To build or to buy. That’s the question agtech startups continually face when developing their technology offerings. Usually it’s a little of both, and that’s certainly the case for Israel-based farm management startup CropX.
The company has made several acquisitions over the last few years, including its most recent, precision irrigation startup Tule Technologies.
But as CEO Tomer Tzach tells AFN, there’s a balance between buying up technologies and building them in-house. Maintaining that balance is as much a part of the company’s M&A strategy as the companies it chooses to acquire.
CropX was founded in 2013 in New Zealand and also now operates offices Israel, the US and the Netherlands. Over the years, the company has grown from offering wireless sensors for irrigation management to a full-stack agronomic farm management system.
To date, the company has raised $25.6 million, including Series A and B rounds, both $10 million, from the likes of OurCrowd, Nebraska Angel Network, Finistere Ventures, Germin8 Ventures and many others. The company’s most recent funding came from a corporate round in 2022 from NEC Corporation.
A different kind of SPAC
Tzach calls irrigation tech the “bread and butter” of CropX. It’s what the company began with and what prompted the team to relocate headquarters to Israel, the latter being a major leader in irrigation development.
It follows, then, that CropX M&A activity to date has included multiple startups focused on water. In 2020, it acquired precision irrigation company CropMetrics from Nebraska in the US. Later that year, CropX also scooped up New Zealand-based smart irrigation firm Regen. (A third acquisition, of Dacom in 2021, focused on more general precision ag.)
Thanks to these acquisitions, the CropX system collects soil data as well as above-ground data on plants and offers insights and advice on irrigation, disease control, and nutrient management.
Tule’s technology adds a final layer to this system: real-time vertical transpiration data, otherwise known as data from the canopy level of a crop. Having this layer means CropX has data from the entire soil plant atmosphere continuum (SPAC) and can provide insights on water at all stages of its journey through the plant.
“We are the first and only company to have kind of all of this data collected in order to do better irrigation. So [Tule’s] technology was very complimentary,” says Tzach.
This more complete view of water usage comes as more agriculture companies are prioritizing water conservation in ESG goals and drought hampers crop growth globally.
Beyond irrigation
The statistics are well known by now: Agriculture accounts for 70% of water usage worldwide; about 40% of that is lost to the environment due to poor management and/or systems.
Yet farmers aren’t necessarily rushing to implement smart irrigation systems, according to Tzach. “In the United States, 70% [of crops] are rainfed. In Europe, 90% are rain-fed.”
Even farms that do irrigate may have lukewarm feelings around irrigation management. CropX discovered this firsthand when it tried to sell to some US farmers.
“The perceived value of irrigation management was not that high for most of them, for two reasons,” he says. “First, water is subsidized in many places across the globe. Farmers are not paying the true cost of water. Even if they do, when you look at the cost structure on the farm — labor, energy, fertilizer, etc. — even if you pay the full price, water is still not that expensive compared to other things.”
“Many farmers would rather just over-irrigate and not deal with the risk of potentially making a mistake.”
Tzach agrees this point will need to be addressed in far more depth as water conservation grows in importance.
To keep CropX growing in the meantime, the company has expanded into a kind of one-stop shop for agronomic management.
“We initially went into fertilizer management because, unlike irrigation, everybody uses fertilizer. Then we realized [farmers] need so much more: crop protection, seeding, pricing. They’re not going to use 15 different apps. So it made sense to become a full agronomic farm management system,” says Tzach.
“One-point solutions are never enough,” he adds.
For example, using fertilizer requires irrigating correctly, or the former gets washed away. The same goes for spraying and irrigating.
“It makes a lot of sense to combine all of these solutions together,” says Tzach. “When I look at the exits in this industry, the larger ones are never for the one-trick ponies. [Companies] that get to the hundreds of millions of dollars in valuation are always companies that have a broader solution.”
Many acquisitions, one platform
One way to get a broader farm management system is to build the pieces in-house. That’s wildly expensive for most companies, including CropX, which has instead opted to go the M&A route for many parts of its system.
“We did most of our learnings on CropMetrics, but we became better at [acquisitions],” he says. “Today, we know exactly what we’re looking for. We have a very well-defined strategy, both in terms of what we acquire and how we integrate it afterwards.”
Part of the CropX M&A strategy is that the team carefully integrates every single company it acquires. “We don’t want to become a holding company,” says Tzach.
An acquired company must be fully integrated into the CropX system before the company moves on to another deal. CropX integrates the teams, customers, back-end systems such as the CRM and databases. The technology must be fully integrated into the farm management platform.
“So we end up having one platform and not five or six or seven,” he says. “These people are going to become our partners and part of our management team. All of the founders are still on the management team, and still speaking very highly of their decision to merge with CropX.”
As a testament to how much the company has learned over the years, the Tule acquisition took less than four months. “I’m not aware of many multinationals with a dedicated M&A team able to move that fast.”
Another key selling point in the Tule deal is its presence in specialty crops in California. Tule has both technology and experience with vineyards, tree nuts, and orchards. CropX acquired with those things an automatic geographical footprint in California, which is ground zero for specialty crops in the US.
Latin America is another region on the CropX radar.
“I think a very good way to accelerate our presence in Latin America would be to acquire a company there,” he says, though he quickly points out the company would have to be relevant beyond just geography.
Augmenting organic growth
All of this, of course, is just one part of CropX.
“It’s a way to augment our organic growth and add to our platform quickly, but that comes in addition to our organic growth strategy,” says Tzach.
The latter is growing very quickly, too, he adds.
The company is close to having 100 employees, with roughly one-third of those on the R&D team. That includes hardware and software developers and those working on machine learning and data science, to name just a few areas.
“We have a very, very big team that’s developing solutions for agtech. So we have organic growth and internal development, and we have M&A that augments that. Both groups fuel one another.”
