Excellent analysis as always, Ariel! Your comments about the depreciating fixed assets reminded me a lot of how farming assets are used in different ways around the world.
For instance, in North America, it's not uncommon for a single farming operation to own an entire fleet of agricultural machinery (tractors, sprayers, combines, etc). The situation is very different in places like the Indian subcontinent or Africa, where plots are tiny in size and whole communities share the ownership, maintenance, and usage rights of a single tractor (which is many times smaller than a typical tractor in the USA, for instance).
One of the companies I love following is Hello Tractor, an African startup revolving around tractor-sharing powered by technology. Societal and infrastructure constraints power innovative business models around the world :)
Thank you for sharing the Hello Tractor example. I was just doing some research in Argentina to see if there was already an app/service like that! My father and a brother own a couple of tractors and some farming equipment there and do a lot of contract work for other farmers and for grain elevators during high season, besides working their own land (row crops + cattle). The job matching process happens haphazardly though and sometimes he misses jobs or has to travel back and forth long distances. I think an app/service like this would help make the work flow more efficient. He also has high social capital in the area and know "who's who" in that sector so he could attract enough users to the platform and provide the initial trust to get this going.
For sure! I know that a big reason for Hello Tractor being set up in Africa is that there were no formal networks to order contract work, like you would do with an ag retailer or a co-op in the US. As long as the supply and demand exists, a platform that centralizes these transactions will always have value (cough cough, looking at you Uber)
I love this example Fernando and excellent point! Do you think that smaller average farm size in is the main driver for this difference in how equipment is purchased/deployed, or are there other major levers you see?
Good probing! I don't have a lot of evidence on my hypothesis, so take them as the work of a curious mind and nothing else :) but my gut feeling is that farm size is not a lever so much as is it is a consequence of broader infrastructure and sociocultural norms. I believe two factors are fundamental in determining mechanization level, equipment ownership, farm size, among other things: access to capital, and education programs.
Access to capital is pretty straightforward - if I can't borrow money easily and safely, it's gonna be hard to buy the latest piece of equipment or expand my operation. I haven't seen formal studies on that but I believe there is an incredibly strong correlation between access to capital and farm sophistication (as a way to encompass everything we're talking about). But even if access to capital was a given, I believe that government, academia and the private sector need to invest a lot on educating growers about the technological developments happening in farming. Companies are pretty good at doing that through marketing, but I would assume that research institutes and universities in the USA are more active at explaining the benefits of using modern seeds or spraying your fields or adopting new practices.
But to be clear - that's just a hypothesis and I haven't seen evidence that this is the case.
This is 100% a huge challenge for AgTech and great observation! I think that being useful the whole year is one strategy that companies can take, but there are a few of different approaches to seasons that teams could also invest in depending on the specific problem being solved for customers.
-Develop “evergreen” features — these are features that customers will be interested in every day of the year because they change frequently and have value all year long, things like grain price movements or weather
-Put a lot of effort into “resurrection” tactics — similar to the way that TurboTax marketing goes hard starting in January through April, if your product only solves a problem specific to one season, then a lot of energy has to be put into making sure that the customers who used you last year and went “dormant” in the other seasons comes back each year
-Get really good at “value proposition transitions” — unlike Uber where every day of the year the value prop is “click button get ride”, if your value prop changes throughout the year, the product and marketing teams need to work hard to make sure that through each transition, the value is clear to customers
-Diversify across geographies and crops — this can present its own challenges, but does help the team shorten the feedback loop (e.g., learnings from North America Planting in April can inform South America Planting in September)
I am curious to hear if there are other approaches that have worked well for your team!
Nicely explained. Seasonal businesses are quickly becoming lost in the world of instant results. It is having ramifications across the entire chain from supplier to farmer to processor to the store shelf.
Really interesting thoughts, especially the 'evergreen' features.
Each of those approaches has difficulties - from losing the focus of your product/engineering (with features which are not your 'core' business), to losing marketing focus (too many markets/value propositions).
I think geogrpahic diversification should be the leading approach, as it also increases the diversity of your client base (thus reducing risk).
Definitely pros and cons to each approach and they aren’t mutually exclusive (a company can pursue multiple if enough resources)!
In previous roles I’ve seen geographic diversification be an awesome lever for growth, but it can add a lot of operational complexity to capture all the nuances of each new audience
Ariel - this is a regular discussion at my startup. We're always analyzing trends in sales, retention and product engagement with the filter of: what's going on on farms right now?! It's a bit challenging for us because we work with a diverse swath of growers ranging from commodity row crop to diversified livestock to specialty growers. And many small and beginning farmers also have off-farm jobs, so you have to navigate the seasonality of their additional income sources as well.
I also love your reference to "40 chances" -- it's a very real, unique constraint of this segment!
Thank you so much Sami! And wow — that level of diversity in your customer base is both awesome and sounds like a challenge to build product for and market to!
In my previous roles, even with the emphasis squarely on commodity row crop farmers, I can relate to the number of hours (days?) spent debating as a team how to do something as “simple” as measure engagement since seasons make MAUs and other standard metrics pretty much irrelevant. I can only imagine how those debates shape up when there is a greater diversity of crops and livestock involved!
Excellent analysis as always, Ariel! Your comments about the depreciating fixed assets reminded me a lot of how farming assets are used in different ways around the world.
For instance, in North America, it's not uncommon for a single farming operation to own an entire fleet of agricultural machinery (tractors, sprayers, combines, etc). The situation is very different in places like the Indian subcontinent or Africa, where plots are tiny in size and whole communities share the ownership, maintenance, and usage rights of a single tractor (which is many times smaller than a typical tractor in the USA, for instance).
One of the companies I love following is Hello Tractor, an African startup revolving around tractor-sharing powered by technology. Societal and infrastructure constraints power innovative business models around the world :)
Thank you for sharing the Hello Tractor example. I was just doing some research in Argentina to see if there was already an app/service like that! My father and a brother own a couple of tractors and some farming equipment there and do a lot of contract work for other farmers and for grain elevators during high season, besides working their own land (row crops + cattle). The job matching process happens haphazardly though and sometimes he misses jobs or has to travel back and forth long distances. I think an app/service like this would help make the work flow more efficient. He also has high social capital in the area and know "who's who" in that sector so he could attract enough users to the platform and provide the initial trust to get this going.
We'll see I have to get them on board first :)
For sure! I know that a big reason for Hello Tractor being set up in Africa is that there were no formal networks to order contract work, like you would do with an ag retailer or a co-op in the US. As long as the supply and demand exists, a platform that centralizes these transactions will always have value (cough cough, looking at you Uber)
I love this example Fernando and excellent point! Do you think that smaller average farm size in is the main driver for this difference in how equipment is purchased/deployed, or are there other major levers you see?
Good probing! I don't have a lot of evidence on my hypothesis, so take them as the work of a curious mind and nothing else :) but my gut feeling is that farm size is not a lever so much as is it is a consequence of broader infrastructure and sociocultural norms. I believe two factors are fundamental in determining mechanization level, equipment ownership, farm size, among other things: access to capital, and education programs.
Access to capital is pretty straightforward - if I can't borrow money easily and safely, it's gonna be hard to buy the latest piece of equipment or expand my operation. I haven't seen formal studies on that but I believe there is an incredibly strong correlation between access to capital and farm sophistication (as a way to encompass everything we're talking about). But even if access to capital was a given, I believe that government, academia and the private sector need to invest a lot on educating growers about the technological developments happening in farming. Companies are pretty good at doing that through marketing, but I would assume that research institutes and universities in the USA are more active at explaining the benefits of using modern seeds or spraying your fields or adopting new practices.
But to be clear - that's just a hypothesis and I haven't seen evidence that this is the case.
That all makes a ton of sense and very plausible to me! Sounds like I need dive deeper with some experts for a future edition!!
Thanks, really interesting!
I think one of the biggest challenges in the ag-tech world, is being useful the whole year, overcoming the seasonality of the business.
How do you see it evolving? What needs the farmers have in the off-season, and are not answered yet?
There is a lot of focus on the in-season - drones/scouting/satellites, etc.
This is 100% a huge challenge for AgTech and great observation! I think that being useful the whole year is one strategy that companies can take, but there are a few of different approaches to seasons that teams could also invest in depending on the specific problem being solved for customers.
-Develop “evergreen” features — these are features that customers will be interested in every day of the year because they change frequently and have value all year long, things like grain price movements or weather
-Put a lot of effort into “resurrection” tactics — similar to the way that TurboTax marketing goes hard starting in January through April, if your product only solves a problem specific to one season, then a lot of energy has to be put into making sure that the customers who used you last year and went “dormant” in the other seasons comes back each year
-Get really good at “value proposition transitions” — unlike Uber where every day of the year the value prop is “click button get ride”, if your value prop changes throughout the year, the product and marketing teams need to work hard to make sure that through each transition, the value is clear to customers
-Diversify across geographies and crops — this can present its own challenges, but does help the team shorten the feedback loop (e.g., learnings from North America Planting in April can inform South America Planting in September)
I am curious to hear if there are other approaches that have worked well for your team!
Nicely explained. Seasonal businesses are quickly becoming lost in the world of instant results. It is having ramifications across the entire chain from supplier to farmer to processor to the store shelf.
Really interesting thoughts, especially the 'evergreen' features.
Each of those approaches has difficulties - from losing the focus of your product/engineering (with features which are not your 'core' business), to losing marketing focus (too many markets/value propositions).
I think geogrpahic diversification should be the leading approach, as it also increases the diversity of your client base (thus reducing risk).
Definitely pros and cons to each approach and they aren’t mutually exclusive (a company can pursue multiple if enough resources)!
In previous roles I’ve seen geographic diversification be an awesome lever for growth, but it can add a lot of operational complexity to capture all the nuances of each new audience
Ariel - this is a regular discussion at my startup. We're always analyzing trends in sales, retention and product engagement with the filter of: what's going on on farms right now?! It's a bit challenging for us because we work with a diverse swath of growers ranging from commodity row crop to diversified livestock to specialty growers. And many small and beginning farmers also have off-farm jobs, so you have to navigate the seasonality of their additional income sources as well.
I also love your reference to "40 chances" -- it's a very real, unique constraint of this segment!
Thank you for this.
Thank you so much Sami! And wow — that level of diversity in your customer base is both awesome and sounds like a challenge to build product for and market to!
In my previous roles, even with the emphasis squarely on commodity row crop farmers, I can relate to the number of hours (days?) spent debating as a team how to do something as “simple” as measure engagement since seasons make MAUs and other standard metrics pretty much irrelevant. I can only imagine how those debates shape up when there is a greater diversity of crops and livestock involved!