{"id":7138,"date":"2018-03-21T23:41:44","date_gmt":"2018-03-22T03:41:44","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/farmers-business-network-disrupting-one-farm-at-a-time\/"},"modified":"2018-03-21T23:41:44","modified_gmt":"2018-03-22T03:41:44","slug":"farmers-business-network-disrupting-one-farm-at-a-time","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/farmers-business-network-disrupting-one-farm-at-a-time\/","title":{"rendered":"Farmers Business Network | Disrupting One Farm At A Time"},"content":{"rendered":"

The agriculture industry is one of contrasts. In the US alone, there are over two million farms. Most of them are family-owned and average 440 acres per farm [1]. The fragmentation of farmers differs from the consolidation that the agrochemical and seed sectors have been going through. In the last years, the three mega-mergers of ChinaChem with Syngenta, Dow with DuPont, and Bayer with Monsanto [2] have tilted the power balance even more so towards input manufacturers. Together, these six companies control over 80% and 90% of the corn and cotton seed markets in the US respectively [3], a situation that critics characterize as oligopolistic.<\/p>\n

The power imbalance between suppliers and buyers of seeds and chemicals, coupled with the fact that US farmers don\u2019t set prices anymore since other countries are bigger producers, has prompted a squeezing-out of the American farmer. Seed and agrochemical companies have used the information asymmetry around crop yields and their opaque pricing to their benefit, pushing seed and pesticides prices up. The fundamentals of the industry \u2013unpredictable weather, variable soil conditions, and very localized information sharing among buyers\u2013 have allowed seed companies to justify their products performance and margins so far.<\/p>\n

Along this change in the agricultural landscape, two major shifts have occurred in the technology industry. Equipment manufacturers such as John Deere have introduced sensors into their equipment, enabling them to collect and transmit relevant data about soil, planting, irrigation, harvesting, local weather, etc. Meanwhile, big data analytics and machine learning have allowed for this data to become more actionable. IoT has reshaped the industry towards a \u2018precision agriculture\u2019 model, where farmers get to make smarter decisions on smaller pots of land, thus increasing yields considerably.<\/p>\n

Co-founders of Farmers Business Network (FBN) Charles Baron (MBA 2013) and Amol Deshpande, both with close ties to the farming sector and with backgrounds in tech and VC, met in Silicon Valley in 2013 and decided to create a platform that would rebalance the bargaining power between input companies and farmers [4]. The platform fully depends on the crowd-sourcing of data that farmers collect both from their machinery and manually. Thus, farmers\u2019 trust and FBN\u2019s reputation are the key assets that enable them to operate. By aggregating and cleaning the data, the FBN team analyzes and benchmarks yields and prices from inputs, then provides the farmers with a user-friendly platform with data points for their negotiations with suppliers and for their overall decision-making process.<\/p>\n

\"\"<\/a>
FBN Platform – Benchmarking vs. Region<\/figcaption><\/figure>\n

The crowd-sourcing platform has clear network effects, but still the founders decided to shift from a freemium model to a subscription flat fee of $600 currently. Early on, farmers\u2019 feedback conveyed that they distrusted the free model and disliked fees variable with acreage. Since trust was a key component of the success, marketing in the early stages centered around word of mouth [5].<\/p>\n

Beyond trust and its \u2018Farmers First\u2019 approach, FBN has been successful due to the value that it creates to every single farmer, with aggregate savings in the order of hundreds of millions of dollars [5]. Furthermore, the co-founders have understood how to leverage network effects, and as they\u2019ve grown their customer base \u2013currently at approximately 6,000 farms and information from as many acres as the state of Indiana\u2013, they\u2019ve expanded the customization by adding filters to their data and broadened their business model to include new verticals such as input procurement, financing and intelligence services [6].<\/p>\n

The company, currently backed by long-term investors such as Temasek, T. Rowe Price, and Google Ventures, sees the IPO as the only viable exit strategy. An acquisition by any of the major companies in the sector would probably erode the trust of the data suppliers (i.e. the farmers) and destroy value. With a Series D that puts their valuation closer to unicorn status in 2017 [8] and numerous monetization opportunities down the line, investors are lining up at FBN\u2019s door while employees of disrupted competitors leave angry comments on their Facebook [9].<\/p>\n

 <\/p>\n

Sources:<\/em><\/strong><\/p>\n

[1] https:\/\/www.ers.usda.gov\/data-products\/ag-and-food-statistics-charting-the-essentials\/farming-and-farm-income\/<\/a><\/p>\n

[2] https:\/\/www.usatoday.com\/story\/news\/politics\/2017\/08\/29\/mega-mergers-agribusiness-raise-concerns-food-costs-biodiversity\/558980001\/<\/a><\/p>\n

[3] https:\/\/www.ers.usda.gov\/amber-waves\/2017\/april\/mergers-and-competition-in-seed-and-agricultural-chemical-markets\/<\/a><\/p>\n

[4] HBS Case 9-217-025 \u201cFarmers Business Network: Putting Farmers First\u201d, by Prof. Shawn Cole and Tony L. He.<\/p>\n

[5] Charles Baron.<\/p>\n

[6] https:\/\/www.farmersbusinessnetwork.com\/<\/a><\/p>\n

[7] https:\/\/www.crunchbase.com\/organization\/farmers-business-network#section-funding-rounds<\/a><\/p>\n

[8] https:\/\/www.forbes.com\/sites\/amyfeldman\/2017\/11\/30\/farmers-business-network-raises-110-million-to-help-squeezed-farmers-with-help-from-technology\/#63ffdbe8a6db<\/a><\/p>\n

[9] https:\/\/www.forbes.com\/sites\/alexkonrad\/2017\/03\/07\/farmers-business-network-takes-on-big-agra-with-funding-from-gv\/2\/#26c458c42ed1<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A young startup co-founded by an HBS grad has revolutionized the agriculture sector and put Big Agra in defense mode. 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