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How Transformative is Indigo Ag’s Business Model?

How Transformative is Indigo Ag’s Business Model?

by Dr. Vijayender Nalla, Content Director and Founder at Agribusiness Academy.

Like many of you, I followed the press coverage of Indigo Ag and its recent billion dollar valuation which was received with a mixed response. We became curious to learn about this company that is innovating on plant microbes and using the best performing ones in the seed production process and productivity for the farmers. In my personal view, the answer to their success lies in their business model and here I share the learnings I have had from reviewing their business.

While several Agtech innovations and investments are focused on productivity enhancement, most farmers will be honest in letting you know that they are interested in enhancing their incentives not productivity. The reality of tech focused Agriculture (Agtech companies as they are popularly known) is that it will fall short in enhancing farmers income and incentives. Several farmers and farmer groups I had an opportunity to learn from have educated me that increasing productivity almost always resulted in lower net. Incomes for them. The closest I could get to drive home this message is this graph below.

Net Farm Income in Billions of Dollars

Source: https://www.agriculture.com/news/business/will-farm-income-increase-in-2018

Now, the projected farm incomes all the way up to 2022 in the United States is expected to be way below the 45 year average income realization. If all the tech, economies of scale and market mechanism in the US cannot come to the rescue of farmers, it is very unlikely that the graph is going to be positively different in other emerging markets.

My natural inclination is to understand and review business models of innovative companies, and I rarely come across a technology solution that connected their revenue model to the realized returns of their customers. On the business model front, Indigo Ag looks to be a pioneer within the agri-input industry and it was quite refreshing to see their approach. Here is what Eric Jerk, Head of Strategy and Business Development, had to say about their engagement approach with farmers:

Instead of marketing and selling our product like traditional ag companies, charging a fixed upfront price, we are committed to sharing risk and performance in an aligned way.

For our first cotton launch, for example, instead of asking farmers to pay us upfront for our seed treatment, we asked them to pay us a fixed amount per acre post-harvest, so long as they saw a certain amount of increased lint production.

You can read through his full blog here: https://www.indigoag.com/pages/point-of-view/indigos-partnership-model-reduces-grower-risk

Now, in the best interest of food sustainability and the future food security, I do hope that Indigo Ag will continue to scale up their business model on the partnership model and set a precedent for other Agtech companies to follow. By doing so, they will not only enhance their business performance but will also be able to fast track their innovation pipeline; it is quite a feat to have a model where millions of your customers would like to contribute to your innovation agenda one way or another.

Here is wishing Indigo Ag and other value driven businesses all the success in contributing to a sustainable food supply chains.

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