What every VC should know about farming
As a farmer’s daughter, I am shocked by how often farming is misunderstood. When my co-founders and I set out to build FarmRaise — the full-stack financial services platform for agriculture — we were bombarded in pitch meetings with questions like:
“You’re a woman. Farmers are mostly male. Will they buy a product from you?”
“Farmers are hard to reach! How will you go-to-market?”
“Isn’t your market too small?”
“Farmers are slow to adopt technology. Will they balk at sharing their sensitive data with an app on their phones?”
Although agriculture is one of the biggest sectors in the world, and farm finance alone is a half-trillion dollar market, farming is misconstrued by many venture investors. We were fortunate to find some early believers in the likes of Better Tomorrow Ventures, Pear VC, Stanford University, and Financial Ventures Studio, and raised a pre-seed round of capital to prove our concept.
Since raising our last round, we’ve achieved product-market fit and reached tens of thousands of farmers. We’re now scaling rapidly at a ~10% weekly growth rate and want to share FarmRaise’s story to demonstrate the magnitude of the opportunity in agriculture innovation.
Myth 1: farmers are slow tech adopters
It’s time to put the parable of the American farmer who eschews a cell phone, gleans knowledge from local hoedowns, cooperatives, and church, and drives a 1970s John Deere relic to bed.
Today, farmers mostly communicate by iMessage, glean knowledge from YouTube and Facebook groups, and operate some of the most sophisticated technology in the world to plant, harvest, and steward their produce. Some aspects of running their business — like finance — have yet to be digitized, but these components are the minority. Farmers are no more averse to tech than the average non-farming American, and likely more prone to tech adoption given their reliance on machine innovation to achieve higher efficiencies in their field.
Be the product first
At FarmRaise, we set out to prove that farmers would not only use a fintech product, but that they would pay for it. Before we put hand to code, we tested our first product — a software solution that digitizes the process of applying for and managing finance — by using a white glove approach, offering farmers help with every application they’re eligible for and submitting these documents by hand. The farmers liked our service so much that we couldn’t manage the farmer inbound; we were blown away by the number of funding opportunities to access month over month, and couldn’t keep up with the deadlines. It was time to scale back white gloving and build a real product.
We started by integrating our white glove learnings into minimum viable products in Typeform and once we saw farmers engaging these prototypes, we began coding the actual product. When we shipped the first version of the product, our growth rate doubled and our farmer engagement rate accelerated by 6X. Unlike our white glove solution, our tech product could handle the growth. Farmers are interacting with our product at least once per week on average, and this engagement continues to climb as we build new features into the stack.
We came to the table convinced that farmers would use technology — but we had to prove that our specific product would work. Our product today was built on weeks of white gloved diligence which allowed us to de-risk this tool before putting hand to code. Once we knew we had product-market-fit, the next step was proving that we could get our product into the hands of tens of thousands of farmers.
Myth 2: farmers are impossible to access
The farmer is perceived as the Bigfoot of customer segments: elusive, hidden, inaccessible. Investors worry that there’s a long tail of farmers that startup founders simply cannot reach. Growing up in the farming community, I watched how farmers shared knowledge about products: they talked about them on the phone, wrote about them in newsletters from farmer organizations, and shared tips over meals. The most popular brands seemed to have strong organic growth through word of mouth. Today, that knowledge sharing has migrated to the internet and more specifically, to Facebook groups.
Certified Organic Growth
At FarmRaise, our number one customer acquisition channel today is organic (Google Search and word-of-mouth). We started this movement through a digital community that spread like wildfire, reaching farmers via Facebook groups rather than paid advertising. We joined dozens of agriculture Facebook groups and created our own group centered on farm funding, posting new articles that would attract farmers back to our site. This group wasn’t just about getting farmers to buy — it was about posting our content and watching farmers engage with it, give us feedback, and share their experiences with other farmers. This group informed our product roadmap and go-to-market strategy.
Diversifying our go-to-market strategy via regenerative agriculture tailwinds
As FarmRaise scaled organic growth, we were approached by large agribusiness companies to provide tools and services for the farmers in their supply chain. 2021 is a historic moment in agriculture as companies commit to supporting sustainability on the supply chain farms, and our conversations with these companies soon converted into a second go-to-market channel: agribusiness partnerships. By mid-2021, we’d landed an official referral partnership with the largest ag company in the world: Cargill. Partnering with companies that have hundreds of thousands of farmers in their supply chains helps us get to more farmers faster and will be key to scaling our long-term growth
Myth 3: farmers won’t pay
The myth that you can’t capture revenue from farm businesses is the toughest to bust, because farmers’ cash flow is cyclical and big purchases must be expertly timed. Because there are only 3.4 million farmers in the U.S., we had to prove that we could capture significant revenue — thousands of dollars — from our customers each year.
Let the farmer decide
As we built our product, we ran a parallel pricing test by offering farmers a sliding “pay what you want” pricing mode. The prices they selected helped us identify our current revenue model: an annual subscription fee and a 10% take rate on funding unlocked. This model scaled with our user base, and we’ve just begun hearing back on USDA funding decisions for our customers. The average fee for success unlocked is thousands of dollars per farmer annually, confirming our hypothesis. Our pricing works because farmers told us what they wanted — an affordable pricing model aligned with their cyclical cash flow needs.
So what now?
As farmers demand capital for sustainability practices and investment funds prepare to deploy capital toward regenerative agriculture outcomes, FarmRaise is the bridge. We will raise additional capital to add more products onto our stack and scale our solutions — in the process decreasing farm businesses’ cost of capital — and demonstrate to venture investors that agriculture is a flourishing market in which portfolio companies can achieve stellar outcomes. Join us!
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