Upstream Ag Insights - July 31st 2022

Essential news and analysis for agribusiness leaders

Jul 31, 2022

Index for the week:

The Potential Theranos' of AgTech
Digital Enablement: From Challenge to Opportunity
A Connection Between The Bookends: TELUS Agriculture & Consumer Goods' New Strategy
Radicle Growth Announces The Radicle Farm, a global farm-access platform to accelerate Agtech start-ups
Danish Agtech Agreena Acquires Hummingbird Technologies
Enko Raises $70M Series C to Commercialize Safe Crop Protection through Machine Learning-based Discovery Technology
Qualities of High Performing Ag Sales People
Arable Raises $40 Million to Accelerate Sustainable Agriculture
Syngenta Presents Interra® Scan: High-resolution Soil Mapping for Better Soil Health
The Problem With A Squishy Point of View
Autonomy Corner: SwarmFarm Robotics on 1 million Acres and Three Types of Autonomy + Acquisitions and Investments Accelerating OEMs’ Autonomous Capabilities

Thanks for reading, subscribing and sharing!

1. The Potential Theranos' of AgTech - Easy Observations

Nathan Faleide doesn’t hold back in sharing his perspective on “The Theranos of AgTech” conversation catalyzed by Rhishi Pethe’s excellent article on analogs.

There is one thing I want to highlight here though that I think is noteworthy: fraudulent behaviour is much different than running an unprofitable business or pivoting business models.

In his post Nathan calls out some potential Theranos analogs as Climate FieldView and Granular. I have a different perspective.

It’s worth directly stating what Theranos did: outright lied to investors and partners about technology, capabilities and IP while using another companies technology to incorrectly perform blood tests for patients relying on the results (that were often uncalibrated and wrong) to determine their health status (eg: incorrectly showing disease).

Any agtech analog to Theranos therefore should have whistle blowers, lawsuits surrounding it and/or have went bankrupt. This doesn’t describe Climate FieldView or Granular, two of the groups highlighted.

Nathan does bring to the forefront the profitability challenges of these organizations within their parent company after large acquisition price tags and pivots in business models and product offerings. What’s I think is a closer analog in terms of the dynamics and path of these businesses that were acquired is Broadcast.com (though still imperfect).

Most readers know of Mark Cuban. Broadcast.com was the company he co-founded that made him a billionaire. Broadcast.com was an Internet radio company founded in 1995 that allowed sports fans to listen to audio coverage of their favourite university sports teams. In 1999 Yahoo! purchased Broadcast.com for $5.7 billion when they had only around 500,000 users. The expectation was that the future of audio was online (directionally accurate, but as the saying goes, being early and being wrong are sometimes indecipherable from one another) and that those users would turn into core users of other Yahoo! assets. That thesis never panned out. Yahoo! discontinued Broadcast.com services in 2002, just 3 years after the acquisition.

If we zero in on Granular and go back to the 2017 acquisition there was a similar sentiment to Broadcast.com driving the acquisition by DuPont; “the future of agriculture is data driven and having digital farm management software will be required to be competitive in the future”. While there is truth to this today, the specifics of customer incentives, business models, and support for the core business (for seed and crop protection companies) continues to be an evolving target within that narrative. This has led Corteva to begin to sunset portions of the Granular business just 5 years after the acquisition.

If we think back to the driving force of the Broadcast.com acquisition being directionally accurate and the fact that the driving force of the Granular acquisition is still directionally accurate we can see that in hindsight two things didn’t get considered with internet audio: the proliferation in self publishing thanks to the reduction in cost for audio/video equipment and even more importantly tools to edit and upload along with a platform for people to go to listen (eg: YouTube, Apple Podcasts, Spotify…along with mobile internet speeds and WiFi). Yahoo! was poorly positioned to do this (and timing wasn’t right). This same sort of dynamic is applicable (though still imperfect) to agriculture with the adoption of farm management software: cost in sensor technology needs to come down and ease of acquisition of information to feed into FMS into usable insights still lags (and may never be perfect). It’s also notable that crop input companies may not be the best positioned to execute on this, just like Yahoo. We can extrapolate out that equipment manufacturers are actually well positioned given their tools, how their products are used and their neutrality towards input products for example.

This is another example in addition to last week of how analog’s can be a valuable starting point in agriculture and also used in applicable scenario’s.

2. Digital Enablement: From Challenge to Opportunity - The Daily Scoop

This is a well written article by AgVend* CEO Alexander Reichert talking about what a digital enablement platform is and the opportunities in using:

A digital enablement solution connects people, processes, and technology. It links the everyday systems that retailers use to centralize information, and it gives sellers an easier way to engage with internal teams and customers. There are three core components: white-labeled enablement platforms, a third-party ecosystem network, and expert support teams.

Digitally enabled retailers create stronger and more strategic partnerships with customers. They empower their teams, enhance customer relationships, and exceed expectations. They take today’s challenges and turn them into opportunities.

I agree whole heartedly with this take and it’s consistent with a comment I made last week regarding Corteva that I received several comments on from readers:

There won’t be a whole sale exodus from digital for Corteva (I don’t think any company can in 2022 or beyond), but the areas of digital and how they are emphasized will evolve within Corteva under close alignment with the core revenue generating areas of their business, seed and crop protection. This could mean more focus on digital buying experience for customers or to emphasis of digital tools that can deliver a better selling process to their employees for their physical products. Augmenting the customer experience and enhancing staff effectiveness are opportunities for everyone within agriculture.

Alexander’s article articulately illustrates how and why those opportunities are important.

AgVend also had a great Linkedin post that I think gets at the core of evolving culture to “be digital”:

There is a difference between “getting digital” and “being digital.”

Here’s why:

Getting digital is all about digitizing your current processes and perhaps developing efficiencies through automation. It’s just doing things the way you normally do – except digitally.

Being digital is about transforming those processes to support a better customer experience and deliver new value to your customers. It’s a cultural shift where your team begins to have a “digital mindset.”

Think of it this way:

It’s the difference between digitally logging and knowing your customers preferences vs. being able to anticipate and deliver on their needs before they even know them.

In the next few weeks I want to breakdown some of the components that go into “customer experience” as a tool to use for retails and service providers.

*Disclosure: I am an advisor to AgVend.

3. A Connection Between The Bookends: Telus Agriculture & Consumer Goods' New Strategy - The Daily Scoop

This is a useful interview of TELUS Agriculture and Consumer Goods President, John Raines, but what stood out to me the most this week was the fact that TELUS has been emphasizing the “consumer goods” addition to their name as a “new strategy” in ag media publications. It’s actually been the same consistent message they have stated since they launched. From their initial press release in November 2020:

TELUS Agriculture optimizes the food value chain by leveraging data in new ways to increase efficiency, production, and yields, delivering better food outcomes for businesses and the end consumer.

The only thing that is new is the addition to the name and I think it is strategically beneficial stemming from two points:

The majority of their revenue is coming from the downstream portion of their companies, I’d guess in excess of 65% and maybe even as high as 80%, such as supply chain management and quality and assurance software like Muddy Boots and AFS Technologies that were acquired.
Investor and Consumer Awareness. Being that TELUS is Canadian there is a hyper awareness of the struggles of publicly traded Canadian counterpart Farmers Edge which is a pure agtech company so TELUS would want to do it’s best to disassociate from purely agriculture so it’s easy to see they are not the same and the opportunity is bigger, reinforcing there are downstream revenue growth opportunities for them. Lastly, TELUS is a consumer business. They want to reinforce they are benefitting consumers and the food individuals consume. In fact, I am a TELUS mobility customer and while on hold a couple weeks ago I think I heard about 14 times all the good that TELUS is doing to provide healthy and safe food for Canadians.

4. Radicle Growth Announces The Radicle Farm, a global farm-access platform to accelerate Agtech start-ups - Ein Press Wire

Radicle Growth, a company-building platform investing in early-stage agriculture and food technology companies, announces the launch of The Radicle Farm, a global farm-access platform to accelerate the development of early-stage companies developing new on-farm technologies. The Radicle Farm is a cohort-style program that identifies start-ups who need access to trial design, agronomic support and farms in both the Northern and Southern Hemispheres. Radicle works with entrepreneurs and farmers to assure the data generated from the trials meets the standards of farmers, institutional investors and large corporations.

This is a novel initiative for a venture capital company to deliver in the ag industry.

The industry is chock full of accelerator programs that emphasize the foundations of business building, networking with like-minded start-ups and deliver access to industry incumbents. One area accelerators fall short is around what many ag start-ups need the most: access to farmers and access to acres and trial opportunities giving them good data. This is what the Radicle Farm initiative is looking to deliver.

The other side of the coin is that sometimes companies can access land and farmers, but lack access to capital. Radicle integrating the two together, across hemispheres, sets them up in a differentiated fashion compared to other venture capital firms in the industry. This sits on top of something else that is notable about Radicle: They have a Chief Technology Officer in Neal Gutterson who was previously CTO at Corteva which means they have strong industry insight for their portfolio businesses and the Radicle Farm initiative.

There are currently service providers out there who can deliver access to farms and trials for start-ups, like IN10T. However, I suspect not many VC firms actively pay to vet companies and technology in this fashion due to the time lag (crop cycles are slower than investment diligence), costs and not having some of the foundational understanding of interpreting and using the data in a constructive way.

What else is notable about this with Radicle is that they have what is called the Radicle Challenge where they identify agtech start-ups to pitch to a panel of industry experts for a chance to win an investment, usually sponsored by a large incumbent company like Nutrien or UPL for example. This trialling initiative would be a route to further accessing the best start-ups and confidently being able to identify the most promising ones based on actual in field experience.

Finally, this likely goes beyond proving tech out (early stage trialling) and will be supportive of their more mature investment companies accessing trials for commercial viability at field scale.

5. Danish Agtech Agreena Acquires Hummingbird Technologies to Push Forward Global Farming’s Green Transition - EU Start-ups

Copenhagen-based Agreena is one of Europe’s pioneering platforms facilitating the issuing and trading of carbon certificates. It’s just acquired Hummingbird Technologies – a UK-based firm providing advanced remote sensing analytics to improve the sustainability of the agri-food sector. The two companies have collaborated together in the past, with his new deal coming as an aligned strategic move.

This acquisition won’t come as surprising to many in the space. Earlier this year I stated that given some of the challenges of stand-alone remote imaging and analytics companies along with the current economic environment, we would see some consolidation in this space.

The acquisition price wasn’t stated, but they raised over $21 million according to Crunchbase and I suspect the price tag paid was well below that.

The other notable aspect is that they had companies like BASF Ventures and TELUS Ventures invested in them and neither of them opted to acquire along with the Saudi Agriculture and Livestock Investment Co. (SALIC) who holds numerous agriculture companies. It might say more about the greater imagery and analytics space than Hummingbird itself though.

For Agreena integrating back into the MRV space makes sense. Here is an image from Hummingbird VP of Sustainability via AgFunder News:

We aren’t done seeing consolidation in the carbon space nor transactions occurring in the remote sensing and analytics space.

6. Enko Raises $70M Series C to Commercialize Safe Crop Protection through Machine Learning-based Discovery Technology - PR Newswire

Enko, the crop health company, today announced $70 million in Series C funding, bringing the company's overall capital raised to date to $140 million. Global agrochemical company Nufarm led the round as part of an expanded partnership to bring innovative products to their core markets.
Enko will use the new funds to advance its product pipeline of crop protection chemistries that target critical pests and weeds through novel pathways. The funds will also expand Enko's ENKOMPASS technology platform, which combines DNA-encoded library screening with machine learning and structure-based design to quickly find new, better performing and more targeted chemistries. Since its start in 2017, Enko has generated hundreds of leading molecules across all categories of crop protection. Enko's product pipeline is currently led by a range of herbicides that are demonstrating breakthrough performance compared to industry standards like glyphosate.

This brings the total capital raised by Enko to about $125 million and bringing their valuation to $320 million.

Enko is endeavouring to move the crop protection industry forward and just in time amidst lower R&D expenditure within the industry (as a percentage of revenue). Enko has been collaborating with Syngenta and Bayer on promising new chemistries. Enko's approach has generated discoveries in roughly half the time and with fewer resources than conventional R&D methods.

Less R&D expenditure from crop protection and seed companies compared to 15 - 20 years ago has been a constant trend. There have been more emphasis from crop protection companies on share buybacks for example, attempting to attract investors and bolster returns rather than drive long term innovation.

If we go back to the biotech hay-day when R&D was consistently around 12-13% of revenue (vs. closer to ~9% today), there were very explicit areas of biotech and traits that were going to show good returns and competitive in roads in the market place.

While we still have CRISPR and other synthetic bio tech around being looked at by companies, it seems there has been less emphasis internally and more looking externally to nimble start-ups investing in tech hoping there is a specific break through. We can even look at Bayer recently getting out of biological R&D and outsourcing it while focusing on the commercialization. This is further reinforced in looking at the lead investor for this round: Nufarm.

Nufarm has been involved in a couple key areas from a start-up investment perspective, both around supporting their core business of crop protection: They have invested in Enko as well as plant electrification technology company, crop.zone.

If we take the vision of Nufarm, “to be a world leader in innovative crop protection and seed technology solutions”, their investments and internal expansion (eg: high value seed traits) they really have been consistently working towards this target, investing in some of the most innovative companies out there.

Enko will continue to be a compelling organization to follow in the coming years.

7. Qualities of High Performing Ag Sales People - Linkedin

This is an interesting chart on characteristics of agriculture sales people from David Dam of ALTERRAIN.

We see that two thirds of the top group, where only 11% need to be liked, DO have a relationship based sales process while only 1% believe the relationship is a key factor to closing the business. Do you see it? They DON'T NEED to be liked but are conscious of the importance of developing a relationship during the sales process. They know how (mechanical) but don't need to (emotional).

Useful insight considering the talk is always on “relationship selling” in agriculture. The dynamics of the relationship and the how are important to consider, as pointed out.

There is one conclusion I disagree with:

That is one of the key reasons that the weakest group of salespeople are so incredibly ineffective. Some in this group are attention seekers while some are so timid that if you blew them a kiss they would tumble over. Either way, this is a group that you shouldn't waste time coaching, shouldn't attempt to raise their expectations, and ultimately, shouldn't retain.

Being extremely timid when I first entered the industry, had some of my early mentors listened to this advice I wouldn’t have been given opportunities to learn and grow. In an industry that needs to continue to develop talent, be it in sales or other areas, this isn’t good advice in my opinion (though I fully acknowledge some people aren’t cut out for sales and there are times where cutting losses is the best route, I just do not believe timidity is a uniquely useful indicator of professional capacity).

8. Arable Raises $40 Million to Accelerate Sustainable Agriculture - Business Wire

Arable, the leader in field intelligence for agriculture, today announced it has raised $40 million in series C financing. The company will use the new funding to advance climate resilience in agriculture by accelerating product development, delivering new services for customers and expanding its global footprint.
Arable received the very first investment from Tom Steyer and Katie Hall’s new climate investment platform, Galvanize Climate Solutions, which led the fundraising round. In connection with their investment, Saloni Multani, partner at Galvanize Climate Solutions, joined Arable’s board. The funding sees new participation from Qualcomm Ventures. Also joining the round are Arable’s existing investors, including Prelude Ventures, S2G Ventures, Ajax Strategies, Grupo Jacto, Middleland Capital, M2O and iSelect.

9. Syngenta Presents Interra® Scan: High-resolution Soil Mapping for Better Soil Health - Syngenta

Syngenta has signed a licensing agreement with UK based HL Hutchinsons (HLH) to supply agronomists and farmers with an advanced soil mapping and sampling service initially in continental and Eastern Europe. It will be marketed under the name Interra® Scan and enables agronomists and growers to make better informed decisions for crop management and soil stewardship.

This is European based news, but it’s a notable entry by Syngenta into having a soil based initiative. Today, anything soil based would generally be considered outside Syngenta’s core competency (noteworthy though: they recently hired a Chief Soil Scientist), however, with their Valagro (biological and plant nutrition company) acquisition in 2020, there is a core business augmentation to be had here along with supporting some of their sustainability initiatives like The Good Growth Plan.

The primary data being used will be acquired by SoilOptix, a gamma-ray based sensor technology that can map soil at a relatively high resolution across numerous soil parameters (physical, chemical and biological).

The challenge with this type of data is always the “so what?”; it doesn’t make sense economically to do this test every year for macronutrients (they likely will need to do other physical soil tests annually) and needs highly informed individuals to then be able to make sense of the data and layers and prescribe a specific recommendation to the farmer surrounding fertilizer or other crop input products. This leads me to wonder: what will the business model be?

When I reached out to Syngenta they did confirm that Syngenta employees will be the ones operating the scanner, taking the results and presenting them in Syngenta specific software where Syngenta employees will be the ones working with the farmer to create prescription recommendations on fertilizer, likely along with other products like residual herbicides, seed and Valgaro products. Given their emphasis towards soil health (“health” showed up 8 times in the release) and regenerative ag, I suspect they have grander visions than just selling more inputs though. I can imagine some more partnerships to create a novel offering in the market place.

They haven’t announced specifics, such as pricing or business model yet around this, but I look forward to their full launch of the service later on this year and learning more then.

10. The Problem With A Squishy Point of View - AgTech Marketing Insights

Your customers can't create your category for you; they can only tell you how to incrementally improve it once you’ve begun building.

Another great post from Dan Schultz. If you aren’t subscribed, you should be.

11. Autonomy Corner

The Three Categories of Autonomy in Agriculture, with Andrew Bate, SwarmFarm Robotics - AgTech So What?

This is a great podcast with SwarmFarm talking about the benefits surrounding the value of applications and an ecosystem approach to autonomy.

I particularly liked the way Andrew breaks down the autonomy market and then thinks through the implications in the business:

Aftermarket autonomy kits and Retrofit kits - This is the main group of autonomy, like Bear Flag Robotics, Blue White or even John Deere announcing their driverless 8R tractor
Specialty Autonomy - This is specifically raspberry or apple picking robots for example.
Platform Autonomy - Unlocks value across all types of farming and for a greater ecosystem of developers of “apps”, which is where SwarmFarm sits along with companies like Raven with OMNIPower.

Andrew brings a great perspective around the future of equipment purchasing (3-year lease direct to farmer) along with a view that this is about better agronomy and better outcomes for the farmer.

The challenges of distribution and the farmer uncertainty around not being in the tractor are interesting to overcome, but he brings up points like right to repair that he believes will be a driver of their unique platform and distribution strategy working.

It’s hard to listen to this and not be a fan of how SwarmFarm thinks about the future of agriculture.

12. One Million Acres Covered: SwarmFarm Robotics Leads the Autonomous Agriculture Movement - Linkedin

What may be one of the best kept secrets in agriculture is the opening paragraph to this article from SwarmFarm Founder, Andrew Bate (who’s in the podcast linked above):

SwarmFarm has successfully deployed autonomous robots to farmers who have covered over one million acres, operated for 55,000 hours, and reduced pesticide inputs by an estimated 580 tons. For comparison, an article in Precision Farming Dealer stated that Raven Technologies had accumulated 8,000 hours of operational time, covering 69,000 acres. The same piece cited Blue-White Robotics as completing 10,000 hours of safe operation, and Monarch tractor with 1,300 operating hours.

Executing on that many acres of autonomous farming is impressive. While it isn’t clear what John Deere has for autonomous operations, it is still incredible that SwarmFarm has more acres under their belt than aggregating three other big autonomous players.

13. Acquisitions, Investments Accelerate OEMs’ Autonomous Capabilities - Precision Farming Dealer

This is a good summary of acquisitions made by equipment manufacturers over the last 18 months.

Non Ag Article

The Psychology of Apple Packaging - Sat Post

Earlier in this edition I talked about customer experience. The best companies think about the small details across even seemingly insignificant aspects of the buyers experience. This piece on Apple packaging I thought was particularly insightful, especially a couple quotes:

The third and equally important principle, awkwardly named, was impute. It emphasized that people form an opinion about a company or product based on the signals that it conveys. “People DO judge a book by its cover,” he wrote. “We may have the best product, the highest quality, the most useful software etc.; if we present them in a slipshod manner, they will be perceived as slipshod; if we present them in a creative, professional manner, we will impute the desired qualities.

“[Once Steve and his adopted father Paul Jobs] were building a fence. And Paul said ‘You got to make the back of the fence that nobody will see just as good looking as the front of the fence. Even though nobody will see it, you will know and that will show that you’re dedicated to making something perfect.”

Bonus

A compelling visual of how computers and applications have swallowed up the analog world from a desk perspective:

Lost in history @lostinhist0ry

Evolution of an office desk (1980-2014).

Upstream Ag Insights