A global pandemic may be making it more difficult for farms to do business, but Iowa-based startup Tractor Zoom is hoping to keep equipment pricing transparent so that farmers can still get the job done.
“In the second quarter [of this year] people were hesitant. We tracked the auction market very closely and naturally there was a supply and demand issue,” Tractor Zoom president and CEO Kyle McMahon told AFN.
“The supply contracted because of Covid-19 and crowd restrictions at auctions, and the auction companies learned how to go online. So a lot of this inventory is selling online through auction and that brought the inventory back.”
The auction marketing and equipment pricing company closed a $3 million venture round recently with the goal of scaling its separate “transparent” pricing and analytics platform, Iron Comps. The funding will also be used to add four new hires to its current team of 12.
Innova Memphis, Hyde Park Angels, Iowa Corn Opportunities, ISA Ventures, Ag Ventures Alliance, Ag Startup Engine, and a number of strategic angel investors participated in the round. To date, Tractor Zoom has raised over $6 million.
Iron Comps tracks used equipment transactions and provides price transparency for used farm equipment. It offers real-time comparisons that can make it easier for buyers and sellers to arrive at a price as markets fluctuate.
On Tractor Zoom’s eponymous platform, meanwhile, farmers can enter the exact make and model of equipment that they are looking for and can find auctions where they might be able to buy the equipment. The platform is monetized through traditional ad buys, primarily coming from banks and insurance companies.
To date, Tractor Zoom has partnered with over 450 auction companies to market over 6,300 farm equipment auctions to an audience of over 225,000 buyers across the US.
“Our business is really valuing machinery. We advertise equipment on Tractor Zoom, but our business is our Iron Comps product, which we think of as the Kelley Blue Book for heavy equipment,” McMahon said.
He stumbled across the idea for Tractor Zoom when trying to purchase equipment for his own farm while also working for a private equity farmland fund that sent him to over 1,000 auctions in four years. Overwhelmed with the inefficient system, he set out to make a one-stop-shop for finding farm equipment.
Pricing in a pandemic
Iron Comps was put to the test during the past year as Covid-19 and its tumultuous impact on the commodities market left many buyers and sellers scratching their heads.
“This year is extremely volatile. People are wanting or needing to upgrade,” McMahon said. “Equipment prices were going up and down as new news was coming out and net farm income was changing.”
But the volatility is good for Iron Comps because it offers equipment dealers a beacon of clarity amid the churning tides, he added.
“During the second quarter, everyone thought nobody would be buying equipment. The dealers said, ‘We need to figure out what’s going on with machinery prices so we don’t get stuck upside down on a trade,’ because machinery prices were dropping. That picked up our business.”
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Competition exists for Tractor Zoom, but McMahon sees it as a different value proposition compared to others.
“We’re not just selling you your tractors worth $192,000,” he said. “We’re telling you it’s worth $192,000 because of these latest five comparable sales in the market. We’re able to transparently show that to somebody, whereas our competitors cannot do that.”
Today, the market has picked up from earlier in the year. Farmers have some extra capital from harvest, and the commodities market is in its fourth-quarter rally.
“When the market is stable, values aren’t necessarily changing very much,” McMahon said. “But when the values of machines are changing quickly and drastically like this year, that’s good for our business.”