Brad Fabbri, chief science officer at technology and venture development firm TechAccel, goes through a checklist of points budding companies need to address in priority if they are to successfully raise money.
In the Silicon Valley, it’s common for a technology to launch before its use case becomes obvious. When a small start-up called Twitter first showed up at the SXSW conference in 2007, it was laughably unclear to many people why they would ever want to send 140-character messages out into the ether of the internet. Only two years later, the company’s value blossomed into a billion dollars, and the rest is unicorn history.
In 2013, the first agtech unicorn, Climate Corporation, was acquired by Monsanto for approximately $930 million. This acquisition stimulated a flood of early-stage investments in tech companies looking to apply their achievements in big-data analytics, machine learning and remote sensing to the challenges facing agriculture today. Yet there hasn’t been an exit on the scale of Climate Corporation’s in the four years since.
No agtech start-up can grow roots without demonstrating an in-depth understanding of who their target customers are, and what they really need. The problems and challenges that technology addresses need to be clearly articulated – starting at the inception of the company, and continuously as the company evolves.
What does it take to create a scalable agtech business that provides real value to the ag community? Here are key questions every agtech start-up should be able to address in their pitch:
1. Why does your technology matter?
Can you clearly articulate the problem that your start-up and its products are trying to solve? It isn’t sufficient to deliver a rundown of the different kinds of data your advanced components can produce and assume that the data will be of use to someone in some way. In agtech, you need to be in touch with actual customers to demonstrate the purpose of your technology – and why it matters. Many customers, and in particular farmers, are not receptive to complex methods that analyze and visualize data. They do not generally have the time or inclination to familiarize themselves with complicated information, and would rather look at simple, trustworthy dashboards that summarize their operation’s key metrics and suggest actionable recommendations.
2. Do you know your customer?
Who are your target customers? For instance, for a technology that purports to increase aspects of crop production efficiency, are you focused on the farmer, their trusted advisors or perhaps entities further up the value chain, such as crop aggregators or insurance companies? Each audience will have specific needs, as will growers of different crops.
Once you think you know who your target customer is, it is important to spend time talking to them and learning what their challenges are, what solutions they might be willing to pay for and what margins they might have. It is striking to learn from speaking with a number of agtech start-ups that they have spent little to no time speaking with, and learning from, their potential customers. Getting your boots muddy and understanding the needs of a particular agtech sector is critical, and these relationships can be leveraged when it is time to test the technology in the field.
3. What is the ROI?
Does your agtech solution deliver actionable information that will increase a farmer’s probability of sustainable success and profitability? Just because your company can use sensors, algorithms and/or imaging to deliver interesting information, how does it really matter? For instance, your app might be able to tell a farmer that their corn field could use additional nitrogen near pollination. But in most cases, the corn is too tall at this stage for the farmer to practically do anything with this recommendation for the current growing season. So, where is the value in this information?
If your company is purporting to advise farmers or other ag-industry customers, you have to be able to draw a clear line from insight to action, and from action to results in a timely and applicable manner. You need to demonstrate that the information and recommendations are valid and useful across the geographies and environments for which you are pitching the solution.
Agtech start-ups have raised $320 million in funding so far this year – more than three times the amount they’d collected at the same time in 2016. VCs and big ag-industry players agree tech has the potential to solve some of the most daunting challenges the industry faces. For agtech start-ups with ambitions of shaping the industry, a clearly articulated pitch demonstrating a valid and direct knowledge of the industry is critical.