Welcome back to the Agri Fintech Newsletter and a warm welcome to the 31 new subscribers since my last issue.
In this Issue
🧐 Thoughts [DeFi and real world Agri assets]
🗞 Relevant News [Vegrow, Agriaku, Milk Moovement, Faarms, Jai Kisan, Arable, Silo, Tillable].
DeFi and Real World Agri Assets
Agri Fintech is making better progress at digitising real world assets that any other sectors or projects I've seen.
Let me elaborate.
I previously wrote that my head got turned by agricultural finance when I realised it was mostly about 'real world problems and real world people'. Well, there were also those real world assets.
I'm talking about farmland, equipment, (mostly) predictable production patterns, invoices 🧾 , inventory 🌾 and a million other things that can be used as collateral.
Decentralised Finance, or DeFi, has recently started to talk more about 'real world assets' and there are several companies making progress on that front, which I discuss below.
However, in my view the real progress is actually being made elsewhere, including in the agri fintech sector, which I also discuss below.
To repeat: Agri Fintech is making better progress at digitising real world assets that any other sectors or projects I've seen.
Let's step back and discuss:
1️⃣ DeFi as Institutional Infrastructure;
2️⃣ DeFi and the Real World (Goldfinch); and
3️⃣ Real Agri Assets (Fresh Supply Co).
DeFi and Institutional Infrastructure
DeFi or decentralised finance is blockchain native financing where investors invest funds into structures that are collateralised using web3 digital assets such as NFT's or tokens.
Volumes currently 'locked' in DeFi are currently about $50bn.
▶️ If you are in the US, that is about the size of Pinnacle Bank one of the top 10 Agricultural lenders (who ironically have a warning about crypto scams on their homepage if you do click the link 😂😂). If you are in India, that is slightly bigger than Yes Bank.
If you haven't heard of either of these institutions, then perhaps my point is clear - the numbers are still pretty small despite the noise.
For me, DeFi's significance relates to the role it can play in Institutional Infrastructure. It is the finish line 🏁 that any Financial Institution should be aiming for with their technology strategy i.e. something that is so efficient that a small team can oversee its' management.
Finish lines are easy as most people can agree on the vision. The problem is starting lines - nobody ever agrees on these. I've picked two different approaches below, one from Goldfinch and one from the Fresh Supply Co (FSCO).
(Please check out my Blockchain in Ag primer here for explanations on DeFi, NFT's etc as I don't want too much detail here).
DeFi and Real World Assets
The Goldfinch mission is clear from their website - "Bring crypto loans to the real world".
What does this actually mean? From reading through their documentation these are some of the key points and my side notes:
1️⃣ They are developing an on-chain credit protocol i.e. the ability for anyone to make loans using crypto
📍I read 'institutional infrastructure' here when I see on-chain credit protocol, or a system to manage loan assets using blockchain
2️⃣ They currently fund projects in jurisdictions such as Nigeria or Mexico, mostly with other financial institutions
📍This is interesting because the real world assets they invest in are actually financial companies, which I actually found surprising and not very real asset after all - see more below 👇.
3️⃣ The funds used for lending are 'crypto' funds
📍Again, I find this fascinating as there are plenty of funds in the crypto world that are looking for a home, but not necessarily just in NFT's or yield farming structures, but yearning to make their way back to the real world and support economic activity.
4️⃣ The Digital Asset that is financed is a facility agreement with a financial institution
📍which is ....unfortunately underwhelming 😌. Call me a traditionalist, but I devoured the Goldfinch information with excitement hoping to find collateralised implements, bicycles and all sorts of things, not just a smart contract loan agreement.
They also have a Token as part of their governance process, but currently, I am leaning neutral on these (at best).
When Web3 projects discuss real world assets, it doesn't actually mean real assets... yet.
I think where Goldfinch or MakerDao (using a similar approach), go next will be interesting as I feel the hard work is yet to come. Underlying each loan facility is a broad range of actual assets that will be difficult to digitise and bring on-chain. What do you think?
The full Goldfinch whitepaper is here and I would recommend a look as it does clearly spell out how it works without too much jargon.
Defi and Real Agri Assets
Let's make our way back to an alternative starting point - the actual real assets.
Real assets are physical in nature and are used to run and feed the real economy. Examples include real estate, land, infrastructure and commodities, including those wonderful agricultural commodities 🌾 🌽🍦😋.
Getting this on-chain as part of our 'institutional infrastructure' thesis is waaaayy more complex. It keeps growing, moving and changing form.
Blobs to maturing livestock
For me this is where embedded finance takes on a huge role i.e. financing based on data from within value chains.
FSCO are one company jumping on this opportunity by capturing the data on real assets in the food and agriculture sector from existing systems, and tracking the changes in biological assets over time which;
converts it from a blob, as traditional finance see's it, to a specific maturing herd of 77 cattle, with a specific contracted value. We track the inputs and outputs and put this on-chain.
They are actively building for a world of asset tokenisation and are making the same bet as Goldfinch above i.e that every single asset will eventually have the ability to be referenced globally on blockchain.
Same bet, same finish line, but a completely different starting point.
For now, this entails mapping the data and acting as a payment facilitator in the transaction by verifying quality, specification and triggering a payment from this information, which is recorded on Mastercard's Provenance Solution. In web3 parlance, it is an 'oracle'.
Finally, I enjoyed to learn from FSCO that their funding strategy involved sourcing capital for transactions from both the real world (non bank lenders, investors) and crypto investors and not just one or the other. Smart.
Continuing to lead
There is a lot happening in Agri Fintech now - just look at the news section below.
This innovation is all coming from different starting points but is tracking real assets, whether it be US farmland, avocados from California, grains in India or seeds and fertiliser in Indonesia in a way that will probably end up on chain at some point.
For now, collecting this data and tracking it is the smart thing to do rather than getting fixated on specific protocols.
👋 Don't forget to subscribe below ⬇️ before diving into the news.
I keep wondering when it will change, but for now investment is still blazing with $130m reflected in these announcements alone (excluding the blended raise from Jai Kisan). ⤵️
There are also more and more partnerships being announced with just some below.
⦿ Vegrow, an Indian B2B fruit and vegetable marketplace, has raised a $25m Series B led by Prosus Ventures.
It is notable that Lightspeed Ventures, the Silicon Valley based investor also participated in this round and may see some similarities between this business and their investment in Frubana - covered in this issue.
⦿ AgriAku, an Indonesian B2B inputs marketplace has also raised a $35m Series A .
I hope to feature some of the Indonesian platforms on here at some point soon as it is one country that is very active at the minute.
⦿ Milk Moovement closed a $20M USD Series A to continue their push into the US and Canadian dairy industry.
⦿ Jai Kisan, an Indian rural fintech has raised a combined $50m equity and debt round (Series B). It hopes to close out its' equity round in the coming months at a $200-$240m valuation according to the article above, so I look forward to hearing more about this.
⦿ Faarms, an Indian based digital platform for inputs, has raised a $10m Seed round.
As well as operating the seeds and inputs logistics, the article also cites:
The startup recently partnered with Bharat BillPay to create a marketplace for farmers across India to manage recurring payments such as water, gas, electricity bills, loan repayments, insurance premium payments
Faarms appear to be using the input platform as a wedge to other financial products. 👀
⦿ Arable, raise a $40m Series C to advance its climate resilience product suite.
⦿ Silo, the California based fresh produce software provider, announce a financing partnership with US Investment Bank Jefferies.
🤔 This move is very similar to the strategies I discussed in my last Issue citing Bushel and Produce Pay. I think it is also worthwhile to note / remember that Silo have A16Z as investors and this move definitely aligns with their 'every company is a fintech company' mantra. 👏
⦿ Tillable enables smartphone loan applications as they announce a partnership with Evergreen Bank for farm and operating finance.
With this and other recent announcements in the US farmland investment sector, I really do see another ecosystem take shape (i.e. in farmland investment) and this announcement is just one piece in a wider shift.
*** If you operate in the sector and want to share updates, please do as I am more than happy to receive these.
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