In the past decade, investment in agtech has increased exponentially. During a session on the outlook for ag investing at World Agri-Tech earlier this spring, some of the key takeaways really reinforced concepts we commonly see when working with start-ups in the agriculture industry:
- The adoption curve for agricultural products and services are much longer than other industries.
- Taking a top-down approach, focusing on consumer wants and sustainability first versus a bottom-up approach, usually doesn’t work. Farmers won’t adopt products or services if they don’t see the value. A great example is farmers’ hesitation to participate in the carbon market.
- Importance of the problem—is the problem being solved by the product or service a high priority to the farmer? If not, it’s not going to catch on.
- Over-excitement in the early stages results in less focus on later-stage activities such as commercialization and scale.
Often, we see that many start-ups in the agriculture industry miss the mark because they don’t take the time to understand their customer and pain points fully—or they wait too far into the process to discover that information. Don’t just focus on the technology and innovation—startups must focus equally on the customer.
Investors also have specific factors they’re looking for in an agricultural start-up company, such as:
- Profitable growth rather than growth at any cost.
- Significant customer acquisition in a short period of time, which signals a good product/market fit.
- Clear value proposition and delineation of who is paying for the innovation.
We have a few insights we’d like to add to these points based on our long experience in working with agricultural start-ups.
The agriculture industry is unique compared to other, more consumer-driven industries. This means start-up companies that want to provide products or services to farmers must think differently and approach farmers in a way that resonates with their unique needs and motivations.
Here are some things startups should keep in mind when approaching the farmer audience:
Farmers run their operations like a business. Modern operations are specialized in producing one product, livestock species, or segment of their respective niche (such as seedstock cattle producers). Farmers make decisions about their operation from a business perspective—how is that decision going to affect their bottom line?
Farmers must be very sophisticated in how they process how making one change in their business will affect their operation. For example, one small change may mean additional adjustments needed for any on-farm processing, labor needs on the farm, what type of equipment is needed and how it’s used, and more. Any potential product or service must bring a positive benefit or efficiency to that farming operation, or it’s just seen as a complication to the entire system
Every farming operation is different. No two farms are the same, so it’s critical to understand the psychology of how farmers make decisions and accept that their priorities are different. As farms consolidate and get bigger, efficiency is critical, but that also varies depending on the size of the operation. For example, a grower with 1,500 acres may want to focus on improving yield, but a grower with 4,000 acres may want to optimize and create more efficiencies and be more sophisticated in their approach. The perceived value and simplicity of any potential product or service must be front and center in any messaging and positioning.
Farmers are a skeptical bunch. By their very nature, most rural residents, including farmers, are more conservative and risk-averse. In the last decade, there have been many promises made to farmers—by politicians, companies, consumers, etc. Especially in the ag tech space, there were a lot of “silver bullets” that fell short, resulting in a lack of trust from farmers. Many farmers ask, “The way I’ve been farming has worked for 50 years—why should I rock the boat?” The average U.S. farmer is a 57-year-old white male, so invest in market research to learn more about that demographic.
Farmers won’t jump into things quickly. There are rare exceptions, but for the most part, any new product or approach farmers choose to implement on their acres will be done in a small portion of those acres first. The crop-growing cycle is a full year, so product or service adoption is much slower. If the new product is successful during that first growing season, then the next year, the farmer may expand to more acres before using the product on all their acres in the third year. On average, it takes three years for most farmers to use a new product on 100 percent of their acres. Farmers also value diversity in their operations to mitigate risk, so it’s important to recognize that it is rare that a farmer will use a product or service on 100% of their acres.
When working with farmer audiences, this is just the beginning. If your startup is looking for strategic guidance from experts with deep agriculture experience to achieve growth, contact 9 North Group today.