Starting a business in AgTech - Oh Boy

September 16th, 2022 - My 18th Edition of Easy Observations in Ag Newsletter

Visit my website www.easyobservations.com for more info about me or follow me on LinkedIn and Twitter

Opening Thoughts:

So I had quite the week. It’s part of what I’m writing about this week, but also not. Anyway, I made it official and told people of my new business called Boundri which will deal with mapping and the printing of those maps on a variety of products from custom play rugs for kids to wall art and murals, booklets, magazines, and even puzzles. If you go to the website you’ll see more, but I also don’t want to showcase too much on here about that this week. Check it out if you’re curious and happy to talk more about it if you are inclined to do so. More to come there.

So, if you have or are about to start a business in AgTech then this edition is for you my friend. I don’t plan to complain on why one group did it wrong or that VCs are bad or anything as my meme might imply. I want to more go through the thought process and the options available from now to even the past. A lot has changed and while I do not know all situations, I can tell you I know the feeling, stress, and excitement around it all on a few different levels.

I also want to talk about some ideas and thoughts around where the AgTech world and its investors should maybe evolve towards. The old model was tough, the latest model is complex and doesn’t really fit, but there is I think some hybrid ways groups could try or attempt be it as the company itself or the investors involved.

To be or not to be in AgTech:

That is the question right as the old saying goes? I’ve said before that AgTech means many things and as I mentioned earlier I’m building a new company in Ag, but I’m not sure mine would be considered AgTech or not. Either way, the choice of wanting to create a company in the Ag industry in general is a complex one. You either have to really trust the idea that you are wanting to bring in that is new and scary or you’ve been in the industry and you want to help close a gap. Both can be true for the same group naturally.

I think there are a few key items one needs to consider when they are thinking about doing it and I’ll lay them out below:

• Do you (or other the founders) know anything about Agriculture?

• Does the idea you want to create actually fill a gap or is it reworking an old process?

• Why are you going into Ag?

• Where is the money coming from an how?

• If you are raising money, can your product create enough actual money to make payback for investors?

• Do you want a sustainable business or build to sell generally quick?

• Can your product be used by most in Ag or is it a niche?

• Will your product survive in a down Ag market?

• Are you B2C, B2B or both?

• If B2B, are you thinking smaller or bigger groups or purely corporate juggernauts?

I could likely put some more down but I’ll say this, if you can’t answer these questions honestly while still making sense then maybe you should rethink your thoughts. Look, Ag isn’t for everyone and it’s a weird industry especially the tech side. There just is so much nuance to it all and weird niches and cultures. Geography itself causes a slew of problems.

Now I’ll be honest too, it’s okay to start something without knowing all the answers too. Heck maybe you were dead set on not raising money, but then some group or person(s) came along and it just was too hard to say no. Things change and you’ll never know until you just do it and try it as well. This is very true in Ag I feel and it’s actually why many have pivoted or changed a lot regarding the product development or process. Ag is incredibly dynamic and can go from good to bad overnight.

Overall, I think creating a company in Ag and especially AgTech is not a simple as many have assumed. Sure, some groups came in being wildly optimistic, raised a bunch of money, shifted a few times, and are still around. Cool, let’s see what happens next I guess. Where I’m going though is if you were not caught in the more recent cycle of AgTech money shenanigans then I’ve got some ideas and thoughts around it.

Let’s back up for a second:

I’m going to try and showcase somewhat how any type of AgTech company had to deal with the Ag industry based on when and what they were trying to do. For the most part it’s more of a timing thing if you ask me so I’ll start there.

• Early days - 90s and early 2000s

  • I grew up in this time frame and I’ll say this, the industry was incredibly small at the time. Like everyone knew each other pretty well and saw each other all the time at meetings in person to pitch this company or that. It was sort of cutthroat to a point. What there wasn’t though was investors, social media, good internet, cloud storage, video conferencing, smart phones, cell signal, grants, incubators, and on an on. You literally had make something that made good money and support it out of literally nothing. You had to create something that no one has ever done almost. Wild wild west more or less.

• Better days - 2005-2012

  • This was an odd time, but one that showed promise. The internet was finally becoming more refined and computers were getting bigger and more user friendly plus cheaper. Farmers were becoming use to computers in the cab and at home so curiosity turned into reality. VRA was starting to grow finally and the large corporates were finally looking into other AgTech/Precision Ag businesses while paying decent money for contracts and R&D. Investment was still rare beyond private people, but bigger companies like the Corps and Ag Retailers saw the value and paid well. Software was still tough and little was still done on the web, but most understood the concepts and products at least.

• Current times - 2012-2022

  • As many have pointed out the Climate deal to Monsanto opened it all up for money, valuations, and investment. I agree and don’t honestly as I knew a few that were headed that way and even my own families company was starting back in 2010. It was new though regardless and shocked everyone. Moving on…smart phones, cloud storage, better internet, investment options, high evaluations, cheaper and easier tech, social media, better labor options abroad, money in Ag, and general positive press all brought on promise. Especially from 2012-2014 I’d say as Ag in general went through a high commodity price phase and almost everyone was making bank while needing to spend. Not much has changed in some way although there was a small lag from 15-18’, but it didn’t stop progression.

• Now and into the future - 2023 to WTF knows

  • I think we are about to see a large shift soon in AgTech in many different ways. Investors are getting tired or worried as some have lost big or are not seeing an out via the group selling off. Corps and even farmers are getting tired of the same old story and rhetoric of many in AgTech as the results and promises are not always playing out well. Heck, look at Farmers Edge stock. That should be enough to worry any investor unless the numbers are really sound and legit. Hype in AgTech is done and won’t work going forward. You need a real solution that will actually make money instead of just being a company that builds a cool thing that gets a bunch of users and sells. Some sort of hybrid model is needed. Some investment maybe, products/services that make ROI, more specific niche products, and concentration on customer satisfaction.

Where I’m going:

Basically, depending on when your AgTech company came to be is determining your future. Many of the earliest groups have been bought out already or merged in someway. Heck, many friends and colleagues of mine from the past are in this camp and for good reasons. They built a legit product without tons of odd investor pressure and created a network of valuable core products. The thing is many of those people are also retired or getting pretty close. It was a different time.

Many mid-00s are not too far off from the early guys too. Though I’ll say they maybe started off in the best time frame as they could learn from the past for the first time of any AgTech group and had an easier time to fill the gaps in the industry. My former employer AgIntegrated is a good example of this.

The current groups are in a state of flux unfortunately now I think. Many raised a lot of money and if they haven’t been bought by now for the many X valuations they were going for I don’t think they’ll get it unless the numbers are literally legit. 10x buyouts to revenue in AgTech is a tough play right now, but that is what many need according to investors. That is the issue, hyped assumptions has led to tough reality. So is there a better way for newer groups coming into the AgTech industry? Maybe.

What is next:

I do not have all the answers or perfect suggestions I’ll say that to start. What I think many in AgTech need to do now is really rethink what they are trying to do and what the industry actually wants. Not an easy task for sure, especially for groups that started in the last 10 years.

We need a sort of hybrid thought process here. I’m a business traditionalist in that I’d rather not have investment to start beyond my own money and build something out of that. Maybe work with a private smaller investor to start who knows stuff, the industry, and has connections too or a combination of both. One might need to stay away from these certain seed round or A round raises and be a little smaller to start within a certain niche or area.

Become really good at being small and efficient instead. Maybe you can create a really sustainable company by spending only a few 100k to get going. Maybe you can be more nimble when you aren’t tied to large and usually uneducated investors in Ag. Maybe you can start simple, tell your story in a more logical practical way while creating something that is more niche, regional, or just oddly different.

There is too much copying of general ideas in AgTech right now and I’ll say it is confusing the crap out of farmers and other businesses in Ag. They are becoming overwhelmed in the hearsay and promises. They just want something that is real, does what it is told, and makes basic ROI or fulfills at least something they want.

All in all, trying not to do the same old stuff others have done while keeping it very specific and unique. Focus on quality and not quantity. Don’t sell hype, but reality. Be small and efficient. Keep the product specific to the niches that actually need it. Overall, just be smarter about the reality in what you are creating. It doesn’t have to be or should be some big selloff payout play. That can happen, but try to build a smaller more sustainable product and story first. It’ll make it way easier to expand as clients see the fit better over time.

In closing:

Once again, starting a new business in any realm is tough and within Ag is even crazier to an extent. AgTech has had many shifts over the years and it won’t stop. What AgTech needs is a better thought process in why what is being provided even exists and how that came to be.

You can’t just create your own narrative in Agriculture. It’s slow and painful. We need better investors in it too. Ones that understand the nuance and timeframes plus the types of customers. It’s an odd bunch for sure in Ag, but many what better things to make their lives more efficient. AgTech is the answer in many ways to this.

What we in AgTech need to do is stop making something out of nothing and listen to what the industry actually needs. It is getting better, though we still are not there yet. While I’ve been in this industry it’s turned from a good ole boys group to a very sectionalized industry. That is good, but we could all talk to each other better as we used to which always seemed to help us all figure out the actually wants and needs.

More or less, it’s time to listen to the Ag industry better.

Thanks for reading Easy Observations! Please Share, Subscribe, and Comment if you would be so kind. I’d also be happy to get together and meet if you’d like to talk more in-depth about AgTech or Earth Observation in Ag. Feel free to contact me at my website. All the best!