We at Bowery Capital released the 2016 edition of Opportunities In Vertical Software in November, which laid out our point of view on ten specific verticals and the potential for various software solutions to dominate each of these ten verticals in the coming years. For ten weeks, we are releasing content focused around the impact of software on these ten industries. We have done several interviews in weeks prior covering the Logistics, Education, Legal, Restaurant, Insurance, and Construction verticals. For the agriculture software vertical we conducted an agriculture software interview with Lance Donny to talk through four big questions about the agriculture industry. Lance Donny serves as the CEO of OnFarm Systems Inc. Lance served as the Chief Financial Officer of PureSense Environmental Inc. and has broad experience in technology, finance, and early stage companies.
What are some of the most interesting developments in your industry over the last 10 years and how has software added value?
Increasing availability of data – Over the last 10 years the increased availability of data has been a tremendous game changer for the agriculture industry. Data sets around weather and harvest/planting have become much more widespread and the increasing number of agtech companies has grown to ~500 currently active companies. This increased availability of data has started to shift the farm planning conversation from a historical frame of reference to a more future looking conversation based on predictive data available. The increase in data sources & companies has allowed farms to generate ~100K data points per day each, and current trends suggest that data generation can increase to 4M data points per farm daily within the next 10 years.
A shift in consumer behavior – Consumers have become more interested in the food they consume and are looking for as much information as they can to understand what went into growing their food, when it was harvested, and the overall handling from field to fork. This shift in consumer desire has prompted the supply channel to better understand their products. Farms are adopting technology that enables aggregation of the information to meet the needs of both the supply channel and consumer.
Farms are getting both bigger and smaller – We’ve seen the number of mid-sized farm shrink in the US. Also, the age of the farmer continues to increase. At some point we expect this to reverse itself as the next generation of farmers takes the reins. This younger generation uses technology throughout their lives and as they take on more responsibility on the farm we should see more interest in technology, from agronomics to operational management.
What are some of the challenges / hurdles that still exist?
Process and decision making have been the same for generations which creates a challenge for technology adoption. Part of the problem is trust; farmers have done things the same way for a very long time and their decisions are often based on the past, their neighbors or their gut. Incorporating technology into their day to day business can be uncharted territory.
Agriculture data remains fragmented with hundreds of different solutions and no standardized method to exchange data. Given that agtech providers are generally focused on a particular part of farm management, data becomes silo’ed on different platforms with no easy way to aggregate or work with the data. This limits the amount of actionable insights that can be produced for the farmers.
Lastly, the cost associated with agriculture technology for many farmers remains sometimes confusing and often above the perceived value. Companies are trying many different pricing methods from one time purchases, to software as a service subscription based on users or per acre. The challenge is that there is no one size fits all pricing, top line economics vary greatly by crop along with the realized impact of the technology. Unclear value propositions and pricing creates confusion and adoption hurdles for farmers.
When looking to enable a process with software what are the most important points for a buyer to think through?
As farmers begin to adopt technology solutions for their processes, the most important starting point is to pick one or two pain points that have high significance and look for a solution that will help mitigate that. Farmers should start with applying sufficient time and resources to solve these first pain points. If they only commit a small piece of land or their time it will diminish the value that they can extract from an implemented solution. And if something goes wrong or they get busy somewhere else, projects that have little importance tend to be forgotten.
Implementing a software solution also requires some change to their traditional practices on the farm. Farmers need to be aware and willing to change so that they can reap the benefit of the solutions they install.
What is your vision for the industry in 5-10 years?
Agricultural production yields are expected to grow ~70% by 2050. I believe that the technologies that have the greatest impact will be focused on hyper efficiency. We already have 600 bushel corn, the yield potential is there for most crops, technology will unlock that potential by improving everything we do in the season. Production will increase while maintaining or with limited increases to resources. Farms will benefit from implementing technology to provide predictive insight. As the next generation adopts technologically driven processes the benefits achieved will fuel more and more innovation around farm management and hopefully faster adoption by farmers.
Thank you for reading this Agriculture software interview with Lance. Make sure to check out the 1st Agriculture Deep Dive post discussing the History & Market Dynamics of Agriculture technology as well as the 2016 edition of Opportunities In Vertical Software for the full report.