Startups in the agriculture space need many of the same resources as other tech startups – innovation, investment, supporters, and markets – but access to them could be a bigger challenge for agricultural startups than for startups in the software sphere.
Agtech Startups Face Tough Challenges. How Can They Overcome Them?
Yariv Erez, CEO | Frontier AgriTech
Startup culture has been widely praised for its innovation, contribution to the world and importance to the economy. At the same time, startup culture isn’t monolithic; it has many variations, each with its own subculture. Among the more unique are agricultural startups – small companies with big ideas on how to produce more food, make brackish water drinkable, how to grow healthier livestock, and much more – while also generating profit.
Startups in the agriculture space need many of the same resources as other tech startups – innovation, investment, supporters, and markets – but access to them could be a bigger challenge for agricultural startups than for startups in the software sphere. To mitigate these challenges, agtech companies benefit from partnering with an organization that can guide them through the maze of regulations, funding propositions, marketing challenges, and the myriad other details that will only be familiar to individuals and organizations directly connected to the needs of agriculture, farmers and growers.
Indeed, agriculture startups are similar to marathon runners, as it may take a long time to develop, test and prove their technology, mainly because of the reliance on seasons, biological processes and other aspects at the heart of farming. In contrast, tech startups in other sectors are more like sprinters, with their cost-benefit cycle evidencing itself much more quickly. In addition, agriculture and its practices vary greatly by place and society. My father, a life-long farmer whose footsteps I followed into the field, often says that agriculture by its very name encompasses culture; without an understanding of the “culture” of those growing crops and raising animals, there can be no “agriculture.”
Partnerships with experienced, well-connected players, including specialized incubators, universities, and R&D centers can bring a wealth of knowledge and experience from both the market demand and scientific research sides. This can lead to the right funding, add marketing expertise and help with effectively and efficiently scaling technology.
Finding the Right Funding
Agtech holds appeal for some VCs, as some of the fastest-growing areas of tech, including generative AI, machine learning and computer vision, are transforming farming and dealing with the challenges of climate change and urbanization. For many VCs, however, there are challenges to investing in the sector. Agtech innovations can often take significantly longer to produce results. In addition, startups need to work out deals with farmers or landowners, making the process of developing technology more complicated.
Partnerships with organizations like R&D centers can help better position agtechs for funding by providing them with testing grounds to prove their technology, speed up their timelines, and give investors confidence that the startup is on a practical path to success. In cases where VCs aren’t the best option, partnering organizations can help connect startups with different types of investors, including family office investors. Many of these funds are dedicated to specific goals, such as reducing world hunger and promoting sustainability, and they are often willing to wait longer for returns than VCs. Finding the right family office investor can be a challenge – so partnering with an organization that has experience in the area could help facilitate the process.
Effective Commercialization and Marketing
While technology can help solve many of the problems in agriculture, attracting buy-in from the farmers who could benefit is a challenge, more so than for other tech startups. Most farmers realize a good technology when they see it, but many have specific obligations (contracts with buyers, commitments to use seeds or products from specific suppliers) that could prevent adoption of new solutions. In addition, while the needs of farmers may be the same across a wide range of markets, many of those markets may not be able to afford a new product or technology. Agriculture in general is also a very traditional sector, with land – along with the ways of planting and raising animals – often passed down within families, resulting in a reluctance by farmers to accept change.
Here, too, partnering with a veteran organization that knows the market – and is familiar with the technology – can help startups achieve their goals. The partnering organization can direct the startup on what markets to target, how to get to those markets, and how to expand to other markets. This is the kind of research that startups would likely not have the resources to accomplish on their own – but with a knowledgeable team on their side, the commercialization process could go much more smoothly.
Developing Products for the Real World
In the world of software, many startups develop a technology with an eye towards being acquired by a big tech firm – and often partner with one of their potential suitors to develop the technology that will facilitate that buyout. Agtech startups often don’t have that option; the potential partners are usually large multinationals with in-house R&D, so getting their attention is much more difficult than in the tech sector. Much of the non-multinational R&D is done at universities or university agricultural technology extensions, which may have rigorous protocols for enrolling an outside startup. And the variables in agtech, including types of soil, animals, clients, markets,are often too complex to develop a technology that could scale beyond a single niche.
Here again, a partner that knows the landscape could be of great assistance. Organizations that have been working in the agriculture sector for years will have a good idea of which university program a startup could work with, as well as access to experts who could help them scale their technology to serve a wider array of markets. These organizations are likely to have connections with multinationals, providing a path for startups to work with companies that could eventually fund their work, or even acquire them.
Agtech could literally save the world by providing new methods of growing food, reclaiming water, and ensuring that the ecosystems that support species continue to do so. As multitudes of startups seek out these goals, it is important to remember that the sum of people and organizations working together is greater than all the individual parts. To best address the challenges to success, the sector needs to prioritize working together rather than in silos. Finding a partner organization can be an important step toward success.
The content & opinions in this article are the author’s and do not necessarily represent the views of AgriTechTomorrow
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