George Kellerman / June, 2018
What are the top three challenges unique to building an agtech startup?
George Kellerman, COO and General Partner of Yamaha Motor Ventures shares three challenges building and scaling an tech startup in the agriculture industry such as identifying the real problem of the grower and not just the perceived problem, navigate the financial uncertainty and seasonal changes, as well as the balance between being focused and addressing a too narrow market.
What are the trop three challenges unique to building an agtech startup?
The top three challenges to building an agtech startup I would say are understanding the real need of the grower. Often times I talk to growers and they say that startups come and pitch their product or idea and the grower realize very quickly that the startup has no real understanding of what their daily problem or challenges are.
You really need to understand the grower. You need to spend time with the grower in the field. Don’t just think that you can design a product or service in your workshop and then go out to the field and expect it to work. You need to spend time with the grower understand the actual operation in the field and develop for that. That’s probably the biggest challenge.
The second one is just being able to weather the financial uncertainty of the agricultural industry. If you’re working on a particular crop that crop might be doing really well but then the weather turns and they have a bad season, and the grower can’t afford to use your product or service. So you need to be able to fund your operations over a long period of time and not just over one season but multiple seasons and get out in the field. That’s really hard for a lot of startups because they don’t have the financial resources to wait till the next harvest or the next spring.
Another challenge for agtech startups is that they often tend to be too focused. What I mean by that is that they’re looking at a problem that is so narrow that there really is no market for it. If you want to get outside investors interested there has to be a larger market opportunity. As an investor, we often tell startups, you need to focus.
The challenge in agtech is that the industry is so broad and there are so many different needs, whether you’re dealing with cattle, dairy, plants, permanent crops, and within that whether you’re dealing with spraying, harvesting, or weeding. There is a lot of different things that you can do. You need to have some focus in order to have a thesis, but if you’re to narrowly focused it’s very difficult to get investors to fund you. One of the challenges may be the only source of capital is the industry itself, meaning the growers who need that particular solution. Sometimes it’s difficult to put out the money if they don’t know the value of the solution ahead of time.