Countries could see economic growth in e-agriculture when the private and public sectors are aligned to create a climate that fosters innovation. Some lessons can be learned from the Caribbean and Latin America on creating a healthy ecosystem for ICT start-ups in agriculture.
In February of 2016 the Caribbean Development Bank and the Trident Angels Network, an investment group of Barbadian business leaders, convened a meeting to talk about how they can support scalable business development in Barbados. The Barbados Ministry of Labour, the Organisation of Eastern Caribbean States and the World Bank attended along with the Barbados Chamber of Commerce, PitchIT Caribbean, Start-Up Jamaica, Devlabs, and the Barbados Youth Entrepreneurship Scheme.
Critical to the meeting were local start-ups in different stages of development, from students with a business idea, to small businesses looking to expand from services to scalable solutions, to start-ups generating revenues and hiring their first employees. The stakeholders opened their networks to the entrepreneurs to allow them insight into the market, access to potential customers and support services. All the players identified gaps in the support structure for entrepreneurs, and they formed a working group to foster a healthy ecosystem.
Validate with paying customers
CropGuard is one of such Barbados-based start-ups that was present at the February meeting. It tackles pests in agriculture with an innovative software platform that connects farmers to agri-suppliers while offering vital data to government agencies. CropgGuard was launched in September 2014, and was the second prize winner in the AgriHack competition sponsored by CTA in October 2014.
CropGuard had developed a product, but was not yet making significant sales. Therefore, the team was encouraged to start approaching large customers immediately and to test their product by solving the needs of paying customers. Devlabs provided a sales opener, who had come out of the Start-Up Jamaica network, to fill up CropgGuard’s sales pipeline in Barbados. In three months CropGuard had approached all of the farms in Barbados and closed contracts with 50% of them. CropGuard’s next move is to leverage the regional ecosystem to start making sales in Jamaica. The CropGuard team will be based out of the facilities of Start-Up Jamaica and can leverage relationships from members of the Barbados Chamber of Commerce and the business leaders in the Trident Angels Network.
The CropGuard example illustrates that software based agriculture companies have the potential for quicker growth at a lower cost because they do not need a physical product before they start creating revenue. Entrepreneurs can test their product on paying customers, giving them vital access to develop solutions for their customers. This advantage is lost if entrepreneurs are taught to first seek out unrealistic investment. Most early stage ICT start-ups in agriculture do not need cash investment, they need technical development and sales support. Business leaders, business associations, incubators and accelerators can create impact by talking directly to entrepreneurs and giving them targeted sales or technical support.
Learn to pivot
The following two examples highlight further lessons learned based on the experiences of DevLabs in supporting ICT start-ups in agriculture. Jermaine Henry is an entrepreneur based in Kingston, Jamaica, who specialises in business development. He worked with a team to create a two-sided agriculture marketplace, connecting farmers to wholesalers. Their business would have to get both farmers and buyers on their platform. His team was winning pitch contests, going to conferences, getting press attention, and speaking at the United Nations about alleviating hunger in developing nations. Their business plan expanded to providing capital upfront to the farmers while wholesalers sold their product. Yet after a year and a half they had not finished building their platform and they had not made one sale.
Devlabs brought Henry and his team to Silicon Valley for an informal fellowship. In the first week Henry was talking to farmers and buyers. He realised that his solution was too complicated and unsustainable. Henry spent time on the Oakland docks with wholesalers, watching them work and found that their systems were analogue and time consuming. Henry saw an opportunity for a software solution that would be manageable to create and added value. He pivoted from a marketplace to a management tool for freight forwarders in his new company, Quicdock.
Henry’s experience shows that ICT entrepreneurs in agriculture need to focus on talking to their customers to develop a product that fits the needs. Education and training programs as well as incubators and accelerators need to understand this and not distract entrepreneurs from building a product and making sales. In addition, moving away from two-sided market places and focusing on selling business to business are sustainable strategies for entrepreneurs that do not have access to angel or venture capital and need to make sustainable revenues immediately.
Learn by failure
Chile is a country that has invested heavily in the software and ICT start-up ecosystem and has transformed itself into the innovation and entrepreneurial hub of Latin America. In 2010 the Chilean Economic Development Agency (CORFO) launched Start-Up Chile, which offers training, mentoring, networking events and US$40,000 in seed grants to start-ups. Universities support start-up entrepreneurship, and there are tax and immigration policies to attract foreign investment.
ReinSystem is one of the start-ups to come out of the fertile ecosystem in Chile. The team created the business at Universidad de la Frontera as their thesis project. ReinSystem was a combination of hardware and software to help farmers monitor soil conditions. They leveraged the university’s incubator, Incubatec grant programme, which has specific criteria targeted to support first time entrepreneurs. The seed funding they received allowed them to develop the software and hardware to begin selling across Southern Chile. After a year of generating revenues, some members of the team realised that their revenue margins were too low and decided to create a new business. From their work with ReinSystem they learned that most large farms already have sensors in their soil and that the indicator that makes the biggest impact is water. They decided to focus solely on vineyards. In three months the team launched Irricrops, a software platform that helps vineyards manage irrigation. Irricrops is now experiencing growth five times as fast as ReinSystem.
The Irricrops example illustrates an advanced ecosystem that allowed entrepreneurs to fail and learn from their mistakes. The Irricrops team learned from their first experience and launched their minimum viable product (MVP) quickly, with contracts already pending. They applied for and received the same funding that they received for their first company. The ecosystem did not penalise the team for their failure, but allowed for experimentation and learning. Governments, foundations and multilateral organisations should not invest in companies, but should invest in the talent in the region.
What the three examples show is that when stakeholders including governments, investors and the business community, are committed to investing in entrepreneurial success, a diversity of entrepreneurs are empowered to create inventive methods and solutions. An ecosystem in which agriculture technology can be developed and flourish, therefore, depends on the collaborative relationships that support the local ICT entrepreneurs and trust building among the actors, like education institutions, start-up incubators, accelerators, business associations, government and multilateral programs. Everyone in the ecosystems needs to understand the key points that make agtech companies different from traditional agriculture businesses and how to support their growth.
Article about the informal fellowship of Jermaine Henry in Silicon Valley