Very enjoyable chat with Patrick Henry CEO of GroGuru, a company using soil sensors to give farmers AI-based recommendations for crop irrigation. We discussed why their soil sensor is a massive leap over existing solutions, how agtech companies can incorporate sustainability into their products, why strong distribution channels are essential to agtech companies, their approach to building an amazing team, why listening is one of the most important founder skills and more!
Learned so much speaking with Connie Bowen, Director of Innovation and Investment at AgLaunch a network that connects farmers and startups as well as the cohost of the End of Agriculture podcast. We discussed the importance of diversity in both farmer networks and startup teams, the different types of investment opportunities in agriculture, why irish butter doesn’t get the sustainability credit it deserves, the opportunities for sustainability minded farmers to go direct to consumer, why labor issues in agriculture is such a major and under discussed aspect of agtech and more!
Here is the audio. The excerpts below are lightly edited:
MCWALTER: Can you tell us a little bit about Aglaunch?
BOWEN: Aglaunch, at its core, is a farmer network based in Memphis, Tennessee, with a focus on the Delta region. At its core Aglaunch connects technology startups with farmers. We are also quite intentional about developing an inclusive pipeline for the future of agriculture and agriculture technology by being very intentional about education and historically marginalized communities and ensuring that the future of agriculture is as bright as it can be.
MCWALTER: What is the typical profile of those farmers who opt into the network?
BOWEN: It is very intentionally diverse. We’ve got your traditional row farmers including soybeans and cotton. And then we’ve actually some really interesting non now active network members is one acre, he produces all year round and hoop houses, he’s gone direct to consumer and COVID. He’s this he’s got like six or 700% sales, he had to convert everything away from restaurants. And so we kind of divide our farmer networks up right now about a bit geographically. So we’ve got what we call our world delta network that’s largely based in Tennessee, but it does blur into surrounding states. We’ve got our urban network in Memphis, which is in its earlier stages, but that’s focused more on urban farmers, we’re seeing really especially crowd, you’re seeing hydroponics, some kind of funky stuff, it’s really focused on community inclusion, and food access, then you’ve got Iowa network tends to be more traditional water, a lot of soy, and corn in Iowa. And then our Oregon network we’re particularly excited about because there’s, it’s focused really in the William Valley, which is a super diverse crap region. So we get a lot of specially crap farmers in there. But we do I should mention, we do have specially crowd farmers. So we do have livestock producers in our Delta region.
MCWALTER: Are there margins in ag to support VC type investments?
BOWEN: There are definitely VC investable opportunities in ag. Though VC is appropriate for a lot of companies, but maybe not for others. Let’s say you have a specialty Apple harvester, right? What’s the best case exit for that company, it’s never going to be a unicorn. And so you so there are different ways you can approach those opportunities. I’m a big fan of impact investment in a lot of cases also.
MCWALTER: In terms of the startups that are most successful, do they typically have founders coming from agricultural backgrounds?
BOWEN: I’m a big believer in diverse teams across the board, I like to see someone from an agricultural background. And really, I think we don’t see enough people from a kind of a consumer background in agriculture, because I think that’s a big part of the missing kind of linkage. The thing that matters most across the board for startups is coachability, and willingness and desire to work with the people who you need to work with to grow your company. And that in a lot of cases in agriculture is farmers. Not in all cases, but in many cases that might mean getting colocated? I mean, obviously, we’re in COVID times so everybody’s remote, but maybe more people should be moving off the coasts and getting into the heartland more and try to walk the land a bit?
MCWALTER: How did you end up working in agriculture?
BOWEN: If you told me five years ago that I would be living in Missouri, I would laugh at you. I grew up in suburban New Jersey, with New York City being like THE city. I then did this entrepreneurial fellowship program called Venture for America which is how I ended up in St. Louis. And through that, I learned a lot about things like urban agriculture and our family also has a corn and soy farm in Iowa. And so I had that exposure, but definitely wasn’t living it. For people working on agriculture, it is helpful. Because the reality is, you do need to have some boots on the ground experience or at least a very high degree of empathy on your team. And I do think that can come in the form of kind of an advisory member or good listening can kind of be a good stand-in for that.
MCWALTER: With the 365 day nature of farming, how best can entrepreneurs work with busy farmers in order to deploy the technology or idea?
BOWEN: I guess the first thing I would say is farmers are a very, very broad category. A crop farmer is far different than a Midwest massive acreage row crop. So you need to segment your market and understand who you really need to be talking with and I think that it can be very difficult to do. It’s a relationship building game and I have seen a couple of startups that I really admire essentially build their own farmer networks. And they’ve done that by very deliberately talking to people who they’ve been able to get warm introductions to.
MCWALTER: Agriculture is full of large entrenched enterprises, can these companies be disrupted?
BOWEN: Great question. I think that it’s possible, otherwise, I wouldn’t be doing what I’m doing. Part of our thesis with Aglaunch is that it’s not possible for that kind of disruption to happen independently so you do need to have a support network. If you look at Monsanto/Bayer they have a grower testing network, and resources that enable them to focus on different innovation areas and capturing different market areas. So startups do need that as a company and it’s very difficult to assemble them all on your own
MCWALTER: What are the opportunities for farmers looking to decarbonize?
BOWEN: Take the example of Irish dairy which is really one of the most sustainable ways to create a product like butter, and who doesn’t love Irish butter! It also tends to be pastured which is a carbon sink opportunity. However, the way that the EPA accounts for ag emissions means that we are not calculating all the benefits. Then when you look at policy fixes that are being implemented, the only solution is to cull cattle and that’s not a good solution for agriculture or the Irish economy either, which has a pretty strong reliance on agriculture. And it’s not a good solution for global sustainability because when you put Irish butter next to most other production systems it is a lot more sustainably produced. And so that’s a problem with our carbon accounting methodology.
I do think there’s an opportunity for farmers to directly monetize, by bypassing conventional aggregators and purchasers and forming their own different types of models which can feed into a greater focus on sustainability. I hesitate to use the word coop because coops aren’t always serving farmers in the way that you would think that they would. But in this world where we’re seeing an increase in direct to consumer sales and a renewed focus on traceability alongside cheapening of traceability technology it will create opportunities for farmers who want to market directly, bearing in mind that marketing directly is a heck of a lot of work.
MCWALTER: So if there still needs to be if not a coop than some other form aggregation, maybe the “Low Carbon Farmers of America”, whatever it is, and they have some form of verification step allowing their milk to be easily used by direct to consumer brands?
BOWEN: My belief is that people don’t actually want to know more about their food and the food system. Most people, I mean, you and I might, but that makes us exceptional, not normal. Most people aren’t going to learn everythin#bbffd7g about their food system. Most people wouldn’t understand why I would want that hazelnut orchard to be organic, and another crop to be conventional but both for sustainability reasons? Like, that’s just no one is going to get that. And so I believe that it’s going to come down to branding and trusted brands and so at one level the big existing brands have an opportunity. But on another level, they’re going to have to acquire smaller brands, because they’ve got something of a tainted brand already.
And that’s where I think that there’s an interesting opportunity that’s tech-driven. And we’re actually working on a project with this as well that links special attributes like some sustainability factor into a smart contract system with an institutional purchaser who can actually start to nudge the supply chain in specific directions. In theory but it’s complicated. But it does enable diverse diversification practices without adding another label as those labels like organic and fairtrade etc get really overwhelming.
MCWALTER: If you think about a 10 to 15 year time horizon, what are the things you’re looking at that might have the largest impact on decarbonization?
BOWEN: Soil is the cheap way to draw down carbon and I am a huge fan of silvopastoral systems. And then I also think, and this doesn’t get talked about enough, in my opinion, one of the major challenges to actually adopting regenerative practices is that weeding is not that much fun. It’s very expensive and requires a lot of labor. And so then you start to talk about robotics and farm equipment that requires some type of investment. And you can’t talk about that without talking about labor crews. Labor policy is how people are treated, how people are paid. How do we even source the labor? Because there are massive labor shortages in this country. Then step back and say, Hmm, it’s kind of a problem that in an economy where there are high unemployment rates, we still cannot source people to do this work. What does that say about this work? And so I think one thing that doesn’t get talked about quite enough in the regenerative agriculture conversation is the role of contract labor. And this kind of historically biased system interacts with technology adoption in key ways that need to be addressed and isn’t talked about.
MCWALTER: How has COVID-19 affected your views on agriculture?
BOWEN: I’ll say about the labor situation, generally, I think that we don’t give enough attention to essential workers in the agri-food logistics system. And that’s just really terrible. But what it has done is it’s really brought agriculture more to the forefront, it’s on the front pages a lot more often, people are a little bit more nervous about where their food is coming from. And I think that that’s good and it creates some opportunities that we have we can build upon. I don’t know that awareness will be a lasting change but I do think that we have accelerated adoption of direct to consumer which creates some interesting opportunities in terms of connecting farmers to consumers throughout the supply chain.
MCWALTER: What is your podcast, the End of Agriculture about?
BOWEN: My friend Sarah Maka, who’s a freelance journalist and I accidentally started a podcast where we examine what is behind key elements of agri-food systems. We don’t actually want the end of agriculture to happen, but we think it’s worth exploring the issues so that we can think thoughtfully about the future.
Really great conversation with Sarah Nolet, founder of both the agtech focused VC firm Tenacious Ventures and AgThentic an agtech strategy and advisory firm, as well as the host of the “AgTech…So What?” podcast. We discussed the how agtech in the US and Australia differ, the importance of a translating values and points of view between tech entrepreneurs and farmers, why we need measurement and verification in regenerative agriculture, the importance of getting the business model right in complex supply chains like agriculture, what the most promising technologies are in agtech and more!
Here is the audio. The excerpts below are lightly edited:
MCWALTER: Could you tell us a little bit about AgThentic?
NOLET: We are a strategy and advisory firm working at the intersection of technology and agriculture. The reason for being is we want to help more innovators have an impact in food and agriculture. And we know that technology alone isn’t enough, because we’ve seen too many technologies be developed and pushed into the industry, because they’re exciting, cool technologies, but unfortunately, maybe no one wants them or they don’t solve a real problem. So we bridge the gap between these new technologies and the business models that can help their adoption and ultimate impact. We do that in a range of ways from working on projects and in an advisory capacity with different clients.
MCWALTER: Are entrepreneurs selling into the ag sector not talking to people enough?
NOLET: There’s that classic issue of customer discovery. People don’t know what farmers actually need or want. It can be really tough to bridge that gap. So you’ve got people in cities who have ideas for technologies and new businesses, but maybe they didn’t grow up on a farm or they haven’t spent a lot of time on farms. So while their idea seems good, when they’re having a latte in a city, it doesn’t actually stack up when you’re on the farm or somewhere in the supply chain. I don’t know if you’ve ever tried to call a farmer and say, “Hey, can I come talk to you about your problems”, but you know, they’re busy. And they speak a different language about farming, not about tech. And so it’s not easy to overcome some of those barriers.
MCWALTER: I grew up on a farm in Ireland and talking to farmers can definitely need a bit of translation…
NOLET: Yeah, it’s a totally different language. If tech people go deep on tech stuff, and farmers go deep on farming stuff, neither is actually understanding the other.
MCWALTER: How does your background help you bridge that communication gap?
NOLET: I guess my background’s kind of in this translator role, and I’ve done it in a few different areas. But specifically, so I grew up in Silicon Valley in California, nothing to do with farming. We had a bit of a hobby farm in my teens that I spent time on, very much not a commercial farm. I always say that we grew rocks and squirrels because there’s nothing commercial there. But it instilled in me a passion for the environment and for those kinds of communities and that kind of lifestyle, but I was very much told and followed the advice of first go off and make money, and later do something that’s good for the world. So I listened to that advice for a bit and ended up working in the defense industry and have degrees in computer science and systems engineering.
I realized that I liked technology but also started to plan a bit of a translator role. I was working with deep technical people on new radar systems and remote sensing systems, but translating it back to what users actually needed. How do we build systems that use this technology to solve real problems and communicate that wel? But it just wasn’t cutting it for me in the defense industry and I wanted to do something that I was more passionate about. I spent a bunch of time on farms in South America, it was initially a holiday that turned into more like an accidental gap year. And that really connected all the dots for me and was why I became so excited about agriculture and ultimately brought the technical background and translator capabilities into this sector working across farmers and entrepreneurs and∑ investors in agriculture.
MCWALTER: And then you moved to Australia?
NOLET: We moved here about five years ago for my partner David’s job. I got really lucky in that Australian agriculture is as powerful and high potential as it is. At the time, Australia didn’t have much in the way of an agtech startup ecosystem. And so it was an opportunity for someone like myself, who had been doing that kind of work in the states to help build the ecosystem here and bring a lot of those best practices to Australia.
MCWALTER: How do the US and Australian agtech sectors differ?
NOLET: The US is just much bigger. And so there’s more capital and culturally starting a startup is more part of the cultural norm than it is in a place like Australia. In ag-tech five years ago Australia didn’t have much. But nowadays, any startup solving a problem along the value chain in the US means there’s going to be startups doing the same thing here in Australia. So we have quite a vibrant ecosystem here now, but it is smaller. We also have some nuances here, there’s farming systems like mixed farming and extensive pastoral systems in the Northern Territory that doesn’t exist in the US. Agriculture here also isn’t as subsidized so there’s different dynamics here. But a lot of the innovations are, definitely spanning that breadth and definitely the same quality as you’re seeing in the US as that ecosystem has grown in the last three to five years.
MCWALTER: How are farmers adapting to new technologies?
NOLET: When you think of innovation, if it’s hacking away at a terminal writing software, then there’s some farmers that do that, but a very small minority. If it’s innovation in farming systems and in business decisions, then farmers are incredibly innovative. They are truly pushing the envelope in innovation as much or more than the tech entrepreneurs coming into this space, because they’ve been living and breathing it and seeing the challenges for decades.
Also, agriculture is super broad. Are we talking about specialty crops and perennial systems? Are we talking about irrigation or are we talking about really extensive systems where you’re using helicopters to manager cattle or are we talking about intensive indoor horticulture systems in greenhouses? So entrepreneurs need to get out and spend time with farmers. Though, many of the entrepreneurs we work with are increasingly coming with some kind of Ag background, maybe they grew up on a farm or worked in an agronomy role. And so it’s not just people from the outside coming in. And in fact, in many cases, it’s farmers themselves who are solving their own problem and then thinking about how to scale those businesses.
MCWALTER: The traditional tech startup has very rapid iteration whereas with a farm you might be talking 12 months before you can iterate. How can agtech iterate rapidly when dealing with that timeline mismatch?
NOLET: It’s a real challenge and actually was some of my early interest in this space. Because when we look at innovation programs, like accelerators and incubators, they expect you to come in and three months later, you launch an MVP and raise money. Well, in agtech, if those three months didn’t coincide with planting and harvesting maybe you didn’t try anything at all in those three months, and so does that really work to support innovation? That said, there are lots of ways to get feedback on your product and to work early and frequently with users, whether that’s trialing in different geographies, whether that’s getting feedback on versions of the product that aren’t the actual product. Or get trials in a field and see what happens over a 6,9,18 month period, then it’s much more about managing and communicating those expectations. The worst outcome is when you over promise and under deliver, whether that’s to a grower or to an investor and so if it needs to take that long, then you should build your business plan and runway and milestones around that need and manage risk as much as possible. But if it needs to take that long, it needs to take that long and there’s no use hiding it because you are working with a natural system and some investors will get that and others might not. But they’re probably not going to be a fit for you anyways
MCWALTER: What about the large agri businesses, how do they interact with new agtech players?
NOLET: One of the big challenges for entrepreneurs is how do you get your product to farmers. So you might meet your first couple customers at conferences or on Twitter or on podcasts because they’re out, actively searching for and engaging on the tech side. But after your first dozen or a couple dozen, where do you find the rest and often you’re going to need to go through some kind of channel. So there’s a big role for the existing agribusinesses to play by being that distribution channel to farmers. And it’s really interesting now that we see the business model of those players starting to shift whether it’s more to biological inputs than chemical or more to digital offerings instead of hardware. There’s lots of room for growth and innovation in that space. And that’s where we see a lot of corporates really focused.
MCWALTER: Is there an issue with a lack of connection between consumers and farmers?
NOLET: Yes though technologies and increased access between the consumer and the farmer are really starting to shift those dynamics. One example would be carbon. There are lots of people looking at carbon markets and carbon sequestration through farming practices, and big companies are paying real money to offset their carbon footprint and offer these things to their consumers. And farmers can play a role in that soil carbon sequestration is one of the cheapest methods to pull carbon out of the atmosphere. And so you get this really interesting connection between a consumer who says I want to buy this product and I want to know that it wasn’t harming the environment. And increasingly, I want to be able to recognize the farmer who made that possible and ideally reward them, whether it’s through a premium or some kind of other mechanisms, like a carbon market, or offset or a label on the product. We’re seeing tons of innovation in this space that goes well beyond the old questions of whether a product is organic or not.
MCWALTER: What are your thoughts on regenerative agriculture?
NOLET: We’re doing a series right now on our podcast on regenerative agriculture, and it’s been fascinating to understand how controversial and polarizing that term can be. And it’s for exactly that reason, whereas some people have used regenerative agriculture to say, you’re a good farmer, and if you’re not doing this, then you’re a bad farmer. But that is overly simplified and the farming practices that are good in one area might not be the farmer practices that are good in another area. And yet you still have the challenge of giving consumers something where they can make a snap judgment and buy the carton of eggs and not have to understand 17 things about how eggs are produced. So it’s really quite a complex issue. But I worry a little bit about oversimplifying from a marketing perspective, without that underpinning of truth and so the key for me is in how do we validate and verify things like carbon sequestration.
MCWALTER: And are there particular business models in the space that generally work better than others?
NOLET: The two things we coach and emphasize and look for is how do you acquire customers? How do you create a kind of acquisition loop? And then how do you retain customers? What is your retention loop? And how do you make your business model such that those are reinforcing loops that grow over time? And obviously, that’s how you can get to high growth and to sustainable growth is through thinking about how you’re creating and capturing value in both the acquisition process and the retention process. So no different probably than any other industry, in terms of the fundamentals of business models, but definitely some nuances around as we said before distribution and channels and supply chain and natural systems and timelines.
MCWALTER: What are your views on the more advanced type of agtech technologies such as cellular meat or vertical foods and their impact on decarbonization?
NOLET: It’s a question worth millions, if not billions of dollars. My view is probably that we’ll see a food system that has many different kinds of production. And that will include cellular agriculture and fermented products, it will include indoor farming and outdoor farming. So we’ll see hybrid systems and increasingly mixed types of production increases, because again, the challenges that we face are really large and we need all kinds of systems to solve them. In particular, we look at it through an investment lens. When you say, do we want to see this change in the world from an impact perspective versus would I invest in that as a business? Those can be different answers.
We also talk about, replacing certain types of agricultural production for example animal farming. But there’s lots of good research that animals used as part of a rotational grazing system can sequester carbon in the soil. And so do we want to replace those animals with cellular systems and lose those decarbonization advantages? Where I end up on these issues is there’s no one answer and it’s much more about creating a food system that has diversity and resilience and different business models and different forms of production. And the only way we’re going to do that is through more innovation and technology and investment because otherwise those new systems won’t be as efficient and have the decarbonizing potential that they could. We definitely need more super smart people and capital thinking about these problems, but there isn’t likely to be one answer.