Welcome back to the Agrifintech newsletter!
This issue covers some news items in more detail than usual rather than focusing on one core theme. Jump in and enjoy!
📣 Athian marketplace and client VC's
📣 The enduring appeal of private investment in Ag
📣 Vegrow and 📈 digital trade in India
Athian crowds in more client VCs
Do you remember DAO's?
⦿ Decentralised Autonomous Organisation's, or DAOs, are the legal / corporate version of a blockchain based company. Back in 2021, I covered this topic in Blockchain in Ag and discussed the DAO model.
Decentralised - hive minds, community
Autonomous - smart contracts once conditions and preconditions are met.
Organisation - some legal personality.
The key thing which interested me with this model was the ability to crowd customers into an entity, drive product development and kick start the all important network effect.
⦿ Athian, who have founded a carbon credit marketplace for the livestock sector, have essentially performed this same feat by bringing a long line of demand side clients on board as shareholders. ♻️ See company news here. Their platform, which focuses on insets, rather than offsets, will utilise these value chain actors as buyers for credits generated by producers in the lifestock sector.
⦿ It is an impressive roster of investors and buyers: Tyson Ventures, DSM Ventures, California Dairies, Elanco Animal Health.
The size of the investment was not disclosed, but a similar Seed round for Carbonplace, a carbon platform backed by 9 global banks earlier this year, raised $45m.
Does this make sense? Absolutely! By involving the value chain they can bring clients on board and avail of patient capital from corporate VC's. ✅ ✅
I've previously documented the venture capital activity in the sector but also noted that corporate venture capital is playing more of a role, with some prominent examples being;
➡ Telus Agriculture investing into Digital Agricultural Services to expand into the Canadian market
➡ Bayer acquiring Combyne Ag to increase their footprint in downstream crop marketing️.
🤔 However, I do have one key question with this model worth exploring.
From a producer marketing perspective you now have two products to sell - your physical produce AND data for carbon credits. For producers within the Athian ecosystem, will these be marketed separately or together?
If Athian are marketing the carbon credit data for producers how does this get distributed to a wider audience and not just its shareholders i.e. the value chain buyers?
This is where linking several marketplaces could be interesting to give full pricing transparency. I also suspect a lot of the mechanics and governance on these 'product + data' models also still need to be worked out when transactions start to scale.
What do you think?
The enduring appeal of crowdfunding in Ag
Reaching out to the 'crowd' remains a popular model for agrifintech as I previously covered when discussing India based Growpital or Campo Capital in Brazil here. The list continues to grow with Harvest Returns also bullish on this model.
⦿ US based platform Harvest Returns announced over $30m in funds disbursed this week and they see increasing demand for private credit from agri producers who feel banks are becoming more risk averse with capital.
⦿ When I spoke to Chris Rawley, the CEO of Harvest Returns this week, he put the enduring appeal of crowdfunding down to the ability to get creative for clients.
We have a variety of structures available here in the US and regulations that allow us to be creative in some regards, but crowdfunding in Europe seems a little bit easier.
🇪🇺 For context, in Europe, as with most financial regulation, the European Crowdfunding service providers regulation, permits registered companies to 'passport' their activities across different countries and lays down what is permitted. HeavyFinance is one example of a crowdfunding company in Europe who operate in the agriculture sector.
⦿ Rawley elaborated on the creativity element.
Banks are tightening credit in the current environment and we get so many companies coming to us wanting to do creative things but they have reached credit limits with the formal banking sector but don't yet have the scale to reach out to private equity or venture capital.
Those are exactly the type of situations that we specialise in, whether it is on the equity side or the debt side.
⦿ One major challenge for the crowdfunding model is attracting investors and agriculture has proven a way to stand out in a crowded field. Rawley believes agriculture can offer two specific things opportunities to investors who are considering alternatives in their portfolio.
Firstly, structures tend to be focused on capital preservation with an embedded return. Secondly, food and agriculture represents a great hook for values based investors with 50% of Harvest Return's existing investors openly supporting regenerative and sustainable agriculture.
⦿ Below is a chart produced by John Newton which depicts just how quickly interest rates are rising in the US for operating loans.
While financial conditions are tightening with increasing rates, it is likely creativity will become more important.
Vegrow and 📈 digital trade in India
Are digital and formal markets in India at a tipping point? The data seems to suggest as much. 🔥
⦿ The eNAM, or electronic National Agricultural Market, is an Indian initiative to join local markets together into one pooled national market and increase price transparency for both buyers and sellers. There are 203 commodities mandated to be traded including soybeans, silk and potatoes.
⦿ According to a recent analysis - presented here - the trade is continuing to increase with 18.8m metric tonnes, representing $9.1bn, being traded across the mechanism in FY23. This is an increase of 32% on FY22 and the article also implies that the market penetration is expected to touch 20% of the total available market for trade in ALL farm goods outside of dairy and seafood in the current fiscal year. That is significant scale. 👀
⦿ Recently, eNAM permitted trade to go across state borders within India and this was seen as one reason for an increase in trade values, as sellers could now sell to the highest bidder.
💡 One thing that really caught my eye with this initiative is its interoperability with the private sector, which 60 companies, including fintech companies, were availing of. The article lists some familiar names such Arya.ag, Bijak and Star Agro as participants.
⦿ On a similar note Entrackr brought my attention to similarly impressive data from Vegrow, the B2B food output marketplace. 📈
The research cites an 8.45 X increase in gross merchandise value (GMV) year on year for the platform.
The USD value implied is modest, at just over $12m, but the 754% increase is definitely worth shouting about, especially in the overall context of the market growth.
BTW - I also like the emphasis that Entrackr have put on profitability and cash here also by the way. 😉
And that is everything this week folks as newsflow has been pretty slow in recent weeks. 🐌
The newsletter will be back again in 2 weeks focusing on some wider fintech themes and how they relate specifically to agriculture. Don't miss it. 👀
If you enjoyed this please share this with your network via email or linkedin. 🙏