🌱 Building opinionated software for farmers
A trillion-dollar industry ridden with labor shortages, data fragmentation and commodity risks is ripe for innovation
Finding thematic commonalities
At Zenda, we delve into underserved industries that have yet to fully embrace the advantages of emerging technologies. This has spanned from certain areas within financial services to healthcare to agriculture. These industries, which constitute a significant portion of the global GDP, have yet to experience the transformative power of vertical software, AI/ML, and enabling technology platforms. Through conversations with professionals deeply rooted in these industries, we have identified common challenges that contribute to their reluctance in adopting new solutions. We’ve interwoven a few themes (which we will explore further in future articles):
Product: The current technology stack (or absence thereof) varies based on customer size within the industry. It often includes spreadsheets, pen and paper, whiteboards, costly legacy software, and reliance on professional or consulting services. However, this fragmented approach creates data silos, impeding the ability to make timely, data-driven decisions efficiently.
GTM: In the context of selling to enterprise customers, capturing distribution poses evident challenges, particularly when partnering with an early-stage company. Some of the main reasons include a lack of trust (why should I change the way I do things and rely on you, or hand over my proprietary data?), technological/adoption risk (what are you building today that’s different from the countless other vendors we reviewed?) and the inability to sell to the old guard (will I lose my job?). And of course, with the advent of AI/ML applications across vertical-specific use cases, the build vs. buy considerations gain even more significance.
Business model: Pricing strategies commonly employed by B2B SaaS companies targeting technology companies don’t necessarily translate to customers operating within underserved industries. In these industries, calculating unit economics and determining ROI is complex and non-trivial. Furthermore, incentives vary significantly across different stakeholders.
Monetizing software through fintech products like payments, lending and insurance has gained popularity. However, this approach isn’t universally applicable across all industries. The true value of these innovative monetization strategies lies in gaining a deep understanding of customer workflows, economic factors, cash cycles, balance sheet requirements and other relevant factors. This understanding is essential in order to design financial products that align with and address the specific needs of customers.
Given that the complexities of building software for farmers is vastly different than that of doctors, it becomes challenging to identify areas where a single product can effectively cater to diverse industries with varying problem sets, behavioral tendencies and cost structures. Even within the same industry, different customer segments present unique challenges.
Although we have witnessed successful vertical software companies established by individuals outside the industry, we acknowledge the value of technical builders who possess firsthand industry knowledge and can adeptly communicate with customers in order to deliver value effectively.
📢 We’re always looking to speak with folks from founders to industry professionals. If you know of anyone building or operating software for these underserved industries, don’t hesitate to reach out: jeff@zenda.vc or er@zenda.vc!
Breaking ground in agriculture
It begs us to ask, how does possessing specific knowledge and user empathy translate into building product for these industries? In one of our recent research sprints, we’ve spent time speaking with growers in the agricultural space to understand foundational issues that permeate from seed to sale.
Shockingly enough, agriculture, despite being a trillion-dollar industry, predominantly operates in an analog manner. The majority of commercial farms continue to rely on outdated methods like pen and paper, clipboards, whiteboards, and spreadsheets across multiple facilities. Although some farms may use a rudimentary ERP system, they often face constraints in terms of integration capabilities and rely on cumbersome CSV data transfers. This results in massive blind spots, as much of the data remains scattered and inaccessible, with data retrieval occurring systematically rather than in real time.
The lack of any scalable infrastructure to better facilitate and manage farm operations in real time will further exacerbate existing workflow inefficiencies from scouting to harvesting, leading to higher costs over time in an already margin-compressed industry.
While emerging point solutions are propping up to address specific use cases on the farm, the industry faces an existential problem: there just aren’t enough farmers to carry out the work. More than 20% of people have exited the agricultural labor force, yet the number of acres being operated and the work that needs to be done haven’t changed. Labor shortages alone drives at least $3 billion in losses in the US each year, and the problem is growing.
Thematically speaking, we see an opportunity to aggregate data to better operate these farms, starting with the workers themselves and expanding all the way upstream throughout the value chain.
We recently spoke with a senior operations manager of an agricultural company that specializes in the production of high-quality, locally grown fruits and vegetables in the South, who validated the operational issues plaguing the industry and discussed the potential of leveraging software.
The conversation is anonymized and edited for brevity.
What software have you used to facilitate farm operations?
We have outsourced our processes around food safety to specialists. We also utilize environmental control software to monitor factors like humidity, light levels, and CO2 measurements. We evaluated solutions for other use cases but found them lacking in the context of meeting our specific needs.
What is the cost breakdown of your farm?
Our primary concerns are labor and energy costs. We also prioritize food safety traceability due to upcoming mandatory requirements. Real-time data feeds could help manage energy costs by correlating productivity with kilowatt hours used. While we have no issues with spreadsheets for data analysis, we want to minimize time spent on manual tasks away from actual work.
What are the key criteria for adopting new software solutions?
We value flexibility, organization, and understanding of agriculture with a technical perspective. It is important to have software that can accommodate different equipment and operational parameters. For instance, in farms with limited or no Internet access, it is crucial to have processing and storage capabilities at the device level. This enables workers to perform tasks on their devices, which can then synchronize and update once they are connected to the Internet.
Regarding food safety compliance, we seek methods that align growing, picking, and reporting in real-time. Bridging the gap between regulatory requirements and practical on-farm realities is essential.
Subscription-based models are not well understood in the industry. Those recurring costs would further compress our bottom line, so justifying its usage (per worker) relative to our other costs as previously mentioned is non-obvious. Regardless of business model, pricing and ROI will need to make sense for both parties.
What key hurdles will software vendors need to overcome when selling to farms?
Adapting software to meet the needs of different farms is a challenge due to their unique parameters. Standardized solutions often lack the necessary flexibility. Another challenge is the adoption of technology in and of itself, particularly among the aging farming population who live by the status quo. Partnering with crop-specific associations or tech-enabled farms can help drive adoption. Building trust is crucial, and having a strong foundation of industry knowledge is the fundamental requirement to establish it.
In other news…
Check out our Research Fellowship Program
We’ll often use this channel to provide fund/portfolio updates and asks. We recently posted the public launch of our research fellowship program - a global network of operators and industry practitioners who join our investment team to help develop investments themes and learn about VC. Please feel free to share and apply!
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