There are plenty of new products and gadgets on the market for farmers to try, but sometimes the risk isn’t worth the potential reward. One US startup is hoping a data-backed warranty will change that.
“There are a lot of issues that farmers deal with every day like grain marketing, land access, and agronomy. But two that haven’t been capturing much attention have been access to capital and risk mitigation. We are hoping to bring some of the fintech tools and techniques that are being applied to the mortgage and student loan industries to agriculture in hopes of creating economic incentives for farmers to change their behavior,” Dan Cosgrove, CEO of Growers Edge, tells AFN.
Bunge Ventures, the VC arm of global agribusiness and food company Bunge, also joined the round – offering Johnston, Iowa-based Growers Edge a potential avenue into overseas expansion.
“Anytime you have a strategic investor like Bunge or Cox they bring a level of professionalism and rigor to the board that is typically very welcome in a startup environment,” Cosgrove says.
Media-oriented Cox is “very interested in food and ag,” he adds. “They have a good level of concern about sustainability and doing the right things for the environment.”
The bulk of the fundraising effort took place before the pandemic hit, according to Cosgrove, putting the startup in a good position to weather the financial uncertainty ahead.
The funding will mainly be used to build out its data analysis efforts. Growers Edge works primarily with ag retailers and product manufacturers to crunch their data and combine it with in-house analytics. The startup then produces a crop plan that is backed by a warranty.
Growers Edge is product agnostic and open to working with any company on developing a data-backed warranty program. This could be an attractive proposition for other agritech startups that are eager to get their products into farmers’ hands and begin generating some sales traction.
“If the farmer follows our plan, which typically includes purchasing inputs from those ag retailers, they will not fall below the yield threshold we’ve indicated. But if they do, we write them a payment for that miss,” Cosgrove explains.
“If they exceed the yield threshold, then they get to keep the upside. We see that farmers spend more money per acre if it is a company with a plan that has a warranty behind it.”
The financial security that Growers Edge offers could help tip the scales towards adoption of tech-based solutions, which has remained one of the biggest challenges to scalability for many agritech startups. Last month, it announced a partnership with field intelligence firm Arva Intelligence to create a proprietary ag input warranty program for growers in Arva’s network.
More farmers could see the appeal of this kind of financial safety net during the Covid-19 pandemic and the uncertain market it brings. Cutting costs may mean buying fewer inputs, opting for cheaper ones, or waiting to try out new technologies.
So far, Cosgrove does not believe that Growers Edge has seen an impact from Covid-19.
“Farmers don’t get to do too much of their job from their basement like other people do,” he says. “What is clear is that it’s always a good message for input providers and retailers to say they are in it with their customers. We are trying to prove to these companies that there is a way they can work with customers to allow them to experiment, buy some newer products, or premium-branded products. We don’t want farmers to stop buying the best inputs in a tight economy.”
Ag fintech startups make up a small yet growing segment of the broader agrifoodtech ecosystem. Minneapolis-based farm management software platform Conservis has evolved into a fintech platform since launching in 2009. Others — like the UK’s Stable, which helps farmers, traders, and insurers manage food price risk — have entered the game with finanical services in mind. In 2017, the Australian government backed Agrihive, a fintech startup aimed at increasing farmer net wealth.
In emerging markets, startups aimed at boosting smallholder farmers’ access to capital and other financial services are increasingly securing VC investment.
India’s DeHaat [disclosure: DeHaat has received investment from AgFunder, which is AFN‘s parent company] recently raised $12 million in a Sequoia Capital-led round for its “full-stack agricultural services” platform which helps smallholders to buy inputs, access financial services, and sell their produce.
Last month, fellow Indian outfit Jai Kisan banked $3.94 million in pre-Series A funding. It’s deploying a point-of-sale network throughout rural India to make insurance and loans more accessible to smallholders.