In the “From Lab to Success Story: What Business Model?” keynote, IDTechEx technology analyst Michael Dent shares market research that hints at the path ahead. After his presentation, six well-informed panelists continued the discussion.
Seana Day (Better Food Ventures & The Mixing Bowl), Peter Hanappe (Sony CSL), David Bowles (The Yield Lab), Erik Pekkeriet (Wageningen University & Research), Sarah Waltner (Raven Applied Technology), and Daria Batukhtina (Kubota Holding B.V. - Innovation Center) debated which agricultural robot development and business models are the most successful.
This section, not only details where the industry is headed, but also what’s happening right now. One way to assess the current state of the agrorobotics sector is to understand which technologies are being funded right now. In the "Start-ups & Investors - How to Partner Effectively" session, two start-up CEOs (Naïo Technologies’ Aymeric Barthes and EcoRobotix’s Aurélien Demaurex) and two investors (Capagro’s Tom Espiard and BASF Ventures’ Dr. Claus Hackmann) share their experiences. These four panelists explain how each party can best collaborate to move everyone into the future.
The Key Technology Trends in Agricultural Robotics
Michael Dent began his keynote by stating familiar facts: The population is growing but food production is not. In addition to the need to increase food production by 70 percent, another potentially troubling trend is that the number of people working in agriculture is decreasing. Labor costs are increasing across the industry, which is squeezing margins on farms.
“Despite the clear need for digitization, agriculture has historically been fairly slow to adapt, often lagging behind other Industries in terms of adoption of digital technologies and robots,” Dent says. “However, over the past five/six years or so, this has really begun to change. Farms are adopting more and more digital technologies, and increasing numbers of startups get funded across the world, as they try to take advantage of a skill gap in the market.”
A recent IDTechEx report, “Agricultural Robots, Drones, and AI: 2020-2040: Technologies, Markets, and Players,” identifies six areas that will have the biggest impact on the industry overall: small autonomous robots, intelligent tractor-pull implements, robotic implements with simple vision/control, autonomous tractors, autonomous sprayers and fresh fruit picking.
“At IDTechEx,” Dent says, “we believe that the uptake of precision enabled agriculture could significantly disrupt the existing agricultural supply chain.”
In the future, he continues, farming will become more reliant on and driven by data. This will create additional value along the supply chain, from sensor and robotics equipment manufacturers to data analytics firms. The face of agriculture is certainly changing, and IDTechEx has identified a few key trends that are helping to drive this transition. One such trend is toward ultra-precision agriculture.
“Constant-rate technology, where entire fields are managed as one entity and where inputs, like nutrients, water, and crop protection products are applied uniformly across the field with no site-specific customization,” Dent says, has started to transform to variable-rate technology.
This helps to significantly reduce the inputs used and increase yields because parcels of land are managed based on their unique needs and the treatment required. Technologies like geolocation, sensors, drones collecting data and images, and more are used to assist with variable-rate technology.
“This trend will continue over the next few decades, evolving from variable-rate technology to ultra-precision agriculture,” Dent says. “And in ultra-precision agriculture, the whole farm is managed on an individual plant basis, where the exact doses of inputs are applied to each plant based on its measured needs.”
The industry is in the early developmental stages of ultra-precision agriculture, but IDTechEx estimates that it could arrive within the next two decades. Another key trend will develop in a similar way. Dent cites the use of artificial intelligence for better disease prevention, yield prediction and quality management.
This is rarely used now, Dent says, but this will change. The industry will begin with simple AI and move toward more complex AI systems. Ultimately, as the algorithms are improved, neural networks will become more common, and IDTechEx estimates that animatronic robots will enter the industry within the next 20 years. Dent says these technology trends will be supported by three enabling technologies: vision technology, AI and autonomy.
These enabling technologies will eventually support robots and autonomous machines, but they too are in the earlier stages of development. Computer vision, for example, came a long way in the last decade, Dent says, but the computationally heavy algorithms still require a lot of energy to run. In time, AI will go beyond computer vision to plant recognition and yield prediction, all of which helps to accelerate the transition to ultra-precision agriculture.
With autonomy, Dent says, the challenge is finding the balance between the cost of additional sensors and their benefits, as well as combining a variety of technology systems into one machine that can, for example, see, spray, and navigate the challenging landscape.
“The increasing drive toward autonomy is likely to cause a long-term paradigm shift in agriculture towards smaller agricultural vehicles, with robots becoming increasingly cost competitive,” Dent says. “We think that the transition towards small autonomous fleets of robots, as opposed to single large pieces of agriculture machinery that are operated by a single user, will lead to a fairly significant shift in the way farms are run over the next two decades.”
What Makes a Successful Robotics Development and Business Model?
While IDTechEx is busy researching the upcoming trends, others are working to bring them to life. Things continue to move quickly. When it comes to outlining the right ingredients for a productive and profitable agtech venture, however, it’s clear that everyone uses a different recipe.
For Sony CSL researcher Peter Hanappe, the recipe includes a lot of teamwork. Hanappe works primarily with small, mostly organic urban farms, creating advanced robotics tools for agroecology, the study of the relationship between agriculture crops and their environment. One of these tools is a small, lightweight weeding robot. The work of creation is collaborative by nature, but Hanappe works in such a way that invites others to join the process.
“We always said we would make the hardware open source because we're from computer science backgrounds, and we have a tendency of working open source,” he says, adding that the team wanted to explore alternative business model, and open source seemed like an intriguing option.
“It's probably the idealistic maybe a bit naïve,” he says. “We still have to show that it's possible. So we're not sending anything yet. The proof is in the pudding, can we really build a business model on top of that? I think there are good signs.
“In one sense,” he continues, “I think farmers like to know the technology that they're using. I mean you could completely offer these products as a closed box or even as service maps, but I think it's nice also to explain to the users how it works. Another thing is if you want to be able to collaborate with, say, scientists and engineers and farmers and create a community around that, then I think going open is the way to conquer peoples’ hearts.”
Weighing in on the investment side, Better Food Ventures & The Mixing Bowl partner Seana Day believes describing the right business model is complex. It begins with understanding adoption rates based on crop/commodity, and the size and scale of the operations within the sector where the robotics company is attempting to create a solution. Add to that the tech company’s internal development, milestones, inflection points, and where they are in the proof-of-concept/commercialization/scaling up process.
“It's complicated, and then of course we have to overlay that with some of the external factors,” Day says. “Is there adequate support for those technologies in the field? Is there a field service organization? Are there boots on the ground? Is there sort of an external service provider that's able to maintain and help support those technologies?”
According to Day, investors also evaluate companies based on the potential route to the market. Having the capability and support to get there is essential. Right now, most investors are focused on funding smaller projects.
“We're still decades away from a billion-dollar start-up robotics company,” she says, adding that things are progressing. “This has been a breakout year for farm management software and some of the more software-oriented business models have gotten traction and have gotten past the commercialization. Now, they're starting to see some market penetration. It's just going to take time.”
David Bowles, a venture capital investor from The Yield Lab, is also seeing a lot of activity in the agtech space, but he believes a successful business model requires differentiation.
“What's very frustrating is a lot of these companies are solving the same problem, and what I mean by that is a lot of them are solving the problem of navigation around fields or having a communications platform,” he says. “To some extent, they take very basic problems, and on top of that, each one adds something new and unique—a new way to detect diseases in apples and a new way to weed a field of carrots.
“So, it's something interesting and unique for each these companies,” he continues, “but they're also having to do a huge amount of work just to get unique technology on the platform. For us, it's really frustrating because of the huge amount of time resources wasted, and we're kind of interested in more platform technologies and people that can bring their unique insights, unique capabilities and leverage existing technologies, automation, or navigation devices.”
For this season, the agtech space is mostly filled with medium-sized companies that have been funded. Larger companies are few and far between. Companies that get funded are the ones who can produce a venture capital return, and those, Bowles says, are the ones that offer a large number of different technologies and feature sets. He warns against becoming too invested in the nitty-gritty technologies by referencing two companies that have been dominant within the agriculture industry for many years.
“John Deere did not become huge purely from weeding,” he says. “Case IH did not become huge purely by being a seeding company.”
One way to develop a wide range of technologies is to work with others. Based on his experience as the program manager agro food robotics at Wageningen University & Research, Erik Pekkeriet understands the way participating in research and development (R&D) can support a viable business model.
“Robotics demands a different kind of R&D that is must more intensive, but the payoff can be very good,” he says, adding that many companies are hesitant to invest in R&D, particularly when there isn’t room in the budget, and they don’t see the value. Sometimes the best way to do research is through active collaboration.
“I think the Dutch are, at least, very open to community, and they communicate everything with each other,” Pekkeriet says. “So, it's a low step. It’s very familiar. And I think that's also a good point of agriculture and food. When you talk to farmers, it’s easy entrance. You can start testing immediately. And I think that it’s good to have an end user.”
Daria Batukhtina, business development manager for Kubota Holding B.V. - Innovation Center, couldn’t agree more. She believes focusing on the farmer is the only way to ensure successful solutions and mass adoption.
“Kubota wants to go beyond our business domains to provide total solutions that support the food value chain, and this type of the digitalization path is not possible without knowing the real near- and long-term needs of the growers and farmers,” Batukhtina says. “It's not possible without cooperation.”
A successful business model also goes beyond what end users need. It also requires companies to support them and play a role in their future profitability. After all, there’s a lot of increased pressure on farmers to produce more and produce sustainably, all while reducing carbon emissions and saving the planet.
“If we consider the historical aspect of this, for about 400 years, the farmer was the most important person on the planet. How do they feel today?” Batukhtina says. “This is a collaborative work. This is a joint effort. You can't develop the sustainable business model if you do not consider the life circle of the farmer.”
Ultimately, the best business model focuses on collaboration. Sarah Waltner, general manager at Raven Applied Technologies, says it best:
“No one company. No one University. No one agency is going to bring everything that is needed,” she says. “I think it's important to really ask ‘what do we need to have direct control over?’ Is it direct development or composition? What things are not our strong suit or aren’t a part of what we bring to market? Then, for those things, we rely on collaborative partners.”
When everyone works together, every step of the process becomes a bit easier. Each partner can operate in their own zone of genius, the place they are best equipped to provide expertise.
“We are really focused on helping the actual farmer with the fundamental needs to be profitable, to be sustainable, to know that they can get their job done on time,” Waltner says. “That really is our striking force.”
Startups and Investors: How to Partner Effectively
It’s important to note that there's more than one successful business model. Collaboration is key between manufacturers and farmers, but it is also essential in the relationship that exists between robotics start-ups and their capital investors. The startup-investor relationship is often described like a marriage. There are those that blossom into a beautiful partnership, and those that were doomed from the start.
The startup-investor relationship is often described like a marriage. There are those that blossom into a beautiful partnership, and those that were doomed from the start.
To get the inside scoop on what works, Aymeric Barthes (Naïo Technologies) and Aurélien Demaurex (EcoRobotix) shared their experiences as startups working with investors to fund their robotic solutions. Alternatively, Tom Espiard (Capagro) and Dr. Claus Hackmann (BASF Ventures) gave their perspectives as investors supporting the next big innovations on the path to profitability.
Based on their discussion, effective partnership requires five key components. Here’s what they had to say.
“One of the things that is really key in the relationship for me is trust,” says Demaurex. “It's the number one. When you work with investors, of course, there is a honeymoon at the beginning of from both sides. So, you have to trust each other. The investor must trust the startup because they are investing in it. There are a lot of things that can lead to mistrust that’s created on the startup side. For example, not delivering according to the plan. Changing strategies is quite common in startups.”
“It is important to talk frankly and face reality,” Barthes says. “The reality of the startup is that it’s violent. Everything is moving very, very fast, and every day, you have to face a new issue, a new problem. You’re concerned about everything from your clients to the legislation to the next fundraising operation. So, it's really important to be able to talk.
“I am the CEO of a startup, so the team I have in front of me is the team of investors, and I'm expecting them to really be able to face the reality and to understand our problems and to bring solutions based on their experiences to help us to make our vision possible,” he continues. “That is the main problem we have, so it’s important to be reactive. Sometimes, investors are too much based on their experience and not enough tuned into the future.
“I think the biggest difference between startups and investors is that we believe in the future and the new way to manage the company, the new way to manage our issues. On the side of the investors, they are very experienced, and they make decisions based on that. It’s important to have both sides. I don’t want that to change, but it is why we need to find the right words.”
3. Shared Values
“In the beginning the investment, you should have shared goals and shared values with the company, and I think one of the first steps to have a strategy day,” Hackmann says. “This way, the investors and the management of the startup can get really aligned on the strategy, make a deep dive to have a common understanding about the go-to-market strategy and also on the exit. If you are aligned on that, basically everything else will follow.
“As in a good marriage, you still can learn from one another over time,” he continues. “Corporate can learn from startup new technologies, new dynamic, new applications, new approaches. From the other side, startups can learn how to basically find a strategy and use a network and how to execute. Give the startup a platform to execute their new technology and showcase it and run it, and you’ll work together for a longer time. This is to give them a boost to go into the right direction.”
4. A Good Contract
“You need a good contract. We are in 2020, it might not last,” Espiard. “There needs to be a precise understanding of what is the exit. You want to make sure that you build value together, but at some point, in the life of startup, there will be an exit scenario. This has to be understood by both parties. It needs to be worked out in governance so that as an investor, I don’t impair the value for each of us with an exit and challenge the exit scenario and balance. “
“Most VCs have an investment horizon,” he continues. “That investment horizon is 4-5 years generally because the VCs have investors themselves and have to give back the money to the investors. So, when we make an investment, we have to have an exit strategy in order to liquidate and give that money back to our investors. In the governance, there is a clause that will say, at one point, you will enter into a process where the company will be traditionally be sold. There are some ways to balance the right of the corporation in case they want to have a say and make sure the company and the process is not jeopardized.”
5. A Shared Vision
“I think the key is to maintain a recurrent information flow,” Barthes says. “We choose to call all our investors very often, show them our strategy and build the strategy with them as much as possible because the more you have investors around the table, the more complicated it is to synchronize the strategy and build the strategy. You have to take the time to do that. It’s really the key to ensure a good relationship because if they share the strategy with you, if they share the vision it's easier to take the necessary steps to make it a very successful partnership.”