| Here’s How Ag Startups Can Avoid Aggro

Posted in Start-up Ventures at 9:00 AM by Loftis Consulting

For centuries, agriculture has been at the heart of the world’s economy. Without it, people couldn’t eat and do all the amazing things that they do. Traditionally, however, agriculture hasn’t been seen as exciting. But that’s all beginning to change, thanks to the fact that the sector is going through a tech revolution. Silicon Valley-type entrepreneurs from all over the world are trying to inject digital technology into the once-backward sector to achieve new levels of productivity and growth.

Companies are innovating in all kinds of ways. For instance, The Agri Hub wants to create a platform akin to Amazon or eBay for farmers all over the world to come together and learn about new farming products. The company behind the venture hopes that the hub will accelerate the adoption of new technologies in developing countries by providing farmers with a source of information they can understand.

Other high-tech ag startups are trying to bring new digital technology to the farm itself. For instance, a company called BluWrap is bringing oxygen management techniques to farms to extend fresh protein storage life.

Starting up in the agricultural sector has never been more lucrative or rewarding, especially since the global ag business is growing more than 7 percent per year, despite declining numbers of people in the sector.

New entrants, however, can find the sector difficult to navigate. Here’s what you need to know to avoid aggro.

 

Dig A Little Deeper

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Population alarmists like Greenpeace and Paul Ehrlich have spent the last forty years telling us that the world would run out of food to feed its expanding population and that we will eventually experience famine on a global scale. Ehrlich originally predicted that this would happen by the end of the 1970s, but this never came to fruition. In fact, today the world generates more calories per person than at any point in human history, despite the population ballooning to more than 7.5 billion people.

For ag startups, the notion that the population is growing and that food production need to increase is nothing new. In fact, it’s something that everybody is discussing, and technology appears to be solving – at least for now.

But top entrepreneurs are rarely concerned with what everybody else is discussing: they’re more interested in what’s not being said. Take Peter Thiel, for instance. He’s made a living being a contrarian thinker, looking deeply at problems the world faces, and coming up with novel and sometimes unpopular solutions. Ag startups need to do the same. In the agricultural sector, food production isn’t the only issue. Other issues include things like water use, slurry runoff, land use, deforestation, and energy use. Visit www.ucsusa.org/food_and_agriculture/ for more details. Ag start-ups that can solve these problems simultaneously at low cost will be at a distinct advantage and contribute to solving some of the world’s most pressing problems.

 

Know Your Field

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In agriculture, it’s a good idea to know your field, quite literally. Most people who want to disrupt the agriculture industry don’t actually know how it works in practice. It’s as alien to them as any other.

However, agriculture, just like other industries, is built upon generation after generation of experience, often handed down from father to son. Not only do those wanting to disrupt the industry have to understand its structure, but they also need to know the basics of animal husbandry and crop growing. Fences, cattle pens, deer stands and all manner of farm enclosures require special consideration. Visit Varnerpipe.com/steel-tubing/ for details. And they also need to understand how crops are cycled from one year to the next. No matter what product you’re planning, it needs to fit in with the realities of farm life. A scheduling app, for instance, isn’t any good if it doesn’t understand how often cows need to be milked.

 

Trial Products First

If you think you’ve created something really innovative, it’s a good idea to prove it. Investors and customers want to see evidence that your product works in the real world for ordinary consumers like them.

This is where it can be helpful to make use of the scientific method. Set up a trial where you compare two groups of customers side by side, one using your product and one not. Make sure that you randomly select customers for each group so that variations between the groups are explained by the use of your product and nothing else. Then conduct the experiment to see whether your innovation offers real value for the metric of interest, be it profitability, productivity, time-saving or the health of animals.

To carry out a well-designed trial, you may need the help of a statistician. You want to know whether the difference between the two groups is “statistically significant” – or, in layman’s terms, whether it’s down to pure chance or not. Once you’ve got that kind of evidence, it’s much easier to persuade new agricultural customers that your product works and can provide them with additional value.

 

Make Sure Your Innovation Is Defensible

The history of agriculture is littered with technological advances which helped to raise the incomes and profits of everybody in the sector. But many of these advances weren’t defensible, meaning that the people who invented them didn’t reap the rewards.

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Take crop rotation as an example. Crop rotation was an invention which helped to dramatically increase yields on a given plot of land. When it was first invented, the inventors were able to increase the amount of money they made for a short period of time. But as soon as people saw how it could dramatically increase yields, they copied it, eating away at the inventor’s profits.

If you’ve got a great idea for improving farm productivity which you can’t defend, send a letter to the FAO, but don’t invest your own money in it (unless it’s for philanthropic purposes). Make sure that whatever advances you make, whether it’s technological, genetic, or systems-based that you can reap the benefits from your hard work. If you can’t, margins will remain low, and you’ll be spinning your wheels, never really making the money you deserve.

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