Upstream Ag Professional - December 3rd 2023
Upstream Ag Professional - December 3rd 2023
Essential news and analysis for agribusiness leaders
Welcome to the 20th Edition of Upstream Ag Professional!
Index for the week:
One (Three) Upping Indigo Ag: New Initiatives from Farmers Business Network
Breaking Down the InnerPlant + GROWMARK Sentinel Project
Converging Agribusiness Software Trends and Implications: Ever.Ag and AgVend Launch New Products
AgroSpheres Completes Expansion of $25 million Series B
Four Areas to Revamp Your Ag Retail Business: Investing in Strategic Assets
Yara Introduces New Line of Biostimulants: Importance of Effective Positioning in Biostimulants
The 60 Best Charlie Munger Quotes
1. One (Three) Upping Indigo Ag: New Initiatives from Farmers Business Network - Upstream Ag Professional
Key Takeaways
Despite impressive membership growth, FBN's does not share specific engagement or activity metrics among its 75,000 members which calls into question the actual member engagement.
Overextension Strategy Risks: FBN's approach of being an "8-in-one" app has similarities to Indigo Ag's previous “5 start-up’s in one.”
Strategic Partnership with Chinese Suppliers: FBN's initiative to partner with Chinese suppliers to bring low-cost input offerings to North America is a noteworthy move. This strategy involves providing services, from product registration to on-farm trial analyses.
This week, I read the linked interview with FBN’s Head of Data Science & Analytics, Kit Barron, and Vice President of Global Procurement and Supply, Tom Lyons.
The interview took place during an FBN “Roadshow” which “attracted the participation of many Chinese agrochemical enterprises” that I get into below.
First, some interesting numbers on FBN’s business:
FBN now has over 75,000 members.
The FBN membership base has grown 42% from its 20,000 members in Q1 2021 to more than 75,000 in Q3 2023.
Cropland owned by farmers who are FBN members, reached 139 million acres, accounting for 29% of cultivated land of the US.
FBN says they have analyzed 100 billion field data points from across North America, covering 31.5 million acres of land, 6,800 seed varieties, and 150,000 purchase invoices for agricultural inputs.
The aspect that stands out about these numbers is that none of them emphasize the current engagement or activity of the member base.
Becoming an FBN member is low friction: there is no cost, and all it takes is an internet connection and an email address.
What indicates a healthy business are customers, or users, taking business actions; what percentage of those members purchased a product from FBN in the last 365 days, what percentage of those individuals grew their business with you in the past 365 days, and on the lowest of ends, a membership activity metric, such as an L28 (members that took an action within the app or on the website in the last 28 days).
If those KPIs, or variations of them, were positive, they would be stated because that illustrates a highly engaged member base. This, to me is a red flag regarding the health of the FBN business.
One (Three) Upping Indigo
In September, I wrote Indigo Ag: Analyzing What Went into their $3.5 billion Valuation and What Went Wrong, highlighting the following:
In 2020, David Perry (in)famously stated that Indigo was “five start-ups in one” because they had so many different pillars within their business. Being that this was across crop inputs, grain, carbon, transportation and more, the total addressable market that Indigo could sell to investors was massive.
But, this broad based approach was a red flag. And even after focusing their efforts on three business units— it was still too many.
FBN went a similar route, now even emphasizing that they are an “8-in-one” app.
Business strategy and tactics stem from the concept of strategy in war.
A basic understanding of battlefield strategy is that you cannot attack an enemy from every direction. It scatters resources and people, leaving you in a weak or vulnerable position. The aim is to focus resources, play to your strengths, and get small wins, then move from there.
Indigo was doing the equivalent of aimlessly letting soldiers run rampant on the battlefield, and FBN is doing the same— this wreaks havoc on a battlefield, just like in a market, wasting resources, not gaining any ground, and making it a challenge for the business to gain momentum and wins that it needs to be successful.
In Zero to One by Peter Thiel, he emphasizes that it is easier for start-ups to overcome competition by dominating a small market rather than a large one.
Any big market is a bad choice, and a big market already served by competing companies is even worse…In practice, a large market will either lack a good starting point or it will be open to competition. And even if you do succeed in gaining a small foothold, you’ll have to be satisfied with keeping the lights on: cut-throat competition means your profits will be zero.
In other words, dominate a niche.
FBN has not dominated any niche.
In order to succeed in a competitive environment, an entity needs to do something that others cannot. A business needs to be 10x better or solve a unique problem, which means starting in a targeted market.
Once an organization can dominate a niche, it can expand into new markets. This is the fundamental Amazon strategy (start with books), which is a good comparison for FBN— Amazon didn’t start as “the everything store,” they became the everything store over time after exploiting niches in a very strategic way.
FBN is still trying to be everything to everyone before being a single thing to anyone, just like Indigo.
FBN has raised over $900 million USD and then went in various different directions (8+, apparently)— not only in terms of types of markets, from grain marketplaces to sustainability, to software, to inputs, but they were trying to do this across multiple geographies, including Australia which they more recently exited.
To this day, FBN does not own a specific spot in the market outside of “low-cost input provider.”
It is challenging to find an example of a company in any industry that has been successful when going in multiple different directions and attempting to “boil the ocean.”