Agtech startups globally, and their respective investors, are no stranger to the fact that getting your technology adopted and paid for by farmers is a challenge.
While many startups claim to have their technologies deployed across thousands or even millions of acres worldwide, this is usually “soft adoption” where farmers are paying deeply discounted rates, or testing free beta versions.
“An important distinction exists between exploratory use and true enterprise adoption and integration,” reads a whitepaper released today entitled Beyond the Hype: How Agricultural Technology Wins Customers and Creates Value. “Some farmers are also exploring several offerings in parallel during a trial phase.”
Written by Jonah Kolb, vice president at farm management group Moore & Warner, and Arne Duss, founder and CEO of HighPath Consulting, the whitepaper explores this adoption gap, offering insights into the sector’s limitations, and suggestions on how agtech startups can improve their chances with farmers.
Kolb and Duss list four main reasons for limited agtech adoption:
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- Falling farm incomes: the USDA forecasted that 2015 farm incomes were down 36% from 2014, making them the lowest farm since 2006.
- Low incentive: many US farms are owned by their operators, meaning there is little need to deliver market-rate returns to investors, making adoption of yield-enhancing tech slow.
- Risk appetite: with 62% of US farmers nearing retirement age, there is less appetite for systems upgrades.
- Growing season: a single growing season in much of the US reduces adoption opportunities and the number of potential technology iterations each year.
A lack of understanding of the agriculture industry among entrepreneurs is another limiting factor, and something venture capital investors active in the space often highlight.
“The most common mistake is not spending enough time and energy to truly understand ag,” Duss tells AgFunderNews. “We see a real lack of sufficient industry knowledge present at both the start-up and investor level. How does ag work? What actually drives farmer adoption behavior? That lack of knowledge can manifest itself in products that miss the mark, or business models with unrealistic assumptions.”
So what do agtech startups need to do to improve their chances of adoption? Kolb and Duss have six suggestions:
1. Justify the value added by agtech products to cost-conscious customers in a downturn. Proving economic feasibility and ROI are critical, as is providing the price points that make products accessible to the diversity of farmers in the early majority.
This is the most essential point to address, argues Kolb. “For the pragmatic purchaser there is little motivation from novelty: products that don’t have a clear answer are DOA – dead on arrival.”
2. Demonstrate efficacy through independent scientific studies that confirm agronomic feasibility and marketed impact. Not enough new technologies consider potential risk-sharing models — if a product works, why not verify and profit-share the benefits to hesitant adopters?
“We’re seeing some innovative crop input/optimization companies willing to do side-by-side trials that share the risk,” says Kolb. “No cost to the operator up-front, but if the product succeeds versus the control, the farmer and company split the proceeds.”
3. Align distribution of agtech products to the way farm inputs are marketed to farmers today: through trusted relationship models. Trying to disintermediate established distribution channels may take a long time.
4. Target a niche market to build initial market share and establish a beach head. As Moore suggests, “concentrate an overwhelmingly superior force on a highly focused target.” Too many initial, unfocused, and unsupported roll-outs can create significant reputational problems.
5. Emphasize ease of use and systems compatibility. The farm technology purchaser is not only a farmer, but also an equipment mechanic, truck driver, crop marketer, crop scout, drone pilot, and agronomist. Embedded technology and products that are an ecosystem fit will gain traction more quickly with time-strapped farmers.
What examples do Kolb and Duss have of successfully integrated ag technologies? “Our farmers running Precision Planting emailing us planting maps from the tractor cab with a few taps on the tablet – that’s ease of use. Farmers Business Network connecting to MyJohnDeere and auto-populating crop /field records – that’s systems compatibility.
6. Match business and technology goals to crop seasonality. Product roll-outs need to match farm operations. “Harvest preparation tips” three weeks into harvest reinforces the stereotype of Silicon Valley tech having no idea what’s happening in the field. The rapid innovation of the lean start-up model doesn’t always match an industry where some choices and information only come once a year: being right can sometimes be much more important than being early.
“Agtech is truly a marathon, not a sprint,” reads the report.
Are there any startups successfully following all of the above?
“No. There are some who might be close, and even more who aren’t on our radar because they’re focused on very niche markets,” says Duss. “You have to have efficacy and ROI, but it’s not absolutely necessary that companies do everything right all at once… but it is important to have enough of these elements to keep up the forward momentum.”
Kolb adds: “Some start-ups definitely “get it.” But there are others that simply don’t understand the gaffes they are making in the ag community, and don’t realize how that creates reputational problems, which then creates adoption problems. Those stumbles tell me some companies haven’t spent enough time understanding the end customer and/or haven’t made enough effort to add staff, advisors, and board members with sufficient ag background.”
Despite all these clear challenges, Kolb and Duss are very optimistic about the future for agtech and emphasize its clear benefits to farmers in the report.