Tuesday, May 8, 2018

"Farmland Investor on Agtech: ‘A Lot of People Overpromise and Underdeliver’"

So much of what is touted as innovation is just gussied-up rent-seeking, interpositioning or stealth intermediation. In the securities biz, interpositioning is illegal and in the wider world the other two approaches are similar to a description I once heard about a P.E. CEO: "The more you know about him the less there is to like."

From AgFunder, May 7:
Farmland investor Shonda Warner has a rare position in the world of agtech. As managing partner at Chess Ag Full Harvest Partners and an occasional angel investor in tech startups, she plays the role of both investor and user, as Chess Ag is both landlord and farmer on much of its 50,000 acre portfolio.
Warner grew up in rural Nebraska in a farming family and got her start in finance working as a trader for Cargill in Kansas City. In 2006 she returned to agriculture and started Chess Ag, one of the first agriculture investment funds in the country.

Chess Ag manages now roughly $150 million in assets across the US making Warner what she herself calls “the ultimate user” of agtech solutions.

We caught up with Warner to find out where frustrations with agtech startups start for farmers, and what low commodities prices mean for tech startups.

What do you see as the main challenges for agtech adoption?
We’ve spent our lives as farmers and have seen many advancements and failures. Young and well-meaning people come into the game and they believe fully they have the latest thing, and of course, some do and some don’t.  People from the outside don’t tend to give credit to all the people who came before them,  this is really frustrating for farmers. There are often reasons beyond technology as to why applications don’t work.  Perhaps more of a meeting of the minds would help in this area.
There is a fantastic crop of new, young farmers coming along, but farming is extremely capital-intensive; it’s very difficult for young people to get started if they don’t have families in the business, and that’s a whole other conversation. Adoption depends on what kind of technology it is, there are some things that are really worth the time and investment for a farmer, and some things are interesting but more marginal. I think that one of the sweet spots has been a lot of advances in variable rate application technology and that’s a win for everybody.

Ag is such a big sector. It’s so fragmented and everybody is selling down to the farmer.  Many people in the industry don’t realize how little extra margin there is for the average farmer in America to survive on – at least in the last five years. The isn’t much room for financing experimentation with unproven technologies. There are a lot of people in quite a bit of pain, certainly across row-crop America.

It sounds like you think that venture capital is not the best way to finance agtech. Is that right?
I’m glad that venture has come to ag because five or 10 years ago it wasn’t there. So I’m delighted, but I think that there is a huge amount of other opportunities and need in rural America and that the return profile of that opportunity wouldn’t interest the average venture investor.

I think that venture has really been a hot topic for the past few years and I’m a little worried. I hope they’re rewarded properly and stay in the ag space. One worry is that the entrepreneurs don’t realize that it’s a seasonal business. If you didn’t get your trial to the right place at the right time, you have to wait till next year. Money burns at a faster rate this way....MORE
Huh, agriculture is a seasonal business.
There may be an opportunity in that statement.

Possibly related:
Another Day, Another 3D Printing, Robotic Harvesting, Internet-of-Things FarmBot
..."Yup, I used to raise corn for ethanol. But then the topsoil blew away and I couldn't even get enough juice to run my tractor or get drunk on Saturday. Then this stranger came to town. Ordered something called a 'la-tay' and called himself a 'vee-cee.' Said he'd give me $20 million to come to Californee and herd algae. So we packed up our furniture in his little toy car and came west. Now I've got a regular bonanza of the slimy critters and the kids got shoes. Hain't looked over my shoulder back east since."
-from our 2008 post "Algaen Gothic"  

As usual, apologies to the Grant Wood Estate and the Art Institute of Chicago for the image.