Farm startups set to shake up Cargill, ADM are stumbling

The daring startups that once threatened to shake up the $1.5 trillion agriculture sector and disrupt giants such as Archer-Daniels-Midland Co. and Cargill Inc. they are stumbling.

Indigo Ag Inc., once a grain trading and shipping marketplace, has cut jobs and scaled back its business. Farmers Edge Inc. was taken private at a fraction of its initial public offering. Gro Intelligence, named by Time magazine as one of the 100 most influential companies, is closing, according to a person familiar with the matter.

The mistake many of these newcomers make: thinking they can easily apply the Silicon Valley playbook to the world of agriculture.

“How many farmers do you see?” Matt Carstens, chief executive of Landus, Iowa’s largest farm cooperative, asked during a presentation at the World Agri-Tech Innovation Summit in San Francisco in March. “We are all talking to ourselves. This is beautiful. But someone has to run it on a farm.”

The efforts show how difficult it is to turn around one of the world’s oldest industries, especially during a downturn in the farm economy. The task is even more challenging as traditional plant operators are aggressively pushing high-tech services to farmers.

Initially, startups raised billions of dollars from investors, taking advantage of ultra-low interest rates that helped fuel speculative ventures. Their vision, inspired by eBay and Uber, was to take traditional crop trading and management onto digital platforms, providing data and technology to change practices across the farm supply chain, but once abundant funding is dry quickly. The global “agri-food” sector raised $15.6 billion globally in 2023, down nearly 50% from a year earlier and the lowest level since 2017, according to an investment report from venture capital firm AgFunder.

The giants of the industry have proven to be formidable opponents. There was “very, very strong industry resistance to FBN being in the market,” said Charles Baron, co-founder of the Farmers Business Network. The company faced pushback from bigger rivals in the inputs sector in its efforts to use collective data from growers to provide price transparency, resulting in antitrust litigation a few years ago that included allegations against Bayer AG and others.

But the main issue for many of the startups is the difficulty in connecting with farmers.

Lance Lillibridge, who grows corn and soybeans in Iowa, said startups don’t understand the farmer, while growers themselves are wary about sharing sensitive production data in exchange for payments tied to carbon credits.

“They take our data and use it for things we had no intention of using the data for,” he said. “They have broken the farmer’s trust.”

‘a chance’
The venture capital community is learning that the return on agricultural technology is different from other fields, according to Marc Kermisch, chief digital and information officer at tractor maker CNH Industrial NV, which has its own strategy to connect farmers with technology equipment. high.

“Farmers are small business people at the end of the day, and they usually have a chance to plant their crops every season,” he said. “So their bar for adding technology is really high, because if they mess up their crops,” they’re affecting their profits.

Dean Banks, chief executive officer of Indigo Ag, says disruption is easier to talk about than actually disrupt. The company divested businesses, including one that sought to use idle trucks to transport crops, and is now focused primarily on seed coatings and helping farmers sequester carbon.

Indigo Ag’s valuation fell from almost $4 billion in July 2022 to about $200 million a year later, according to estimates from PitchBook, which provides data on private and public markets. A more recent estimate is not available due to a lack of data, and the company declined to comment on the matter.

Both investors and startups have recently been reluctant to disclose company valuations, said Alex Frederick, senior analyst of emerging technology in the agriculture and food sectors at PitchBook. “Investors are quicker to invest when valuations are secure, but valuations have been in free fall to a degree,” he said.

Banks said Indigo has made “significant progress” and is looking to break even by the end of the year, based on earnings before interest, taxes, depreciation and amortization. “We’ve sold or gotten out of businesses where there were other people who were just as good or better at it,” he said.

Canada-based Farmers Edge, which seeks to provide technology solutions across the supply chain, reached a market value of about C$835 million ($607 million) following its initial public offering three years ago. It was acquired earlier this year by Fairfax Financial Holdings Ltd. at a price 98% below that of its IPO.

Valuations evaporated
“Most of the tech world experienced inflated valuations, especially startups, and then as things started to normalize post-Covid, those valuations evaporated,” said Vibhore Arora, CEO of Farmers Edge.

Arora said his mandate has been to reset the company’s direction, double down on execution and stop trying to do everything in the crowded agtech market.

Gro Intelligence, which used satellite data and artificial intelligence to make crop forecasts, earlier this month let go of most of its remaining staff as it faced a worsening funding crisis and is is closing after failing to find a buyer, according to the person. with the case.

The company in February parted ways with founder Sara Menker. Just five years ago, Gro boasted that it was an alternative to the US Department of Agriculture when the agency had to cancel reports due to a government shutdown.

The Farmers Business Network, meanwhile, is trying to regain its footing after a recent wave of executive departures and layoffs.

“The down cycle in the ag industry over the past two years has affected many companies and FBN has not been immune,” said CEO Diego Casanello. He said FBN is on track to be profitable this year on an Ebitda basis after taking “many difficult and careful decisions” to focus on its most profitable and core services.

FBN said in an emailed statement that it continues to grow and is serving more farms than ever on its platform. He notes that he is a key partner of ADM and has become their exclusive partner in managing grower sustainability programs that support thousands of growers. He said the strong resistance from input companies underscores farmers’ need for a competitive market.

FBN had an estimated valuation of about $3.8 billion a few years ago, although an actual figure was not available. The company recently took out a short-term loan in the form of a convertible note that has yet to be priced, according to a person familiar with the matter.

Landus’ Carstens said both FBN and Indigo have done good work, but they “used the strength of our traditional ag” and couldn’t break through. For its part, Landus, with the support of co-founder and former CEO of FBN, Amol Deshpande, is launching its digital platform focused initially on fintech, leveraging the advantages of the cooperative model to provide services to its member farmers and more wide.

The agtech startup space in general needs to prepare for the continued tough funding climate, said Rob Leclerc, a founding partner of AgFunder. Some companies are trying to retool their pitches to investors to emphasize the startup world’s latest darling, artificial intelligence, but it’s often a weak and transparent effort.

“Companies need a really compelling story about why they’re fundamentally different.” he said. “We’re going to see a huge amount of failure” in this sector.