challenging, important, high potential problems to solve in agriculture. And though there is increasingly capital out there to support innovation along the agrifood supply chain, significant challenges remain for agtech startups.

I’d love to hear if the above resonates with you- have you fought an uphill battle as an agtech startup, or do you have a solution to propose?