4 - What Do We Need Right Now to Move Gen Ag Equipment Startups Forward? - Part 1
A competitive market of Next Gen FLCs could dramatically increase the rate of adoption of Next Gen Ag Equipment.
Happy Friday, and Shanah Tovah to those who celebrate!
It’s been a minute since my last Ag is For People. This is, it turns out, definitely not a newsletter with a regular cadence. That said, I’ve got a bunch of things I’m thinking and talking about that I’m trying to be better about writing down, so expect an increased cadence over at least the next several weeks.
Next week, I’ll be attending and speaking at FIRA-USA, the world’s premier agricultural robotics conference. I had a great time and learned a lot at the event last year (despite having to crutch through field trials, and, worse, the Los Vegas airport due to a poorly timed broken ankle.) This post is part 1 in an attempt to organize my thoughts prior to the event and get more out of IRL conversations next week. It’s more off the cuff than most of my writing - I tend to like to have at least half a dozen referenced data points in things that I publish, but I’m busy these days and I’m too cheap to pay for wifi on this 1.5 hour flight, so here goes.
How Farmers Can Use Tech to Make Financially Sound Decisions
Next week, Seana Day, Jeff Morrison, Arthur Chow and I will be discussing the financial side of ag robotics tech, both for farm operations and startups in a panel titled “How farmers can use technology to make financially sound decisions?”
Personally, I’ve yet to meet a farmer who is using “technology”, or at least technology from startups, which I’ll define as private companies who’ve been in market for <10 years, without deeply considering the financial implications for their operation. Even the super tech-y farmers that use new tech far before its been proven to be viable typically have long term returns in mind. They’re actually thinking more like fund managers, in that they’re assuming a relatively high percentage of their tech portfolio fails, but the couple that make a difference will more than make up for those losses.
There are definitely a lot of farmers who are not currently using technologies and are leaving returns on those technology investments on the table. There are lots of reasons for this, but I believe that the most fundamental one is a lack of real time, or close to real time, understanding of the relationships beteen actions and crop production budgets. Human behavior is both a huge barrier and opportunity for driving adoption, and that behavior is influenced by
Similarly, there are lots of farmers who fail to implement technology in such a way that drives returns. I have direct personal experience with the latter case, and its wicked frustrating. The tendency of the farm operator (the customer) is to blame the technology provider for inadequate onboarding, set up, and support. That seems fair - I blame the seller when I buy products that might work under certain circumstances but don’t work for me.
This customer support element is going to continue to be a massive challenge for next generation ag equipment companies to address. There are couple of existing ways to streamline addressing this problem. The most obvious and available option is to leverage channel partners. We just published a database of Ag Equipment Manufacturers in the Agtech Toolkit to start to make this just a little bit easier for startup companies. There are lots of established equipment dealerships that deeply understanding their customer base. That knowledge can be leveraged to sell the right product and deliver the right onboarding and support to the right customers.
In addition to existing OEMs, I believe that Custom Crop Service Companies are a less traditional channel partners that can and will play a huge role in the next 1-2 decades in driving technology adoption.
What the heck do I mean by “Custom Crop Service Companies”?
In the Midwest row crop world, Custom Harvesters are a thing. (They even have a Hall of Fame.) My family’s farm is managed by a father/son/grandson combo that rents equipment to both farm the land that they own/lease and to opportunistically provide custom harvest services. They actively lease and live on our land, but they also derive income and drive up the ROI of their equipment payments through selling their services annually. You need serious access to resources (like, access to 100s of thousands if not millions - financing is common) to get into the custom harvesting game in row crops.
In a leaner example, I’ll point to the most recent thing I paid for. My rugby team needs to get our fields lined semi-regularly. Lining a field is not the most fun way one can spend a Saturday or Sunday morning. It especially sucks if you don’t have the right equipment. But invest about $500-2k in your field lining operation, and you can make it dramatically easier. Field lining isn’t rocket science and it’s not going to brank the bank, but relatively few people have made the investment to specialize in this. One of the local men’s rugby teams has invested in a push cart chalk liner and a few markers, and now they provide the service locally as a means of fundraising for their team. We just gave them $100 for something that’s going to take 1 guy less than an hour and less than a can of spray paint (The cost of living is really low in STL, but, even so, they could definitely charge more and we’d have paid it. Don’t tell them that, please.)
How does that translate to ag equipment?
RaaS (Robots as a Service) has become kind of the go to business model that ag robot startups talk about. If a company can manage to fundraise adequately and build a team that both has excellent technical capabilities and service capabilities while still having a route to profitability, more power to them. Unfortunately, it’s really hard to do that, and selling to high quality service companies might be an easier and more impactful strategy.
One pathway for these high quality service companies to become more commonplace is through increased competition in the specialty crop labor services space. Currently, manual labor come from one of two places: internally employed crews or farm labor contractors (“FLCs”). There are just shy of 8.5k federally certified FLCs in the US today. There are are also a decent number of not-certified FLCs, but, that’s a rabbithole that I’m staying away from, for now….
FLCs today are kind of a hot mess. Some of them are great; most of them are not. I’ve personally worked with an FLC who charged us for more blueberries picked than they sold (so either there was some critter in the back of the semi every day chowing down on 100s of lbs of blueberries or there was a back-door agreement with the guy who took the stuff to the packer for us to break up the load and sell some of our berries for their own profit….) I’ve worked with a separate FLC where women, including our on staff farmhands, were regularly harassed (we’re talking a lot of ass-pinching/slapping and cat-calling, which is actually not so bad as farmworker sexual harassment goes, but, also, unacceptable.) We only learned about that on a management level because the guys were stupid enough to harass our internal team of white, English-speaking women who were in a position of enough privilege to report to us, a fully female-owned farm operation. I’ve never worked with an FLC who used Quickbooks or digital invoicing, and the one that used Excel and typed (as opposed to hand written) invoicing really stood out from the crowd.
I want to be clear - not all FLCs are bad actors, but the existence of any bad actors are both bad press for agriculture and something that our industry cannot afford in a world where attracting and retaining workers is becoming increasingly difficult. Healthy competition amongst FLCs can raise the tide for all boats here.
Most FLCs could be a lot better. The model in and of itself is kind of problematic because it inserts a middle man to defray liability (immigration and citizenship status and farm labor are inextricably linked) and accountability from the farm operation. It’s been my observation that the most efficient, professional, and profitable farms have mostly in-house crews. Many farms leverage a blend of these models, supplementing in-house crews with FLCs during times with higher labor requirements.
All that said, I believe that there will be a next generation of FLCs. Those “Next Gen FLCs” can invest in technology, specifically equipment solutions, to enable their employees to be more efficient. They can invest in software solutions to make their own administration and their farmer customers’ lives easier. They can expand their margins by delivering highly efficient services using fewer people. Talent attraction and retention is the most important differentiator in ag labor markets right now, because there simply aren’t enough experienced people interested in doing this work right now. Next Gen FLCs can attract talent by investing in their employees, from ergonomic improvements to slight wage increases. These wage increases can be possible even in a flat or decreased cost-of-service to the farmer because of the next generation of eqiupment. Talent attraction and retention is the most important differentiator in ag labor markets right now, because there simply aren’t enough experienced people interested in doing this work right now.
It would be easier for next gen ag equipment companies to onboard and service team members at Next Gen FLCs, and it would enable tech companies to focus on research and development instead of putting in long hours schlepping equipment and people around geographically distributed farms. Further, this type of service model could reduce downtime for use-case specific equipment, enabling faster development cycles and faster ROIs.
To tie this all back to farmer profitability, this next generation FLC/service model reduces risk for farm. The big farms with in house teams are essentially doing this today. The small+medium growers don’t have the resources to invest in most robots in their current state. A competitive market of Next Gen FLCs could dramatically increase the rate of adoption of Next Gen Ag Equipment.
Come talk to me at FIRA next week! I’ll be in Salinas Mon 9/18 - Thu 9/21, and I’ll be participating in the following:
Startup Pitches, MC’d by Clint Cowden
Featuring: AVL Motion, Exobotic Technologies, Grain Weevil Corporation, Green Robot Machinery (GRobotMac), L5 Automation*, Muddy Machines, Nature Robotics, Orbiba Robotics, Sami Agtech, SeedSpider, TRIC Robotics, Ullmanna
Judges: Walt Duflock, Seana Day, Bijoy Shah, Rob Trice, Trevor Sieck, Gabe Youtsey, and me
*L5 Automation is a Farmhand Ventures portfolio company
Panel Convo: How farmers can use technology to make financially sound decisions?
Date: Thursday 21, September
Time: 9:20 AM - 10:05 AM
Panelists: Jeff Morrison (Director of innovation & new technology / Grimmway Farms), Arthur Chow (Investment Team / S2G Ventures), and me, with Seana Day (Partner at Culterra Capital) moderating.
Panel Convo: Developing open digital infrastructure for agriculture automation
Date: Tuesday 19, September
Time: 11:15 AM -12:15 PM
Speakers: Will Conrad, Head of Solutions for Ag at AWS and a John Deere veteran, Mike Dentinger (Director of Ag OEM at Trimble), Curtis Garner (Co-Founder of Verdant Robotics), Steven Mirsky (Research Ecologist for USDA, ARS, Sustainable Ag Systems Lab), and me, with Rob Trice (Founder of Better Food Ventures and The Mixing Bowl) moderating.
Have an awesome weekend,
Connie