Identifying viable pre-seed Funding sources in the agritech startup space is a crucial first step in building your startup. Agritech or agricultural technology is the technique of leveraging technology to produce more food with fewer resources.

The core objective is to infuse efficiency into farming processes, starting with maximizing yields to streamlining supply chains. Agritech or agrotech encompasses sectors like agriculture, aquaculture, and horticulture.

Entrepreneurs can look for innovative concepts that have the potential to improve crop production, prep the soil, or cultivation. Or raising livestock and preparing and marketing the products made from them.

Think IoT-driven precision agriculture using high-tech strategies like sensors and data analytics.

Precision agriculture has the added advantage of sustainability and minimizing the carbon footprint with eco-friendly practices.

Other areas where you can develop ideas for your budding startup include lab-grown meats and insect farming to lower the dependence on livestock for rising protein demand.

Robotics, automation, machine learning, drones, and computer vision are other technologies that can disrupt food production and streamline delivery processes.

Prospects of the Agritech Space in the Coming Years

If you’ve been developing concepts in the agrotech space, know that this is the opportune time for a startup. Experts estimate that the worldwide agritech market to grow at a CAGR of 12.14% from 2021 through 2027.

The market size will be valued at $21,879M in 2021 and will likely reach $43,500M by 2027. By 2032, the market will touch the $75872.5M mark.

Several factors contribute to this phenomenal growth, and the burgeoning population is only a start. The development of connectivity and advanced infrastructure could also promote the agriculture sector.

By 2030, it will add $500B to the worldwide gross domestic product, which will translate into 7% to 9% growth. Demand for food is growing rapidly, requiring a 70% rise in the calories needed for consumption. Estimates indicate that the world’s population will reach 9.7B in 2050.

At the same time, available resources to feed the population will become more scarce. Not only are the costs of energy and labor rising rapidly, but the scarcity and the economic impact of unpredictable weather conditions are a more significant concern. Degradation of soil quality is another area that needs work.

Sustainable farming techniques focused on minimal use of water and inputs and higher standards for farm-animal welfare are in demand. These are the areas where you would want to direct your R&D efforts.

Entrepreneurs who have ideated concepts that can bridge this gap and address this problem with viable solutions have excellent prospects. Here’s how to get started.

Pre-Seed Funding Sources in the Agritech Startup Space – Bootstrapping

Before you reach out to investors and look for funding, it’s advisable to build a strong foundation. You’ll start by dedicating time and personal savings toward researching the market and conducting competitor analysis. Also, put together financial projections and an outline of the problem you’ll solve.

Having a clear overview of the problem will help you clarify your vision and put together a detailed business plan. Keep in mind that startups in the agrotech space need not necessarily be only about farming and actual fieldwork.

You can also develop technology for support, such as a mobile app that enables farmers to connect with buyers directly. This app can create a transparent and efficient marketplace for sellers to market their products at the best prices.

Accordingly, your business plan will include strategies to entice farmers to use the platform and, thus, generate revenues. As more farmers sign up for the app, you’ll scale the business. Here’s another example. Consider building an eCommerce platform marketing agricultural implements.

Or a software simulation to accurately predict expected yields after taking into account variables like weather conditions.

Bootstrapping Needs Detailed Planning

Before reaching out to investors with a pitch deck, you’ll develop a minimum viable product (MVP), essentially a v.1. Testing the MVP in actual consumers will help you improve the product by working on the feedback you get.

You’ll also get validation that the product has what it takes to attract consumer interest. At this point, you can build products without investing too much money or taking on investor risk.

For instance, using drones to capture hi-def images of crops. Next, machine learning algorithms can analyze the images and identify issues like pest infestations, soil moisture, and nutrient deficiency. Farmers can receive actionable reports on their cell phones in real-time.

When you intend to start the company using limited personal loans and funding, your focus should be on cost efficiency. Cut back on your costs and economize by outsourcing tasks to freelancers. You can also use social media channels to advertise and market products.

Also prioritize building recurring revenue streams to roll back funds into the company to scale quickly. Consider tapping monetization approaches like subscription models and charging a commission on transactions on your platform.

Leverage the assistance of your agritech community for tips and tricks on how to build a company economically. Resourcefulness and cost-effectiveness are the core strategies to deploy when bootstrapping your startup from the ground up.

Applying for Government Grants and Subsidiaries for the Agrotech Sector

When scouting around for pre-seed funding sources in the agritech space, one of the first stops should be federal support. Research available government Grants and subsidiaries geared toward backing the agrotech sector.

The federal government offers several programs to boost innovation and growth of agricultural technology. Here’s a quick look at some of them.

SBIR and STTR

The National Science Foundation (NSF), the National Institutes of Health (NIH), and the Department of Agriculture offer programs for R&D. Search out options like the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.

They offer funding to upcoming startups engaging in R&D with the objective of commercializing their products. Typical USDA’s SBIR grants are up to $100,000 for Phase I projects. Phase II projects can attract funding worth $600,000.

As for STTR, qualifying startups can get awards worth $50,000 to $250,000 for 6 months for Phase I. Phase II projects for further research and development can get funding of up to $750,000.

Keep in mind that, in fundraising, storytelling is everything. In this regard, for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend Peter Thiel (see it here), which I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

Rural Business Development Grants (RBDG)

The USDA provides Rural Business Development Grants to support agritech startups in rural areas. The agency accepts applications in two categories: business opportunity grants and business enterprise grants.

The primary criterion is that founders should use the money to develop projects for the upliftment of rural regions. These areas and towns should lie outside the boundary of an urban city with a total population of 50,000 people.

The grant does not have any upward limit. You can get funding for purchasing equipment and machinery, as well as R&D. Feasibility studies, acquisition or development of land, and conducting field trials, which are other areas the grant supports.

State and Local Grants for Innovation in the Agro Sector

Aside from federal grants, entrepreneurs should also explore the local and state government grants that are now available. Make sure to look into the capital amounts they offer, application procedures, and criteria for getting approval. Some of your options include:

• New York State Energy Research and Development Authority (NYSERDA) Grants
• California Department of Food and Agriculture (CDFA) Grants
• Farmers Market and Local Food Promotion Program (implemented as FMPP and LFPP)
• Micro Grants for Food Security Program
• Meat and Poultry Inspection Readiness Grant Program
• Seafood Processors Pandemic Response and Safety Block Grant Program
• Sheep Production and Marketing Grant Program

Applying for Private Grants for Agritech Development

Several private organizations offer grants to upcoming founders developing concepts in specific areas of interest. These areas may include rural development, food security, or sustainable farming. Here’s a quick look at your options.

The David and Lucile Packard Foundation

This foundation assists farmers and small startups in their efforts to conserve lands and ecosystems with sustainable agriculture grants. These grants are offered to non-profit organizations working to protect and rejuvenate the natural world.

Startups developing ideas to reverse the effects of climate change and restore the oceans can rely on it for support. Sustainable development and reforestation are other areas the organization supports.

The Bill & Melinda Gates Foundation

This foundation is a non-profit organization dedicated to eradicating poverty, inequity, and disease in global locations. Entrepreneurs developing projects to improve farm yields, increase incomes for small farmers, and promote sustainable agriculture can apply for support.

If you’re developing software and technology to support farmers and green farming, consider this funding source.

The Rockefeller Foundation

The Rockefeller Foundation is dedicated to boosting sustainable farming practices, improving food security, and lowering the impact of climate change globally.

Any innovations and concepts designed to fight the challenges farmers and livestock producers can apply for these grants.

The foundation also supports regenerative agriculture based on traditional indigenous techniques that restore the land with each harvest. Founders with disruptive concepts that integrate a holistic approach to farming for optimum soil health and quality can get backing.

Even though your startup is still at the pre-seed stage, this is the right time to build a list of target investors. You should be ready for the next funding stages well before your company is ready for more capital. Need more help with that? Check out this video I have created.

Entering into Strategic Alliances

Identifying and partnering with established players in the sector is a great way to kickstart your new company. For instance, if your startup focuses on vertical farming or hydroponics, scout around for equipment manufacturers and seed suppliers.

You could also consider strategic alliances with packaging companies interested in processing your products for sale. Entering into mutually beneficial partnerships allows you to identify the resources and areas both parties can share and pool.

Let’s try another example. Since hydroponics require large amounts of water to grow plants, you’ll partner with a brand that develops efficient irrigation systems. Before finalizing the collaboration, you’ll work with an expert advisor to outline the objectives and expectations of the deal.

Discuss the KPIs, resources, and investments both parties bring to the table. Be clear about the vision and mission statement to ensure a successful partnership. You can also consider sharing networks to connect with bigger markets and a broader customer base.

Keep in mind that maintaining open communication lines and transparency are crucial for long-term and profitable alliances. Invest in project management tools to share updates and reports on the progress of tasks and problems.

Reaching Out to Impact Investors

Impact investors are a special class of entities that specifically target startups that can generate a positive impact. You’ll demonstrate that your project is driven by a disruptive concept that can create a measurable social and economic impact.

While capital is your core objective, founders can expect mentoring, advice, and training to develop their businesses. Impact investors are ideal pre-seed funding sources in the agritech startup space since they are typically open to favorable terms.

Impact investors can offer Mission-Related Investments or Program-related investments (PRIs) at reasonable interest rates. Read up on their approval criteria before reaching out to them for support. Their main objective is typically supporting projects that can build a resilient food supply chain.

Typical verticals that impact investors support include precision agriculture, minimizing the carbon footprint of farming projects, and optimizing resource usage. They also support sensor-based monitoring devices, data analytics for better yields, minimizing waste, and efficient irrigation systems.

The core areas of focus can also be supporting and empowering smaller farmers with capital and tools for food security. Sustainable supply chains and reversing the impact of climate change also attract support.

Raising Capital in the Agro Tech Sector Has Never Been Easier

In recent years, agriculture has been undergoing remarkable changes, and technology is transforming how food is grown, packaged, and distributed. Innovations, automations, AI, and machine learning are quickly attracting interest from the federal and state governments.

Founders can successfully look for pre-seed funding sources in the agritech space if they can develop technology and techniques that can address the main challenges the world is dealing with. Take advantage of the incentives being offered to this vertical, and you can get your startup off the ground.

You may find our free library of business templates attractive as well. There, you will find every single template you will need when building and scaling your business entirely for free. See it here.

The post Understanding Pre-Seed Funding Sources In The Agritech Startup Space appeared first on Alejandro Cremades.