Covid-19 has sent the startup world into a tailspin. Supply chain disruptions have threatened the supply of key components and ingredients and venture capital funds have signaled a pullback in activity with some startup valuations already dropping as much as 40%. And, looking further out, business growth predictions are increasingly uncertain as the ability for end-users to afford to invest in new tools and services will likely be impacted by the expected ensuing economic recession resulting from the pandemic.
Agtech startups’ ability to succeed through the pandemic is only as good as a farmers’ willingness to continue purchasing their products and services. The farming industry is dealing with its own set of problems from uncertainty in supply and demand to labor shortages to family needs and personal health.
“Everything in business is slowing down, and we are finding farmers to be less responsive right now too,” Hunter McDaniel, founder of greenhouse tech startup UbiQD, wrote to AFN. “Is it because they are busier, struggling, or worried about their own health? We don’t know. It’s hard to say that this has something to do with agtech specifically.”
Farmobile, which sells hardware to aggregate data coming off farm equipment and stores it for farmers to share with trusted advisors such as agronomists, or even sell to third parties through its data store, has noticed an uptick in demand for its hardware recently. While CEO Jason Tatge doesn’t believe the uptick is directly tied to Covid-19 but thinks farmers with a digital plan will be better positioned to handle the age of social distancing with no clear end in sight.
“In times of social distancing, there are some aspects of technology that will be more suitable than others. For instance, our technology is very low-touch and built for virtual data collection and sharing between farmers and trusted advisors. It removes the need for an agronomist to go out in-person to get a jump drive,” Tatge tells AFN. “And our File Transfer feature allows trusted advisors and ag retailers to send prescription files to-and-from a farmer’s equipment without ever physically touching systems. Even training someone to install a Farmobile PUC device on machines can be done in Facetime or via the phone.”
The good news for many agtech startups is that their target end-users provide an essential function: growing food. There will always be demand for food. Although there will surely be startup casualties on the other side of this pandemic, many are rising to the challenge and coming up with creative offerings.
Services that depend on advising or person-to-person contact are taking a virtual turn. AgriSync, a startup aiming to simplify communication between advisors and their farm customers, has launched a new remote advising service package for small teams of experts. Users can set up a team of three advisors for $100/month. The Iowa-based startup enables farmers to connect with their advisors live using video and other in-app workflow features in order to solve real-time problems as they occur.
Other companies are offering free products and services, discounts, or relief measures and support to their farmer clients facing this uncertain future.
Agribusiness marketplace and data platform Farmers Business Network launched four weeks of special offers to support farmers including up to 15% off chemicals and seeds. It’s also drawing attention to the ridiculously low-interest rates now available. And for every qualified loan application submitted to FBN’s loans business FBN Finance before April 20, 2020, FBN Finance will donate $100 to Farm Rescue to assist farm families whose ability to operate this farming season has been impacted by illness or injury.
Meanwhile, satellite crop monitoring startup EOS Crop Monitoring is offering free services amid Covid-19.
Labor shortages create new opportunities
As borders close and farmers, who typically rely on seasonal migrant workers coming into the US to work for them each season, have to contend with an even great labor shortage than before, the industry is paying additional attention to robotics and automation.
As Spring unfolds, many farms are ready for harvest but fear that their usual seasonal workforce won’t show up. Several pandemic-related factors like fears over spread of the virus, shelter-in-place orders, and changes in immigration policy to curtail travel are creating uncertainty over whether there will be enough workers to make harvest happen. The government already stopped processing applications for the H2A temporary agricultural worker visa program.
Find out how one farmer handled the change in regulations here.
Seasonal labor peaks on US farms during July but some farms are already feeling the impending sting of a reduced workforce. And for operations that are still harvesting in full force, concerns loom over whether adequate precautions and care are being taken to keep workers safe.
“If you are looking for a defensive sector in a global health pandemic, surprisingly it might be robotic farming,” Kyle Cobb, founder of strawberry harvesting robotics startup Advanced.Farm, told AFN. “We have heard from many grower partners, at least in the short term, that demand has gone up for fresh fruit and vegetables because people are home, eating together, and they want them in their diet.”
Cobb is careful to be sensitive to the personal aspects of the pandemic and thinks it’s too soon to talk about exploiting the company’s value proposition. For that reason, his company hasn’t engaged in any outbound marketing.
“For now, we are trying to serve customers in whatever way we can by working as many hours as we can. The beauty of robots is that in theory, they don’t need to stop working,” he says. “The labor challenge is not something new that our grower partners are having to deal with. This pandemic is a chance to develop really good lasting relationships with them and to serve them in a way that we haven’t before.”
Supply chain challenges
Food waste is another challenge that’s ramping up during Covid-19. With restaurants, universities, and corporate offices closed, many farmers are left without a buyer, meaning a lot of food is going to waste before it’s even left the farm. Redirecting food to grocery stores is not as simple as it sounds, as one farmer told my colleague Louisa Burwood-Taylor here.
Colorado-based Food Maven sells high-quality local, oversupplied, and imperfect food from distributors, manufacturers, and producers to restaurants and institutional kitchens at a significant discount through an online marketplace. With foodservice demand plummeting, the startup had to think differently about its route-to-market.
“The immediate impact of Covid-19 was a significant reduction of our hospitality and restaurant business,” Ben Deda, chief operating officer of Food Maven, wrote to AFN. “At the same time, we saw a big need in our communities for home grocery delivery because of shortages in the stores and individuals’ fears that they would not be able to get sufficient food in their home.”
To address food shortages, Food Maven decided to open its inventory to consumers for pickup and delivery as a way to reconcile this supply and demand issue. Within three days, it launched this new offering putting 2,000 products on offer including potatoes, eggs, and ground beef. Over 500 people signed up within the first week, according to Deda.
“We are still offering this bulk consumer grocery inventory at Warehouse.FoodMaven.com and customers are able to purchase their groceries online. FoodMaven is delivering to homes with an option to pick up at our warehouse. We will continue to iterate on this as we see our offerings being a solution to community needs.”
Restaurant & retail tech’s time to shine
But perhaps the biggest silver lining throughout the pandemic will fall in restaurant and food retail tech startup’s laps. Although many restaurants are facing serious financial pain and even permanent closures, some are staying afloat. As shelter-in-place orders require restaurants to close their dining rooms, many startups are pivoting to delivery and takeout formats to keep consumers engaged. QSRs are already well-poised to ride out this wave with many of them having robust digital offerings before the pandemic began.
Fast casual restaurants that rely more on in-house dining are struggling to keep up. Retail tech that doesn’t focus on delivery and takeout functions may take a similar hit, however. Restaurant management platform Toast cut half of its staff recently as its restaurant customers have seen the demand for reserving tables plummet.
Third-party delivery services like Grubhub, DoorDash, and Uber Eats are seeing an uptick in business but receiving backlash from some consumers and groups who claim the services should waive their commissions to help their restaurant partners cope with lost profits.
Some restaurant technology providers are already filling the new gaps that Covid-19 is creating. Restaurant reservation service OpenTable is now using its online platform to let consumers reserve times to shop at grocery stores to keep crowds under control and to help stores manage people flow. Toast, which recently raised a $400 million Series F in February at a near $5 billion valuation, is feeling the sting and seriously poor timing of restaurant closures. To adapt, it’s using a chunk of its new capital to offer free services to new and existing customers.
Meanwhile, a restaurant tech offering from Edinburgh called ePOS Hybrid, recently closed its first crowdfunding round via Crowdcube at £400,000. The company has been rolling out a digital hospitality management point of sale system that integrates and processes self-checkouts, as well as ordering via apps, or online, or even from “smart table” menus.
Resilience aside, the funding well may be running dry
While farmers are re-evaluating the role that technology may be able to play in helping them rapidly adapt to the new market, it may be some time before the innovation pipeline that brings them new ideas and tools to consider regains momentum.
“We are seeing significant disruption in the VC market. Term sheets are being pulled. Deals are being repriced. VCs are reassessing their investment strategy and capital reserves needed for their existing portfolio companies, particularly for those startups that were in the midst of a fundraise that blew up and now will require bridge funding,” Nolan Paul of Yamaha Motor Ventures told AFN.
For emerging startups, Covid-19 may feel like a death knell for their nascent businesses that depend on outside capital for growth. But YMV is taking an optimistic approach to Covid-19’s aftermath, trusting that the extreme pressure will create a few diamonds as some startups emerge leaner, more focused, and with less competition. In the immediate days ahead, however, he offers a timely reminder to control knee-jerk reactions and purely self-interested instincts.
“These are the times when reputations are made, for better and for worse. We’ve seen some egregious practices from a few investors. We’ve also seen some real grit and fight from entrepreneurs. We’re certainly taking note of both,” he adds. “At Yamaha Motor Ventures, we are still very much open for business and looking to deploy capital.”
But according to Tom Oswald, farmer host of the United Soybean Board’s Tech Toolshed and USB director, now is exactly the right time to invest in innovation. Alongside the Yield Lab Institute, USB is sponsoring the Soy Innovation Challenge, a non-dilutive startup accelerator program identifying innovative soybean value chain-based tools and supporting the most promising candidates with business and entrepreneurial network activity.
“I don’t see the pandemic limiting this challenge,” Oswald told AFN. “It may tweak it some but those who want to make a stand and engage will do it. If you encourage people to do what they are passionate about they will do it. Innovative people can’t help but be innovative and right now people may be constrained to their homes but they are facing fewer constraints elsewhere in their lives. I am looking at this from an opportunity standpoint.”
If necessity is the mother of invention, a global pandemic is sure to father an innovation boom
In addition to farmers driving demand for new technologies, several other stakeholders in the food system have a role to play in keeping agrifood tech afloat during and after the pandemic. VentureFuel, which works with organizations like the California Milk Advisory Board and corporations like Pepsi and Anheuser Busch, is all about driving progress through innovation.
CEO Fred Schoenberg sees a few silver linings amid the pandemic’s devastation.
“It’s woken up a lot of people to the fact that they need to adapt, try new things, and explore different ways of delivering their products. It’s a wake-up call that the future here and it’s no longer incremental,” Schoenberg told AFN. “Within chaos is opportunity and I think the smartest companies are stepping up and pushing things forward.”
A prime example he gives is grocery e-commerce. As the entire country is considering shopping for food online, certain fears about having a stranger handle their produce or receiving substitutions seem less imposing compared to potentially contracting Covid-19 at the store. As some skeptical consumers are forced to pilot grocery e-commerce, they may eventually convert to steadfast users in the post-pandemic world.
Companies that operate with a local focus are also well-poised to weather the pandemic as consumers run into shortages at big-box retailers or look to reduce the number of hands that touch the products they consume.
And in the most optimistic light, Schoenberg even posits the unthinkable:
“I think if the pandemic stays as disruptive as it is now startups will pop up left and right. Startups exist because someone sees a problem that they don’t feel is being solved properly in the marketplace and they risk their livelihood to solve that problem,” he says. “And the fact that it’s so disruptive means that larger corporates will have to move. They can’t sit back and wait two years for R&D to make suggestions. They will be ready to embrace people out there making results.”
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