Welcome back to the Agri Fintech Newsletter!
This issue brings:
🧐 Thoughts on [Full stack or Ecosystem?]
🗞 Relevant News [Yes Bank, Stellapps, Agrim, Produce Pay ]
🖼 Company Profiles [Theory Mesh]
Let's dive in:
Full stack or Ecosystem?
The vast majority of conversations I have with starting or scaling Agri Fintechs come down to this one question. Is there an Ecosystem or will you build this yourself as a Fullstack?
This could relate to a marketplace, a dedicated lending product or even a data or insurance product.
I consider Fullstack as a company trying to build out as much of the value chain and Fintech stack as possible. The alternative approach is turning to an ecosystem, outsourcing as much as possible and only investing resources where you have competitive advantage.
This is not a simple question to answer and not always in the control of the person answering. So lets:
1️⃣ Frame an Ecosystem; and discuss
2️⃣ Different Strokes for Different Folks
Framing a Digital Ecosystem
I wrote in Blockchain for Ag "The ecosystem needs to have a shared value proposition and be in sync" and I still think this is key, alongside the governance of this ecosystem, whether that be formal or informal. (I keep bringing up Governance and even got quoted in this AgFunder article talking about it, but for now my typing brain can't articulate it - hang in there. 😥 ).
I have sketched out what I believe a basic Agri production ecosystem - starting and ending at the farm gate - looks like ⤵️.
As the digital component of each ecosystem in agriculture develops, financial services are one of the major adjacent opportunities - and the companies I write about are the ones already seizing those opportunities.
From my financial stack below, Agritech or AgriFintech companies are approaching this opportunity with either a strong Distribution or Analytics advantage - or occasionally both. 😀
When you start to think about the Product offering, how you scale it (Technology, Modelling) and also how you fund it, that is when the dilemma beings to swirl.
You need different analytic capacity to analyse credit. So do you outsource this or develop it in-house? What about funding - do you partner or raise your own funds?
Do investors understand what you are trying to do? A recent piece from Venky Ramachandran referred to this last piece, which he called the Fullstackers dilemma, whereby Indian VC investors had a penchant for fullstack solutions.
But for now, it seems like it is a factor of geography as ecosystems and tools take some time to develop. So lets talk ....
....Different Strokes for Different Folks
Look at India for example. It is the home of the full stack platform catering to specific niches. It has a big enough market to do this, with diverse value chains.
- Aqua Connect (Aquaculture);
- Resha Mandi (Silk);
- Stellapps (Dairy - also mentioned below in the News) or;
- Faisal (Precision Horticulture)
These examples are all testament to this. They have gone full stack.
I loved this from Saurabh Agarwal, the Resha Mandi CTO on LinkedIn some time ago.
I think "Full Stack Hybrid Platforms" is the need of hour to overcome these challenges of farmers as well as build valuable businesses, which are sticky, have better GM & ROI."
This epitomises the Indian context and building attitude. If you want something done, do it yourself.
Another interesting news item below from Yes Bank in India also brings my attention to possibilities beyond the 'Fullstack' ➡️ Banks are starting to partner with some of the existing Agritech players - that is very exciting. But for now, its Fullstack.
Then I look at the Latin American cohort of Agri Fintech companies such as Traive, Agro do Forte or Agrolend. They operate in a large market with different value chains.
These operators work within an ecosystem, partnering with existing service providers, committed debt funds from international Private Equity such as BTG Pactual and an excellent VC network with SP Ventures and others. The ecosystem ethos appears stronger because some of the supporting tools are there - markets, dedicated credit, dedicated equity risk.
💚 Bonus marks: I recently noticed the Fintech community and ecosystem has warmly embraced their Agri Fintech friends, with ABFintechs (Association for Brazilian Fintechs) hosting a dedicated Agri vertical and discussing the role of banks within the system. 👏👏
What strikes me most, is that there are some Fullstack players in the US - say ProducePay, or even FBN - but not many fully formed Ecosystems..... yet.
They are forming though and I see Bushel as an ecosystem leader in grains for example. Their platform facilitates the existing trade and they are very API focused. API stands for application programming interface - 😂 like that clears things up! API's for me are bout openness, interoperability and the greenshoots of an ecosystem.
Europe has neither, which I'm trying to understand. I'll shortly do an Issue on the UK Agri Fintech scene to highlight some of the fantastic innovation there. I will follow this up with more European examples. But I don't see any ecosystems yet, or Fullstack players.
Is there an Ecosystem or will you build this as a Fullstack?
I always want the answer to be the Ecosystem, but acknowledge huge gaps exist. In order to do this, I will think more about what the ecosystem needs - in fact that is what I am asking companies at the minute.
Why? I'll leave with wisdom below from our friends at Leaf 🤔 💭
There is a shorter news section this Issue. The news that caught my attention in the past 2 weeks has a huge Indian flavour, some Fullstack and some Ecosystem development.
⦿ Yes Bank in India have launched a partner programme with Agritech companies, called Agriinfinity. This is an excellent initiative and follows a similar initiative from the State Bank India in September 2021. Agri Fintech enablement programmes should be mandated in regulation, right? Yes please.
⦿ Stellapps, the Indian dairy value chain software provider has brought IDH Farmfit on board as a partner. IDH are an international development organisation who are focused on Trade development. This appears to be the start of an interesting relationship and I can easily see more partnerships like this from the FarmFit fund.
⦿ Agrim, the Indian B2B inputs platform, has raised $10m to further its expansion, including embedded Fintech, and expects to facilitate transactions of up to $100m in 2022 on its platform. I think of Agrim as an Indian version of Agvend the US based platform which works with ag retailers (but also vice versa), where Agrim are working with 170,000 retailers. 🤯
⦿ Produce Pay have launched Quick Pay + to speed up the payments process for producers with vetted buyers. Produce Pay have financed over $3bn in fresh produce since starting out in 2014 and this faster payment option is likely to expedite the amount of capital passing through their platform.
Profile - Theory Mesh
In my last issue I discussed the topic of "Greeniums", a premium paid to producers for sustainably produced food.
Winnipeg, Canada based TheoryMesh are a huge proponent of this and use blockchain to allow deeper insights into supply chains to back up sustainability claims made by food processors and producers.
This information can include production level data (such as till, no till), satellite and machine level data to develop a picture of the production process and how it moves downstream to the end consumer.
Founder, Chris Bunio, envisions a future where a QR code on any product can tell its entire story.
💡In my view, the traceability use case is still the most relevant for blockchain in Ag, a topic I hope to revisit shortly.
Our team at TheoryMesh is composed of Agriculture, Technology and Business experts who are passionate about creating a more transparent and sustainable agri-food supply chain.