Can you combine data science with farming?
Farmers Edge is an agriculture tech company founded in 2005 with its goal being to help farmers “grow more precisely.” However, despite its great ambitions, one which I believe is both noble as well innovative, I do not believe the company is doing justice to its investors nor do I believe it will do so in the future. Below I give some further background information on the startup as well as my rationale for my conclusion. Overall, however, the reasons I believe the startup is not doing well stems from 1. the dearth of revenue they receive and 2. non-job oriented approach to their startup goals.
According to Crunchbase, Farmer’s Edge is a “a global leader in precision agriculture and independent data management solutions.” That alongside a cursory glance on google, twitter, and their website seem to indicate that the company’s goal is to give farmers the data they need to make better informed decisions regarding their farm (i.e. help farmers increase their crop yield, consistently, from the land they have). They do this by having ground agents, satellite imagery and a data analytics platform that informs farmers on how their crops are doing. They charge a range of $1.50 to $6.00 per acre depending on the amount of data the farmer wants. Since their founding in Winnipeg, Canada in 2005 they have received over $106 million in funding, or approximately $9 million per year. Lastly, according to Glassdoor, their annual revenue is ranges between $25 million dollars with an employee size from 200–500 people.
The issue of revenue
First and foremost, I believe the first issue that Farmers Edge and investors must come to terms with regarding the company is its dearth of revenue. For example, despite existing for already 12 years, the annual average revenue of the company is $25 million dollars. And assuming they have around 350 employees (the average of the range), with them working on average 40 hours a week for 52 weeks a year, the total revenue the company has minus wages is $6.8 million. Furthermore with satellite imagery costs being around 1$/km² (I rounded this: http://www.landinfo.com/satellite-imagery-pricing.html), and assuming they have around ~4 million acres of farm they look at ($25 million dollar revenue/year/$6/acre/year cost of one of their plans rounded downwards to be generous) which, according to them, they look daily (https://www.farmersedge.ca/satellite-imagery/) costs around $6.1 million dollars. This means after satellite imagery, they total profit decreases to $0.7 million dollars. Likewise I believe if marketing efforts and machinery costs are included this sum may decrease below 0 dollars. Going from the fact that it took them 12 years to still be unprofitable with over $106 million dollars of investment total or $9 million per year seems kind of silly.
N.B. The 6$/acre was assumed to be a monthly cost because it does not appear on their website. The 4 million acre value seems to be the same order of magnitude as what they have: https://www.farmersedge.ca/farmers-edge-releases-comprehensive-2018-rd-roadmap-with-over-90-new-digital-agricultural-innovations-focusing-on-data-driven-decision-support/
No product-market fit
The second issue I have with the company is its non-job oriented approach to their startup goals. In other words, I do not believe they are achieving what they state they hope to achieve. According to Farmers Edge, their goal is to help farmers increase their crop yield. Despite that being the case, I have yet to see any information on their site, nor google regarding how much farmer’s crop yields have increased from previous years. Furthermore, any information regarding Farmers Edge, on their website, has to do with what their product offerings are or what type of functions farmers will receive if they use Farmer’s Edge, but nothing on how much more the farmer will make nor feel! This seems to be the crux of the problem and may explain why their revenue is so small. The question is, is Farmers Edge actually not helping improve farmer’s lives, or are they just bad at marketing it. And a quick cursory search on google seems to indicate that its the former: http://www.thecombineforum.com/forums/31-technology/249210-issues-farmers-edge.html. But perhaps thats just me being biased.
Conclusions
The agriculture industry in America alone totals over 900 million acres of farmable, and if every one of those acres was charged $6/year that would total an annual revenue over $5.4 billion dollars. Furthermore the $6/year cost would only come out to be $2500 dollars/year for an average farmer* and would be around 4% of the farmer’s annual wage. So if the information gained from Farmers Edge would increase the farmer’s crop yield by a mere 4% the farmer would surely use the product. The only issue the startup would have to face would be to minimize its satellite and personnel cost, and that would have to be done using various technologies, such as IoT. However, despite this being the case, Farmers Edge still has yet to generate further revenue and this is because of the way they market themselves is not job oriented, as well as because they may be incapable of actually providing the services they aim to provide.
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