11.04-11.06 Agritech Business Model

What is Agritech?

The application of modern technology to agricultural processes in a bid to improve production, enhance efficiency, and stabilize the agricultural supply chain. It cuts across all areas within the agricultural industry and may represent the next major disruption within the sector itself.

Fourth Agricultural Revolution

The 1st agricultural revolution was the transition of our ancestors from a nomadic hunter-gatherer society to a more permanent farming society associated with planting and nurturing crops. The 2nd revolution was the leap in the productivity and scale of farming through the mechanization of farm inputs. The 3rd revolution was the widespread adoption of species hybridization and genetic engineering of both farm animals and crops, and increased use of fertilizers and pesticides. The 4th revolution is centered around the mainstream adoption of Agritech into farming practices, it involves the use of tech such as drones, IoT, robotics, data analysis, hydroponics, 3D printing, and much more.

Why do we need to adopt Agritech?

1. The need for improved land management practices: the adoption of more sustainable practices through the use of Agritech is a possible avenue for solving the challenges. Soil sensors, soil improvement techs, and the use of drone-aided soil analysis are a few of the perfect solutions.
2. The challenges of climate change: agriculture contributes significantly to climate change through the release of greenhouse gases and the destruction of tree cover.
3. Increasing carbon footprint: the agricultural industry plays an undeniably large role in increasing carbon footprint, the use of fossil-fuel-based fertilizers, the release of carbon sequestered in the soil, the burning of fossil fuels like coal/crude oil/natural gas, as well as the release of methane, nitrogen, and CO2 through various process.
4. Rapid resource depletion: aside from being a mass producer of waste, agriculture is also a major consumer of resources like metals/petroleum/land/other resources. It leads to the depletion of natural resources, adds to pollution, and worsens climate change.
5. The need for greater biodiversity: agriculture is the most severe factor to affect natural biodiversity. In order to exploit new farmland to mitigate population growth, the depletion of forests, grasslands, and wetlands are frequently cleared. It leads to consequences such as species extinction, global warming, ecosystem disruptions, and increased animal-transmitted diseases and attacks as we encroach ever closer to these natural habitats.
6. Water management hurdles: only 1.2% of freshwater resources are accessible to humans, of this available 1.2%, 70% is used for agricultural activities. It makes sustainable agricultural water resource management a top priority in many regions with increasing severe droughts due to climate.
7. Our population is growing rapidly: the population is expected to hit 9.6B by the year 2050, and 1/3 of people did not have adequate access to food in 2020. It is important that we strive for innovative and sustainable solutions to the problem of rising food insecurity and a steadily growing population.

Use of Agritech

Smart Farming

Use proven scientific methods to increase farm productivity through greater farm produce yields, faster planting and harvesting, sustainable farming practices, and so on.

The smart irrigation system monitors the weather, soil conditions, plant water use, and evaporation to automatically optimize the watering schedule according to prevailing conditions.

The weather forecasting systems to optimize crop planting & harvesting is a great way to increase yield.

The use of sensors/drones/satellites to facilitate precision farming systems allows the right crops and farmland to be accurately allocated to the right place at the right time.

Hydroponic farming involves growing plants without the use of soil, which may be substituted with alternatives such as nutrient-rich water or various other suitable soil substitutes.

Smart farming techs led to the development of vertical farming, a system in which crops are grown in vertical layers through the use of innovative irrigation, lighting, and nutrient delivery systems.

Drones & Satellites – Scanning & Surveillance

The use of drones has brought several key advantages to farmers, such as quicker and efficient dispersal of farm inputs like seeds, pesticides, herbicides, and fertilizers, and monitoring of crop and livestock health through visual and electromagnetic data.

IoT-based Sensors

The IoT devices can be used in Agritech to detect/process/transmit/monitor large amounts of data concerning crops/livestock/prevailing weather conditions. The info can be used to increase yield and save costs through the optimization of farm inputs.

Big-Data

The rise of big-data analysis has allowed farmers & researchers to obtain a deeper and more holistic understanding of how a farm ecosystem works. Big data has also been quite useful for crafting agricultural policies that affect food production and supply at both local & international levels.

Blockchain in Agricultural Logistics

Certain key features that are native to blockchain tech have been leveraged to solve the issue by creating a system that allows both consumers and farmers to directly track the movement of farm products through the supply chain.

Biotech

It involves the use of genetic modification and hybridization, vaccines, bio-pesticides and organic fertilizers, tissue culture, etc. The aim is to improve both plant and animal yield, maximize profits, increase disease resistance, increase nutritional content, and reduce dependence on fertilizers.

Farm Maintenance Technology

Increasing mechanization has long been the dominant green within the world of Agritech due to labor shortages as the number of people within the workforce involved in the agri sector shrinks. This has hit the industry hard, as agriculture is a particularly labor-intensive industry.

Production & Transportation Innovation

One of the major issues of agriculture has always been transportation. The main solution is the adoption of hydroponic farms and vertical farms, which allow farms to be successfully supported in urban areas. Other solutions include digital marketplaces, and streamlined supply chains, which cut out the middleman and reduce the number of steps involved in the movement of a product from farm to plate.

Three Trends of Agritech

Technologies that Enhance Productivity

The growing importance of desert agriculture: as the population rises and the availability of arable lands due to increased urbanization, industrial consumption of raw materials, and poor land management practices, there is an increasing drive towards developing sustainable agricultural practices in regions that are difficult to cultivate such as arid areas or even deserts. It involves the use of innovative tech such as efficient water use, saltwater desalination, drip irrigation, and genetic modification to create crops and livestock better suited to such an environment.

The adoption of seawater farming: agriculture is the single largest consumer of fresh water on the planet, and there is significant interest in the discovery of alternative sources of water for the purpose of agricultural activities.

Tech Serve as the Foundation for New Business Models

Biotechnology

It involves the utilization of cellular and biomolecular processes within organisms for the purpose of achieving various beneficial outcomes. There are some companies that use biotech in the following:

1. Agri Biotechnology Startups: mainly involved in the generic modification of crops and livestock for the purpose of improving qualities such as yield, resistance to pests and disease, as well as shorter growing periods.
2. Microbe Plus: it is a Polish-based biotech firm, with the goal of integrating biotech into Agritech and promoting sustainable agriculture through plant protection tech. They specialize in the production of bio-based farm inputs such as pesticides and fertilizers.
3. Bioheuris: it focuses on the development of herbicide-resistant crops, through the integration of synthetic biology and gene modification to create plant strains that have herbicide resistance by identifying the genes in resistant plants and swapping them into the crop DNA.
4. Microendo: It specializes in synthesizing personalized fertilizers that are safe for plants, consumers, and the environment. Its process involves identifying the unique microorganisms associated with the healthy growth of that particular crop and using these microbes to craft an organic fertilizer.
5. ART Lab Solutions: it is involved in the breeding of improved cattle species, primarily through the use of in-vitro fertilization (IVF) tech. It involves the use of genetic research to create cattle breeds that offer higher yields, are more resistant to pests and diseases, and produce more offspring.
6. BioPrime AgriSolutions: it is involved in plant tissue culture and the use of agri-biologicals. The company makes use of various methods such as doubled haploidy, somatic embryogenesis, micropropagation, and in-vitro mutagenesis to support the breeding process.

Mobile Phones

It has numerous applications yet some of the key uses associated with these devices within the context of Agritech include info dissemination and networking, remote monitoring through the use of IoT, and distribution channels for various financial services such as loans, insurance coverage, payment systems, and savings. The devices can be used for other purposes such as crop yield analysis through their integration with big data, disease diagnosis through the use of plant disease identification apps, access to info on the weather and climate, field and water resource monitoring, etc.

Internet/Connectivity

May of the tech used within Agritech requires some form of internet connectivity of local networks, which allows for remote activity, increased efficiency, global access to information, and so on.

Data Analytics & AI/ML

Data analysis simply means the ability to detect/interpret/communicate useful patterns found within available data. AI & ML have been playing an increasingly important role in this process and may be the answer to many of the problems facing agriculture.

1. Top AI startups impacting agriculture: many startups are geared toward discovering feasible solutions to some of the issues facing agriculture such as resource management, how to increase productivity, and the safest ways to maximize profits. It helps farmers to make informed decisions.
2. AgEYE Technologies: it is a US-backed startup that specializes in the production of AI tech that monitors plant stress through the use of sensors and alerts the farmer of changing conditions that may endanger their crops or how to optimize crop yield. It reduces the burden on the part of the farmer and helps them make informed decisions.
3. HelioPas AI: it offers farmers advanced drought monitoring tech through the use of sensors that measure field data, weather conditions, and soil moisture. Farmers can use it as an advanced drought warning system and a way to maximize their yield through well-informed irrigation practices and drought insurance planning.
4. Walkus Technology Solutions: there are two key problems in developing countries [prohibitive cost of these techs] [the small-scale land holdings are not ideally compatible with robotics automation]. W offers affordable AI-powered sensors and monitoring tech which are designed for small-scale farms and can be monitored by the farmer through a variety of terminals.
5. OneSoil: it is a satellite data analytic company that offers extensive satellite imaging data accessed directly from the EU Copernicus program. Farmers can perform various activities such as allocating land boundaries, identifying crops, and monitoring both cloud patterns and weather data.
6. Root AI: it offers AI-based solutions specifically designed for indoor farming. The techs not only measure the soil and climate conditions within the indoor ecosystem but also detect when crops ripen and help in the harvesting of these crops through the use of patented robots that navigate the farm through the use of special indoor sensors.

IoT Software and Hardware

Top IoT startups impacting agriculture, the applications of IoT in agriculture are limitless. The following are the companies that use IoT and Agritech.

1. Xfarm: it is a firm that deals with the use of agriculture-based IoT sensor tech to solve various agricultural issues, the sensors receive info from the environment such as soil conditions, moisture content, humidity, sunshine, the presence of animal sounds/pests, etc.
2. Mycroclime: it offers a range of hardware/software Agritech IoT solutions aimed at environmental regulation, including cloud-computing services used to aid the integration of this tech. One of the most popular products is an array of temperature and humidity sensors that can be used to create a perfectly controlled greenhouse with a wide range of hardware designed for cooling/ventilation, and heating which the farmers can access from their mobile device.
3. Auroras: its SAFE system detects environmental conditions and passes the info to the farmer. It can act upon the info to make small changes to the environment through the use of an array of IoT hardware such as activated switches/motors/sirens/doors/curtains/fume extractors to optimize.
4. Cultyvate: it is a smart irrigation system that uses a mix of IoT techs, AI/data analytics/satellite imaging to create a fully automated irrigation system that helps farmers optimize water resource management on the farms.
5. Swinesmart: it makes use of various IoT devices and sensors to help pig farmers closely monitor their animals/identify the optimal conditions that can be used to improve animal safety and productivity. The tech allows animal products to be tracked back to their farms of origin, and back to the particular animal it was sourced from.
6. Lentera: it offers a range of IoT sensors that monitor soil conditions, weather patterns, humidity, and the presence of pests in conjunction with satellite imaging technology.

Robotics and Automation

The increasing integration of robotics and automation with AI tech and IoT may represent the future of Agritech and the agri industry as we know it.

1. Grofit: it is an automation company that designs and markets a range of IoT devices custom-made for the agricultural sector. The sensors help farmers monitor various weather and soil conditions remotely through the use of specialized software. The sensors can detect conditions such as sunlight/humidity/temperature/evapotranspiration/soil moisture, etc.
2. IgnisNova: it offers IoT/robotics solutions to farmers through the use of AI-powered systems. The remote IoT sensors allow the farmers to easily access an entire world of info using on-site sensors and satellite imaging to obtain info on environmental and soil conditions, as well as crop health and weather patterns.
3. Deepgreen: it is an AI and robotics company that merges the fields of IoT/AI/Robotics, and automation to create a catalog of tech solutions that allow farmers to remotely monitor crop health through the use of API that integrates efficiently with various agricultural hardware, sensors, tractors, and robots carry out various labor-intensive farming operations.
4. Sensonomic: it is a Norwegian company that is introducing a line of Agent-Based Modelling (ABM) simulations that can be used to predict anything from crop growth to weather models and even on-field farm operations.
5. Sagri: it is designed to integrate IoT sensors, satellite devices, robotic equipment, and crop data into a farmer-friendly AI interface that provides actionable data that can be used to optimize farm yield and conserve valuable resources.

Blockchain/DLT

Blockchain startups transforming the agricultural industry.

WorldCover: it is an insurance startup, which is geared towards building an insurance platform to address the significant climate risks. It monitors rainfall and automatically triggers payouts to farmers under the coverage when rainfall falls to levels that may endanger crop yield. This helps cushion the economic impact of natural disasters such as drought.

TE-FOOD

It is a traceability startup that makes use of blockchain tech and unique identification tools to track various forms of agri products throughout its supply chain.

Ripe.io

It utilizes blockchain tech to build a transparent digital food supply chain in order to foster long-lasting consumer confidence. The startup creates the blockchain of food by mapping the journey of agricultural products along the supply chain through the use of high-quality food data.

Etherisc

It is a blockchain-based insurance firm that offers farmers crop insurance coverage through the use of decentralized insurance apps. It works through an extensive decentralized weather monitoring service that broadcasts weather info to both parties from different reliable external weather data sources and triggers insurance payouts when an extreme weather event that may affect crop yield is detected.

Demeter

It allows farmers to lease and farm micro fields in the world without the need for middlemen, unnecessary complexity, or the overhead of a big organization which would only drive up costs without necessarily adding value to the service.

What is An Agritech Business Model?

It is the plan of a business organization that is a part of the Agritech industry, a business model is expected to outline how a business operates, its products/services, its monetization model, expected costs, customer base, and other details.

Emergence of Agritech Business Models

1. Increased Digitization: the increased digitization and interconnectivity made farmers much easier to reach by Agritech companies. It opened them up to a whole new world of info and opportunities by breaking down the barriers of data asymmetry. Besides, it opened up a feasible integration channel between farmers and Agritech companies.
2. A shift in investor interest: purchasing farmland is becoming an increasingly low volatility investment as advances in tech allow us to better understand and adapt to our changing climate. The growing demand for farm products as the population grows ever larger and increasing urbanization sees a significant number of traditional agricultural economies leave the agricultural industry, leaving room for new investors.
3. Increased accessibility to new techs: one of the major challenges Agritech faced early on was the exorbitant prices of the tech associated with their use. The price of IoT sensors which are another vital component of many Agritech solutions has fallen by over 50% in the last decade as well.
4. Changing political and social sentiments: the changing political will towards Agritech and the push for newer innovative techs within the agricultural industry, has largely been driven by a shifting social sentiment concerning climate change and over-dependence on fossil fuels.

Agritech Business Models

Farmer Advisory/Consulting

It is a digital advisory service whereby Agribusiness firms offer expert advice and consultation services to farmers, typically over digital platforms. The farmers gain important insights that help them optimize profits by adopting Agritech solutions that increase yield and efficiency while at the same time driving down costs in the medium to long term.

There are several advantages to this type of business model: [the info can be disseminated through the use of mobile devices and the internet, even SNS platforms as well] [the operating cost is very low after setting up the platform] [there is potential for rapid growth since the farmers will suggest the service to other farmers once the trust is built between advisory firms and the farmers].

There are several challenges to this type of business model: [the monetization of the service is difficult when dealing with small-scale farms, especially using a subscription-based model] [selling the farmer data to other businesses through B2B mode, it proves a more reliable option] [the firms can offer a paid premium package that offers additional services].

Peer-to-Peer Lending

Sourcing financial support for agri inputs and activities has always been a challenge for farmers, especially for small-scale farmers since the monthly interest may be as high as 10%. The digital lending platforms may offer the solution to some of the core issues. One is known as P2P lending, which is a digital financial service that allows farmers to obtain small-scale loans from interested investors, who typically charge a lower interest rate than the local agencies.

Traceability

It is built upon the incentive of farmers, agro-allied industries, and primarily the food industry to ensure their products meet the standards set by various private/public or internal/external regulatory bodies.

Many businesses set themselves up as traceability firms that use various forms of inventory software, IoT sensors, databases, and blockchain tech to trace agri products or raw materials back to the farm of origin.

Traceability is primarily a B2B business model, as the incentive to maintain these standards rests not primarily on the consumers, but on the brands from which they source their goods.

Digital Marketplaces

The rise of e-commerce had several key advantages, such as bringing consumers and sellers much closer, thereby cutting costs by getting rid of the middlemen. It also exposed both parties to a much wider market through the use of IT/online catalogs, vastly increasing sales volume.

Small-scale farmers are able to utilize the digital market for both the purpose of buying and selling. They would be able to leverage the key advantages of e-commerce to sell the goods to a wider range of customers. E-commerce platforms offer the farmers with limitless shelf space, access to a wide range of buyers, and streamlined payment services.

There are some challenges of this business model: [farmer literacy concerning use of digital marketplace platforms and technology, significant efforts have to be made to educate farmers] [intrinsic nature of the farming industry ‘farmers sell products at wholesale volumes while consumers are mostly the retail purchasers’] [the retailers want to purchase a variety of items while most farmers specialize in the sale of relatively few species products].

The answer to the above issue may be the emergency of a digital trader who maintains an inventory of goods which allows them to aggregate enough products from each farmer and utilize the advantages of digital marketplace to sell to individual consumers. The online traders would provide auction services, logistics and product tracking, streamlined payment services, and much more.

Mechanization, System Leasing, Rentals

The major problem facing modern agriculture is chronic labor shortages since agriculture is a very labor-intensive occupation, it leads to high labor costs as the farmers have to offer higher salaries to attract willing workers to do the job.

One solution is the increased mechanization through the use of robotics and automation. The devices can carry out operations with little/no human supervision, in some cases even more efficient than humans.

Yet, the initial cost of mechanization is still too high for small-scale farmers can afford. One solution is leasing these inputs for a specified period of time instead of purchasing them. Traditional leasing is often expensive and filled with inefficiencies.

A digital platform can provide the service for equipment leasing, allowing farmers to make use of the equipment without having to worry about things like maintenance costs, storage, insurance, and so on depending on what was stipulated within the service level agreement (SLA). It allows the equipment owners and farmers to save costs through efficient scheduling services by allowing the owners to take advantage of clusters of demand.

Other Agritech Business Models

Engineering Services

It offers customers problem-oriented solutions to technical issues they may have concerning practices. This may include mechanical/electrical/software and electronic engineering. Engineering businesses may offer a single technological solution – for example, the multidisciplinary.

There are several key resources that the good engineering model must capitalize on. 1st is constant access to updated/relevant info concerning the industry/ability to leverage the info to create uniquely tailored solutions for your clients. Other important resources include access to a range of effective tools and equipment/skilled labor/parts/a network of engineers in allied fields.

Manufacturing

It is very important because they supply the tools/machines/devices that are used by virtually every sector of the Agritech industry. It involves which items you intend on manufacturing and for which industry, are these items considered high-tech/low-tech, and are you going to use raw materials or pre-fabricated items, are you going to produce the final products or just a step along the production chain.

Operations within a manufacturing company can vary widely depending on the unique product offered by the firm, and its customer/market condition. It involves logistics such as raw material and equipment procurement, supply chain, production capacity, production type, environmental impact & sustainability practices, waste management, market analysis, energy efficiency, customer services, etc.

Processing and Treatment

The agri industry is a primary industry and as such produces raw materials that must be further processed into secondary goods before they can be sold to the final customer. Also, it is an industry that produces large amounts of waste, which requires further treatment into forms that can be safely and easily disposed of without causing harm to the environment. The processing/treatment industries from an integral part of Agritech and the agricultural sector as a whole.

Offline Retail and Sales

It refers to a fixed physical storefront, known as a brick-and-mortar business model. It is different from online retail using a digital marketplace and comes with its unique set of challenges as well. Having an easily accessible location and enough storage space, goods must be well arranged and conveniently kept in units that can be easily purchased by buyers.

The stores can adopt several methods regarding product acquisition, storage, and distribution: [only order the goods when they have been requested by the seller and paid for] [pay to the manufacturer only when the goods are sold, thereby maintaining a good profit margin and reducing upfront costs to the retailer] [obtains the goods from the manufacturer by paying the acquisition costs upfront and then selling them at a retail price to customers]

Service Provider

Farms require utility services such as electricity/water/waste management as much as household or industry. The reliable/safe/continuous supply of those services is of utmost importance to farmers, which is a need that many utility providers capitalize on.

The ultimate goal of a service provider should be to offer optimal services to all clients, irrespective of such classifications. It includes clients who may not be able to afford these services and may require tailored solutions. There are different pricing models that may be used in this business model, but the commonest ones are fixed pricing, consumption-based pricing, and block tariffs.

Comparing Models

Lifetime Value (LTV)

TLV of a customer is a term used within the world of business and marketing to estimate the net profit that a particular customer will contribute to your business over the entirety of your business relationship with them. It takes into account both present and potential cash inflow from a customer.

Subscription models and peer-to-peer lending typically have higher LTV, and mechanization and engineering business models have relatively high LTV because most customers need their services for routine maintenance/troubleshooting/repairs due to the technical nature of the business.

Customer Acquisition Cost

Cost of acquisition (CAC) refers to the total cost incurred by a business entity in the process of acquiring a new customer. In order to obtain profit, the CAC must be lower than the LTV. In simple terms, the cash inflow should be higher than the money spent on acquiring the customer.

Other factors affect CAC: marketing costs, ads, demand for your services, the accessibility of your service to your customers, etc. Several ways to reduce CAC: prioritizing/re-accessing the customer base, adopting the use of affiliate programs, improving customer retention through efficient services and loyalty bonuses, etc. P2P lending, digital marketplaces, and Traceability have a low CAC value.

Steps to Success Agritech Start-Ups

Identify Target Market

The challenges they face, and the solutions you can offer as your value proposition. It involves deciding whether you are a B2B/B2C firm, carrying out market research, and building an effective strategy.

Present a Clear Value Proposition

Be clear about the potential benefits you can offer to the clients, this can only be done after you have mapped out the ecosystem around which the value chain of your clients operates, pointed out the challenges that you can solve for them, and provided compelling evidence through the use of proof, successful projects, and strong data.

You Have to Give It Time

Building a sustainable business model is a marathon, not a sprint, and careful deliberation, consistency, and patience are required.

Know the Way to Scale the Tech

Scalability is important within the world of Agritech as farms typically come in a wide range of forms. It is imperative that entrepreneurs in the Agritech industry understand the operational activities of target clients and understand how to adapt their concepts to these unique situations.

Do NOT Assume You Know

Do not be quick to assume that you are well-versed in sales since you are applying new ideas. There is a significant wealth of info available from past business models, and a good entrepreneur knows how to leverage this to improve existing systems and avoid as many mistakes as possible.

Focus on More

It is important for every setup to be profit and value-centered, it is imperative that they understand the ecosystem in which they exist. Having a more holistic view of the Agritech industry offers entrepreneurs more opportunities for potential innovation and offers useful insights as well.

Focus on Regulatory Risk

Regulation is critical in the world of Agritech since many firms deal with sensitive or potentially dangerous tech such as genetic modification, pesticides, waste management, etc. It is important to pay attention to both the local/international regulations guiding the usage of the technology.

The Same Goes for ESG

Environmental, social, and governance (ESG) criteria are a set of guidelines used to screen corporate policies and to encourage companies to act responsibly. With the increased drive for sustainability practices and carbon neutrality, Agritech firms must make sure they adhere to ESG regulations.

Cross-Functional Implementation Team

The startup needs a cross-functional implementation term with a diverse set of skills and different BKG which allows them to offer unique/varied services to the business. It’s always advisable to seek differing perspectives when dealing with a new business, especially as innovative as the Agri industry.