Farmers Edge, the Canadian ag big data company, has raised C$58 million ($41 million) in equity funding from existing investors. This takes the company’s total fundraising activities to $60 million, according to Wade Barnes, CEO of Farmers Edge.
Farmers Edge is one of a growing number of big data players in the agriculture sector, offering farmers precision agriculture tools to help them make daily farm management decisions such as when to apply inputs. It’s also arguably one of the more established companies in this field after first launching in Canada in 2005.
Mitsui & Co, the Japanese trading house, Kleiner Perkins Caufield & Byers, the venture capital firm, and Osmington Inc, the Canadian real estate house, all contributed to the round. Early stage Canadian VC Avrio Capital, which contributed to the company’s earlier rounds, did not increase its commitment.
This is the company’s fourth fundraising round since November 2014’s Series B round with Kleiner Perkins. Mitsui & Co first invested in June 2015 and Osmington invested in August 2015 in undisclosed rounds of funding, although Barnes revealed to AgFunderNews that Mitsui has now invested a total of $22.5 million.
Farmers Edge will use the new funding for global expansion into South America, Australia, and Eastern Europe. It will also increase the size of its data science team and fund new product development. A general manager from Mitsui & Co’s IT platform division will join the board.
“The next component of our strategy is to deliver on our promise around data analytics,” Barnes told AgFunderNews. “After the farmer signs up, we need to give him a ‘so-what?’ Our sweet spot is our ability to operate in data sparse environments. In data-rich places like Illinois, where there are a huge amount of public weather stations and some detailed soils information, you can aggregate a lot of that and give farmers some pretty solid predictive models. But when you move away to regions like the Matto Grosso it’s a lot more difficult to access data, and that’s where we shine.”
Farmers Edge has already successfully expanded outside of its home market of Canada across several US states. And it’s even picked up clients in the Matto Grosso region of Brazil and New South Wales in Australia; earlier this month it announced a tie-up with Australian input supplier Delta Agribusiness.
There are a lot of upfront costs in taking on a new client as it involves “digitalizing the farm”, according to Barnes. This includes installing a weather station for every 2,500 acres and connecting Farmers Edge sensors — dubbed the CanPlug — to farm machinery.
The data collected by these devices is then run through Farmers Edge’s agronomic algorithms to produce yield predictions and to help farmers make everyday decisions about managing their farm.
Farmers Edge brought the technology behind these sensors in-house when it acquired Crop Ventures and the Farm Command and Land Command product line in 2014. Farmers Edge has now produced several iterations of the device. The weather stations are predominantly made by Davis Instruments, but Farmers Edge is likely to find other suppliers in new geographies, according to Barnes.
“We don’t consider the weather proprietary as long as we’re collecting what we want. We plan to have the largest private weather station network in the world,” he said.
The cost of installing all this hardware is spread across a four-year contract for farmers at $3.95 an acre, so in the first few years Farmers Edge bears the brunt of the upfront costs, but this does not phase Barnes; it’s an essential investment to ensure the best data is collected.
“We think the winners and losers in the whole ag decision support game will be dependent on how accurate the predictive models are going to be, and it’s the data that are going in that will make them accurate,” he said. “If you can’t ensure it’s the best data, the predictive model will be weak. So we consider it an investment; once we add our analytics to the data collected, our outcome will be better than most.”
“We believe that if a farmer gets a bad recommendation from [a decision support software], it won’t be that the model is broken or wrong; it will be that the type of data collected does not represent the field well enough,” he added.
If customers do not keep their subscription after the initial four year period, Farmers Edge will take away the equipment and implement it elsewhere. But maintaining long-term clients is certainly part of the strategy and the means to which Farmers Edge will get value from that initial hardware investment, argued Barnes.
By the end of 2016, Farmers Edge hopes to have revenues of more than $20 million, and while Barnes doesn’t see a huge amount of funding necessary in the future, global growth will inevitably be costly due to the hardware requirements.
The company touched around 600,000 acres in July 2014 and now has a target to reach 4 million by this July. This is where Mitsui & Co will be instrumental, according to Barnes.
“They have a fairly strong reach into emerging markets like Brazil, and they are really helpful in connecting us to farms and industry players in these markets, as well as in Australia and Eastern Europe,” he said. “Mitsui is also very focused on the technology development side of things and is helping us to create partnerships with other tech groups; they’re great in connecting the dots.”
Does Barnes see the hardware always being a component of Farmers Edge’s offering? No, but until he can collect the best data another way, it’s their only option.
Have news or tips? Email Media@AgFunderNews.com