By continuing to browse this website, you consent to our use of cookies, as well as to our Terms of Use and Privacy Policy which provide additional information about how we process your data. This website uses cookies to enhance your user experience. Please read our Cookies Policy for more information on how we use cookies, as well as instructions on how to disable cookies. You may disable cookies through your internet browser settings, however this may result in some parts of the website not working properly for you.

INSIGHTS / INTERVIEWS

Smart Agrifood Summit 2019 big winner Agri Marketplace makes fair trade easy

Portugal · Aug 02, 2019· By Amalia González

Agri Marketplace's founders, onstage at this year's Smart Agrifood Summit ©CompassList

Winner of Best Startup and Best Innovative Agrifood Startup, Agri Marketplace presented its fast, transparent and interconnected crop trading platform at Málaga Smart Agrifood Summit 2019

The agrifood sector is facing a future marked by demographic changes, technological growth, climate change, scarcity and unequal distribution of resources. The Smart Agrifood Summit in Málaga, southern Spain, is a meeting point for innovative ideas and investment, institutions and industry, to promote cooperation and entrepreneurship in the sector.

Of the 130 participating companies, Agri Marketplace (Agri MP) was awarded "Best Innovative Agrifood Startup" and "Best Startup" at the event. The startup received €240,000 in prize money for winning the two categories. The team also won to access IBM Cloud technology and will participate in the next SVG Ventures + THRIVE Acceleration Program in Silicon Valley. The startup plans to raise funding in a Series A round in the second half of 2020 of €2.5m to €3m

Agri MP is a B2B cloud-based platform for buying and selling agricultural products. The startup has built a complete digital solution with multiple valued added services for users. Agri MP's business model redistributes value across the entire agricultural food supply chain in order to increase returns to those who assume more risks (i.e., farmers) and to lower the amount agro-industry buyers pay for products by reducing intermediary commissions.

CompassList interviewed Agri Marketplace CEO and co-founder Tiago Pessoa at the Smart Agrifood Summit in Málaga in June 2019. This interview has been edited for length and clarity.

 

Q. How did you get the inspiration to create Agri MP?

A: We started our company in 2016, after we developed our business plan at an MBA program all four founders [CEO Tiago Pessoa, COO Filipe Núncio, CTO José Eduardo Magalhães and CFO Luís Alberto Silva] attended. We started this venture because two of the founders have ties to agriculture. I farm almonds in Portugal, and Filipe Núncio is a rice grower. Every time we have to sell our crops, sales efficiency is one of our pain points. In fact, we have a lot of difficulties selling.

We created this project to give farmers an open window to the world through a platform that helps them find new buyers for their crops. Instead of just being price takers, they can be active. Of course, supply and demand come into play to establish prices, but crops are not really commodities, and buyers can choose products based on specific characteristics.

Our platform lets farmers describe product characteristics such as genetics, production mode, certifications or country of origin, in the case of wheat; or in the case of hazelnuts, product status, product type, form, variety, genetics, production mode, USDA grades, US size, European size, total protein (gr/100gr), moisture (Max.%), foreign matter (Max.%), defects (Max.%), certifications and country of origin.

By allowing farmers to directly contact buyers, they can cut out the middleman and obtain better prices, while manufacturers can make better deals.

What backgrounds do the founders and team have?

The four founders' backgrounds are in economics and engineering. Some of us are farmers, some of us have experience in technology, in finance. We have combined different profiles to create our company.

How did Agri MP evolve?

We invested a lot in developing the platform and technology, so we did not reach the market until 2017. Running the first pilot was one of our milestones. We started with a few products, mostly cereals. We are now enlarging the product base and working with nuts, almonds, walnuts, pistachios and other crops. We followed a step-by-step process in Portugal and Spain before moving to France, Italy and the US. We plan to expand both the products available and geographically since our platform can work for any kind of crop or country.

To get traction, we focused first on the Portuguese and Spanish markets with a transactions goal of €5m, starting with trading only. We needed users and customers before we could focus on platform improvement and revenue. Therefore, our main milestones have been related to how much transactions increased in each market.

Our next goal was to grant our customers access to new features. We have now added other components to our platform, such as logistics, quality inspections at the field or at the buyer's installations and legal support (for example, for export or import situations at customs).

What kind of customers or products are you targeting?

Firstly, we are targeting non-perishable products, grains, nuts, to avoid the risk of perishable goods, where we want to be a reference. There is much room for improvement in terms of the way the agriculture business is done. However, we also want to have more products on the platform. This year we are going to start a pilot on cocoa and coffee. The next step will be to expand to fruits and vegetables.

In terms of the geographical market, our first goal is to grow in Europe. Of course, we are also working in the US, but just in the West, in California, because it is a big agricultural state. We are also looking into Brazil due to the strong ties between Portugal and Brazil.

What have been the main difficulties?

The main difficulty in a marketplace is to gain tractionto get enough liquidity in the market that people start using our service and want to use it again. To solve the chicken and egg problem of supply and demand. Getting the wheel moving in the beginning is difficult.

Another challenge is the confidence that the farmers and the industry need to have to want to work with platforms. Although agriculture is a sector that is improving a lot in terms of technology adoption, in my opinion, the improvement is related more to agricultural practices, since trade has not improved much in the sector.

How does the platform work?

Its operations are not automatic like stock market transactions, since a match does not mean the operation is done, it just starts the process. There are two ways to work with the platform, as a buyer or as a seller. Sellers can specify the quality, amount, delivery date and other details about the products or the batch they are selling. They can also accept offers from buyers.

Buyers can search for what is being offered by sellers on the marketplace. But, because it is a bidirectional platform, either the seller creates selling offers [X amount of Y product for Z amount of money], or they reply to buying offers already in the system.

When there is a match between a buyer and a seller, the platform discloses to each party information about the identity of the other party. Before matching, the platform allows buyers and sellers to remain anonymous. Our customers do not want to disclose their identity or how much they are paying or receiving for a crop to other people in the market.

If a buyer or seller wants to use any other service on the platform for which they need to opt-in and confirm, their information is shared with the related partner company. We then notify both buyer and seller when we are ready to proceed with the final monetary transaction.

We guarantee that when a seller sells his or her crops, the buyer has the funds to purchase them. On the other side, the buyer knows that we only transfer the money and clear the operation when s/he has received the products and is satisfied with them. So we manage those flows, and then, if everything is above board, the operation is confirmed and the final transaction is made.

Are your company partners incorporated into the platform?

Yes. Although the core of our solution is a trading platform, we have incorporated other connected services for added value. Agri MP is an integrated platform.

The other services are not mandatory. Buyers and sellers can look into them, and, if they think that the prices are good, they can use any or some of our other services. We provide secure online payments for every transaction on the platform.

What is your business model?

Our standard model is a dynamic fee per transaction, which depends on volume and value. We also get a share of the profits from the other services integrated into the platform. For some customers, typically big buyers, instead of charging a fee per transaction, we are planning to offer a yearly subscription. Then they will be able to carry out as many transactions as they want. The yearly subscription is still in the development stage.

What technologies do you use on the platform?

The platform is based on Ruby on Rails, and, although we are still in a pilot phase, we want to introduce traceability with blockchain. 

Can you share your sales numbers with us?

We have reached €5m in volume transactions on the platform (60 per month, with an average amount of €80,000 per transaction). Before we were simply targeting users and not charging commission. Marketing before our sales. All I can share is that our forecast for the end of the year [2019] is around €200,000 in revenue.

How much have you invested in Agri MP?

The founders invested around 200,000 in the beginning. Then we closed a 600,000 seed round, plus some grants from different EU applications and supports. So basically we had around €1m all together [total funding]. We are planning to do a Series A round in the second half of 2020 of around €2.5m to €3m, assuming we hit our transactions targets.

Typically, investors value early-stage business based on the team and its ideas, but we want to add the volume of transactions, as it is the main KPI to value marketplaces. Marketplaces with a higher volume of transactions tend to have a higher equity value.

Who are your investors?

We have a French angel investor, and, from the seed round, we have Portugal Ventures [a VC fund in Portugal] and 4Invest Spf S A, a Luxembourg VC fund that invests mainly in crops.

Do you have competitors in the agritech sector?

Yes, we have several competitors in the US and Europe and one in Australia. However, some solutions are focused mainly on trading crops or just connecting people, while all the business is done outside the platform. In our space, in Portugal, Spain and France, we are well positioned, but we need to continue investing, especially in technology, by creating more services and improving integration.

Where do you see Agri MP in the short term, middle term and long term?

In the short term, our goal is to gain traction and go for the next round of investment, Series A. And then, continue our growth process in terms of markets and trading products.

The life of a startup changes a lot, but we want to support the project because we want to scale it, and, to do that, we need resources and a strong team. We are planning to do a Series B in either 2021 or 2022. That all depends on how the business evolves. We can go for an exit strategy, for an IPO or a global partnership with someone that adds value to what we are doing. Our future is still quite open.

What is your opinion of the future of the agricultural marketplace sector?

The demand for food will increase. We need to eat every day. It is a sector with the potential to grow in the next couple of years. I see agriculture becoming a more open market, removing barriers, removing intermediation practices that do not add value.

In the agricultural sector, we see more and more technology on the input side, to help farmers to manage crops. I think the next step is to develop technology that helps farmers efficiently market their products.

Edited by Wendy Lovinger