The Bowery Capital team is embarking on a ten week journey to cover B2B Marketplaces. We are doing deep dives on various companies, interviewing founders and investors, and learning what it takes to build success in the B2B Marketplace arena. Below is a part of our content series focused on insights from the founders shaping the next generation of marketplace leaders. This week, Amol Deshpande, Co-Founder & CEO of Farmers Business Network, Inc., answers some of our questions. You can read all of the posts in our series by going here.
Amol Deshpande is the Co-Founder & CEO of Farmers Business Network, Inc. (FBN), a leading independent ag tech business that offers a direct to farm commerce, crop marketing and sustainability platform, enhanced by transparent data-driven insights and an international farmer-to-farmer network, that helps family farmers reduce the cost of production and maximize the value of their crops. FBN’s primary business service offerings include the sale of agricultural input products, crop marketing and financial services solutions, and a sustainability platform that brings environmental transparency to grain markets and boosts farm revenues by providing buyers with direct access to verifiable low-carbon grain producers. Amol joins us to share some of the insights he has gained while building an agricultural marketplace.
Farmers Business Network started out focused on agronomic data aggregation but has transitioned towards being a leading marketplace for agricultural inputs – was this transition something you always planned at the outset or something that you began to see a need for after FBN’s launch?
We had always planned to monetize this business beyond simply charging for analytics software subscriptions; the goal of our work around data analytics and data aggregation is really to unlock value for the customer. There are 2 million farms in the U.S. and Canada, but there are only a few seed companies and a handful of major players for some of the other inputs. This imbalance creates real obfuscation of information and real problems for farmers. The analytics and the aggregation we provide has helped create more competition and more transparency, which is a key tenet of FBN. Our goal was never to just be a software company – the data and analytics are just a tool to accomplish our goal of making our customer, the family farmer, more profitable.
When you launched FBN Direct (FBN’s e-commerce marketplace) did you initially target the supply or demand side of the input market when looking to build initial traction? Was there one side of that market that you found easier to onboard?
The farmers are easier to onboard; farmers are looking for options, and in the U.S., Canada, and Australia, right now we are seeing massive demand. The harder part is the supply because you have oligopolists or monopolists who are in control of supply, so it is very hard to run a marketplace in the agriculture industry. In fact, it is almost impossible because there is just not enough liquidity in the market. You need suppliers for it to actually work; and while I think you probably have enough farms globally, I’m not sure you have enough suppliers with diverse enough product bases. So, we really use more of a storefront approach on this and the hardest part when we were getting started was to actually locate supply. A majority of the market simply will not work with us; we want to make prices transparent, we want to lower prices, and that is mortifying to a seed company or a chem company. Much of their profit is based on obfuscation of price, not the performance of the product, so they would naturally oppose our model. Over time, we have found players like generic suppliers and innovative companies that are trying to break through and find a channel and will work with us. We are also putting dollars to work to create our own intellectual property because if the industry is going to deny us supply, then we are going to do it ourselves to unlock that value for our customers.
What is the ideal farm size that makes someone a prime candidate for FBN?
There is no ideal farm size and there never really has been. We would love to have a 20-acre hobby farm as much as we would love to have a 10,000-acre operation. When we started, we disproportionately attracted larger farms because we were purely an analytics tool and the farms that are most commonly adopting those technologies are the medium and larger sized farms. As we have expanded our offerings, smaller farms have come to the table. We did business with a lot of farms that were well under a thousand acres this year, and we are happy to do business in that segment. We want the appeal of FBN to be broad-based and inclusive, we don’t want it to be biased towards only large, small, or medium-sized farms.
FBN offers a suite of services beyond functioning as a marketplace for inputs – which of these value-added services did you decide to expand into first and why?
We went into inputs first because it was something we could get into. When you are trying to monetize a business, you need to be practical about what you can and can’t do. The reality is getting into seed is a long-term game, and three or four years ago we did not have the capital to do that. Now, in today’s world, we have not only the capital, but we have the wherewithal to do really whatever we want and now we have expanded into seed genetics.
When we get an opportunity and we think there is a big market and a customer need where we can provide a better value than the alternatives, we are going to go after it. For example, we think our crop marketing and financial services platform (CMFS) offers tremendous benefits to farmers. Through CMFS, farmers can quickly find loans for land, operating costs, and equipment. Farmers can also come to us for risk management and hedging advice, and our advisory service has gained quite a bit of traction. When you think about all the facets of what a farming operation needs to do, we really have a solution for you on just about every front and that is exactly where we want to be. We are also looking at expansion by crop and by geography. FBN is currently in the U.S., Canada, and Australia, and we want to get into other markets; another area of interest is expanding into more orchard crops and specialized crops.
Many marketplaces need to do unscalable things in the early days to fulfill their role as a market maker – what were some of the ‘unscalable’ things you had to do when you were getting started that then allowed you to reach the scale you’ve achieved?
In this particular industry, the hard part is accessing supply. Today, there are some players in the markets that operate websites/marketplaces, but they are usually working alongside an ag retailer or an ag co-op, and their model is to go in and re-sell those goods and try to skim some percentage off the sale price. We have no interest in anything like that – that is a tiny business and it is also not a business that adds any value to the customer. If you’re going to do something truly disruptive, and truly good for the customer, you have to battle through those barriers; for us, the most unscalable things we have done have been related to accessing supply of product.
FBN currently charges a subscription fee to users looking to get on to the platform – at what point in the company’s lifecycle did you think you had sufficient traction to impose this kind of ‘paywall’ and why?
We have always had a paywall – it started at $500/year and has slowly crept up to about $700/year, which we think is low for the value that a farmer gets. All that said, we don’t know how much friction the paywall actually creates, because we’ve never had a free or freemium option. I would hate to think we are excluding any potential customers through the paywall because we don’t view it as a lot of money, but as commodity prices have declined this has been a very tough year for farmers. The subscription fee is something we are looking at and it may make sense to think about making it easier to be an FBN customer. Philosophically, our view around charging a subscription fee was that engagement will be higher if someone is required to look at the totality of what they are getting before they sign on. Offering a service and just having people create free accounts – there are a plethora of ag tech companies out there who have done that and failed. We took a very different approach and it has succeeded – now the question is what to do going forward.
What was the initial sales pitch when you were first starting out and you were trying to get farmers to pay $500 for an unproven analytics software?
FBN started as network analytics so unfortunately the first hundred or even thousand customers could not get as much out of it – the whole point of network analytics is that it has to build over time. For those first customers, you offer discounted access and you ask forward-thinking customers to take a leap of faith and create an economic incentive for them to do so. One thing people do not realize is that farmers are extremely innovative and extremely willing to adopt technology. I have never approached a farmer with a creative, new idea where they would not hear me out. They will take the call because they are surviving in a tough, low margin business and they always need to be thinking about innovation. You still need to prove your product, but if you have a better value, farmers are going to give you a shot.
What entry-point has proven most effective in getting independent farmers to join the FBN ecosystem (e.g., the crop analytics, the ease of input purchasing, etc.)?
This has changed over time, but there are two big wedges that have really worked for us, and a third and fourth that are still emerging. First, the prospect of transparent analytics, whether it is related to the performance of products or price, is extremely compelling to a lot of farmers. Second, the prospect of saving money on inputs through the FBN Direct platform has also been a big marketplace driver. There are a lot of farmers today that come to FBN and they are coming for the inputs, they know the prices and how much they can save. The third and the fourth emerging areas for us are crop marketing – we have a tremendous crop marketing analytics and advisory platform that is attracting strong interest – as well as our new finance platform – we have been overwhelmed with interest around our land, equipment, and operating loan opportunities. Over time, what is driving adoption has changed as our offerings have changed, but every one of these offerings has value and in a lot of cases, one farmer will adopt three or four of our services.
As FBN has gained steam, what were some of the more and less successful growth levers you tried to pull on to accelerate marketplace adoption? Are there any you would encourage marketplace founders to avoid?
Let’s start with ones to avoid. I would avoid any type of deal or partnership that creates a dependency for you on anybody else. A lot of companies get quick traction this way, and this is not just a marketplace problem. From being at Kleiner Perkins before starting FBN, I learned that when there is a big contingency or dependency in your business that is outside of your control then you are in a dubious situation. Instead, I would encourage founders to do it the hard way and build it yourself from scratch and avoid those dependencies on middlemen or suppliers.
In terms of positive growth levers, I would say having a mission related to what you’re trying to accomplish and sticking with it can be really beneficial. Our customers value that FBN is all-in for our farmers. Our customers appreciate this and they see that FBN is in this to create more value for me, and they’re not going to sell out or even cut a corner in terms of their mission. Whatever kind of business you are in, marketplace or otherwise, I think if you have a mission, you really need to stick to it and that pays off with your customers in the long run.
FBN has also been at the forefront of sustainability – can you tell us about some of your ongoing sustainability initiatives and how you see them driving the FBN marketplace forward?
I believe farmers are the ones who need to implement sustainability at the agricultural level, and they already do in many cases. For farmers, their land is often an asset that has been passed along within their family for multiple generations and there is no one more incentivized to protect it. This is one reason why I think farmland ownership in the hands of small family farms is the right place for it. The question for us is how can we get the market to recognize the sustainability work farmers are already doing, as well as potentially rewarding them for future work they are going to do. We are working to create platforms and technologies to help farmers report on, and potentially extract premiums, for their sustainability practices. At FBN, we want to serve up an opportunity for farmers to make more money for engaging in sustainable practices – we are for the carrot, not the stick, when it comes to promoting sustainability.
If you liked “From The Front Lines: Amol Deshpande (FBN)” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog. Look out for more content on B2B Marketplaces from us in the coming weeks.
