Speedinvest Blog

Planting the Seeds of Digital Finance: The Value of Timing

June 3, 2020

Our partnership with Agro.Club, a two-sided marketplace funding farmers and suppliers when they need it most.

Financial services get a bad rap… because in every industry, even farming, they often get pushed on customers when they’re of no value.

Marketers and salesmen across the globe have long hailed the motto “timing is everything” when talking about closing a sale. This is especially true when selling a product that people know that they need but don’t particularly enjoy buying. Alas, this is often the case for financial products. A survey conducted by the CFA Institute following the 2008 financial collapse found that 98% of respondents acknowledged a lack of trust in the finance industry (Global Market Sentiment Survey, 2013); I guess that’s no surprise.

While I’ll leave the specific reasons for that as the subject of another article, a simple fact is clear: it is essential for a business that sells these types of products to have a business model that offers them at the right point in the customer journey. A platform that engages with the client when they are most likely to think about acquiring the service. As a result, companies in this line of business have had to engage in divergent thinking to cozy people up to their products. Agro.Club, our newest portfolio company, has found a clever way to do just that…

Bridging the gaps

Agro.Club is, first and foremost, a two-sided marketplace with farmers in the middle (see Figure 1). It links the heavily siloed agricultural value chain by connecting input providers — think fertilizer, seeds, pesticides — with farmers on one side of the equation, and farmers with food retailers/ processors on the other. At the same time, it creates an ecosystem for farmers in which to get market analytics, exchange best practices and share general industry insights.

This setup allows the company to obtain all kinds of data on the farmer and, more specifically, their needs. Come harvest or planting season, Agro.Club is uniquely positioned to offer both farmers and the rest of the players in the marketplace bespoke products and value-add services at the moment when they are most susceptible to thinking about them.

But wait, why the hell did I go on and on about financial services if I ended up talking about an agricultural company?

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Figure 1. Simplified Diagram of Agro.Club’s Two-sided Marketplace

Cross-selling Fintech

Well, Agro.Club forms part of a larger trend of companies in a sector we like to call embedded finance (ok fine, we didn’t really come up with the name). For these companies, financial services is not the core product offering. However, by leveraging the data and customer touchpoints of their “main business,” they are able to identify when and how to structure these products. As we saw earlier, that one moment of interaction is key because it leads the products/ services to have a lower customer acquisition cost. This, in turn, results in stronger unit economics and greater product stickiness (aka every VC investor’s dream).

Think about it, traditional, stand-alone fintech companies have to either pour millions into marketing to acquire customers or have some serious skills in business intelligence, growth-hacking or SEO (please insert your favorite buzzword) to keep that CAC down. Companies like Agro.Club simply embed their finance offering (see what we did there?) into their existing product and the marketing is done for them. Thus, the agriculture entrepreneur need not look beyond Agro.Club to satisfy their farm’s needs — insurance, credit and derivatives included.

The bite behind the bark

In its short lifetime, the company has been able to sign up over 9k farmers representing 20% of the Russian market. This is no small feat, Russia is a leading grain exporter accounting for ~23% of the world’s wheat exports (Russian Journal of Economics, 2020). Not only that, but Agro.Club is already working with more than 4k crop buyers and suppliers.

The sector expertise and insatiable drive brought to the table by Egor (CEO) and Andrey (CFO) have combined to enable Agro.Club to realize these impressive achievements with no sign that they are slowing down. These qualities were essential to their leadership in agricultural beacons like Monsanto and Eurochem. Both their vision and ability for execution convinced us that they are the team to lead Agro.Club’s expansion, both in terms of product offering and geography. On the product side, their recently launched Enterprise Solution, will allow large agricultural companies (we’re talking Syngenta and Bayer — large) to run their sales campaigns more effectively, digitalize their business internally and be substantially better connected to the farmer. Having proved a need for these connecting capabilities in Russia and by tapping industry heavyweights Neil Arbuckle (Monsanto, Bayer, United Grain Growers) and Erin Romeo (Monsanto, Bayer), the company is uniquely positioned to take the North American market by storm and unveil the full platform functionality.

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This distinctive combination of factors — the robust business model, stellar traction and ambitious vision — is what finally drove our conviction for the team and Agro.Club. All of us at Speedinvest are excited to be investing in the company alongside Raiffeisen Bank International. We are thrilled to support Agro.Club in its journey to advance the agricultural value chain and put farmers back at the center of it.

Read more at AgFunderNews, Cision PR Newswire, The Spoon, IKS Media (Russian).

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