Issue #9. Prioritizing AgriTech Globally, Improving Silo Bags in Argentina, Venture Investing in Athens
Exploring where agricultural technology is most prioritized; an Argentinian startup's innovations in silo bags; and the reasons behind Athens' low popularity among VCs.
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Random Story of the Week: Global Hotspots for Strategic AgriTech Priorities
There's this great report by the World Economic Forum called Markets of Tomorrow Report that measures how business executives around the world feel about how developments in different technologies, industries, and trends might impact their country. This is probably not the last time I'm going to write about this report, but today I wanted to start with agriculture technologies, and executives in which countries see it as a strategic priority to develop them.
The most concerned countries are the following: Angola, Argentina, Chad, Kazakhstan, Namibia, Zimbabwe, Malawi, Guatemala, Ecuador, and Rwanda. In each of these countries, over half of the respondents believe agricultural technologies are a priority, and the difference from the regional average is at least 10 percentage points. Let's try and figure out why these particular countries are so concerned with agriculture, although there's probably no single reason.
1. Export dependency. The concern executives have about agricultural technologies and their country's dependency on exporting agricultural goods is incredibly correlated in Latin America. Argentina exports 49% in agricultural products, Ecuador 48%, and Guatemala 45%. Most of their South American counterparts export less than 40%, and it's below 30% in Central America.
2. Soil erosion. Guatemala, Malawi, and Zimbabwe stand out — and not in a good way — as countries in their regions with soil most affected by erosion. Despite measures being taken to combat the issue, erosion is still a significant problem.
3. Food insecurity. Malawi, Chad, and Angola are in the 85th percentile of the world's most food-insecure countries according to the Economist, which evaluates 113 countries. In Angola, the situation is particularly severe, with 58% of the population facing acute food insecurity.
4. Potential droughts. Chad, Kazakhstan, Namibia, and Malawi are some of the most at-risk countries for droughts. Vast areas of these countries are covered by deserts: the Sahara in Chad, the Kyzylkum in Kazakhstan, and the Namib and Kalahari in Namibia. Though not in a desert, Malawi still faces droughts during periods when rainfall is below 75% of normal.
5. Local problems. Certainly, each country faces specific local challenges that spur the development of agricultural technologies. Argentina's soybean production, which makes up around 20% of the country's exports, suffers from soybean cyst nematodes; Kazakhstan contends with soil salinization due to excessive irrigation, reducing crop yields and causing land degradation; Zimbabwe is affected by a highly complex land tenure system from colonial times.
For the sake of the countries discussed, let's hope they can achieve their goals in advancing agricultural technology.
Company of the Week: SiloReal
Argentina is one of the world’s leading wheat exporters. In 2022, it supplied 9.4 million tons of wheat valued at $2.5 billion to the global market, ranking as the crop's sixth-largest exporter. Neighboring Brazil is a top exporter, responsible for half of the world's soybeans and 20% of its corn. Brazil has recently seen record harvests. Meanwhile, Argentina is hoping to bounce back after a drought-affected harvest last year, with projections for the third-highest wheat export on record.
You would think that that a record crop is a good thing as long as prices don’t plummet. But one of the reasons they do plummet is storage, or lack thereof. Insufficient storage forces farmers to sell at negative premiums, i.e. at a loss. Brazil, for example, faces a drastic storage shortfall, with an estimated 126.1 million ton storage deficit.This means Brazil is hitting record levels of production but lacks the capacity to store the surplus.
Among the various storage methods available, silo bags are one of the most popular in the region. Invented in Argentina in the 1990s, silo bags are a tube-shaped, hermetic type of storage. They're oxygen-free, so pests don’t infest the stored crops, which can be kept in these silos for up to a year. Since a silo bag is like a giant plastic bag, it’s inexpensive to manufacture. Plus, they eliminate the need for farmers to transport their crop to the nearest grain elevator. While they have gained some popularity worldwide, they are still most popular in Argentina and Brazil. In 2020 alone, the demand for silo bags in Brazil increased by 36%.
However, silo bags aren’t without their drawbacks. They require significant labor and special equipment for loading and unloading. But the main concern is maintaining the integrity of the bags. They can be damaged by falling tree branches or curious wildlife like a nosy fox. Also, these bags are not particularly large (70 meters long, 3 meters in diameter), so an industrial farm might need dozens of them scattered throughout the property. It would be nice to know the status of each bag, such as how much grain is left in each, etc.
One of the consequences of these risks is the inability to use silo bags as credit collateral since the insurer or the bank can’t verify the contents of the bags.
That’s where today's company comes into play. Started in 2021 in Argentina, SiloReal solves the management problem by providing three products:
SiloID, through which a unique ID is ascribed to each silo bag, enabling farmers to keep track of their crop: how much grain they have, how many bags are used, etc.
SiloSat, which allows monitoring of bags remotely using satellite imagery.
SiloMetrix, sensors that are placed on each bag to provide information like temperature, humidity, CO2 levels. Bags with SiloMetrix also have motion sensors, so if someone tries to steal your bag, you'll know about it.
Although it's not clear through which interface, farmers can access financial institutions, insurers, and other entities through auxiliary products like SiloCash and SiloSeguro. How widespread these complementary products are remains unclear. This year, the company is projected to generate just $300,000, which isn't a lot by any standard.
Still, despite the modest results, the concept behind the product is promising: your crops are stored in better conditions, there's less risk of vandalism, and you can insure your assets.
The one component I don’t get is the liquidity aspect. According to SiloReal’s website, you can:
Tokenize your grains by accessing immediate liquidity.
Like, for what purpose would someone buy wheat tokens, exactly?...
Anyway, to date, SiloReal has 50 clients managing 221 facilities, monitoring 1 million tons of grain in Brazil and Argentina. The plan is to monitor 40 million tons within five years, and by then, revenue is projected to reach $70 million. To meet these goals, the company recently secured $1.5 million in funding to enhance its technology and expand its reach and has plans to raise more funds in the near future. We'll see whether they make it.
Startup Region of the Week: Athens
There's not much fun in discussing obvious startup epicenters, like San Francisco or Austin, so in this series, I'll try and focus on the less established and recognized regions. Some have the potential to become major players in the venture industry, while others might not but are still worth talking about.
Let's start with Athens. A great city in its past, it hasn't yet managed to recapture its former glory. But let's not get ahead of ourselves.
The numbers: Greece is home to just 969 venture-backed startups, which is only 0.2% of all such companies in the world, according to Dealroom data. Of those, 453, or about 47%, are located in Athens. You'd think that for a country as centralized as Greece, the percentage would be higher, especially considering that about 30% of the country's population lives in the capital.
However, Athens' startups are significantly better funded: since 2015, startups in the country have raised $1.1 billion in total, with Athens-based companies pulling in $746 million, or 68% of that funding. This means the average startup in Greece raised about $1.1 million, whereas the average for an Athens-based startup is around $1.6 million.
The overall startup ecosystem in Athens is valued at $5.4 billion, which suggests an average valuation of $11.9 million per startup. That, compared to $18.4 million in Europe overall, doesn’t sound that impressive.
As with economic struggles overall, Greece, and Athens specifically, have gotten the short end of the stick during downturns. While funding in Europe has decreased by 44% in the last 12 months, in Athens, the drop is a staggering 73%. Not great.
Industry makeup. The weird thing about Athens is that, according to data from Crunchbase, out of 102 active private startups that have received venture funding1, the three most well-funded companies are in the automotive space. MMoreover, $514 million has been invested in these startups, out of $677 million overall. FlexCar is a monthly car subscription service, as is Instacar, while Spotawheel is a used car platform. However, there's no particular reason why car-related services have popped up in Greece, and all these companies have either already expanded or are planning to expand abroad.
A more narrative-fitting industry that has seen the introduction of several Greek startups is the travel industry. After all, Greece is a top 10 tourist destination. In Athens, 10% of all active startups are in this sector, compared to 3% in Europe overall. Ferryhopper, a ferry booking service; Clio Muse Tours, a museum tours provider; and Dopios, a community tours marketplace, are some of the industry representatives.
The good.
EquiFund. EquiFund is an initiative created by the Greek government in cooperation with the European Investment Fund to support the creation and growth of innovative businesses in Greece. The fund has three programs: the Innovation Window, targeting entrepreneurs at the idea stage; the Early Stage Window, focused on companies with high growth potential; and the Growth Stage Window, aimed at startups looking to scale up. EquiFund has supported 138 companies, investing €350 million.
Growth. Over the past few years, the startup ecosystem in Greece has grown substantially. Two companies in Athens, PeopleCert and Viva Wallet, achieved unicorn status in 2021 and 2022, respectively. According to Dealroom, VC funding in Athens has increased from $40 million in 2018 to $259 million in 2022. That's a 6.4x increase, compared to a 3x increase in Europe overall.
Cost of living. If you're coming from outside the EU and want to enjoy all the perks of being in the EU, like accessing funding from an EU VC or participating in EU funding programs, while also not going broke, Athens is a good option. The city ranks 143rd out of 259 cities on the cost of living index in Europe2.
The bad.
Overall digitization. Among EU members, Greece ranks 25th out of 27 on the Digital Economy and Society Index, lagging in all four dimensions: human capital, connectivity, integration of digital technology, and digital public services. This low level of digitization affects both businesses and consumers. For instance, only 17% of companies use cloud services (compared with 34% in the EU), and only 9% of households have fixed broadband speeds over 100 Mbps (compared with 41% in the EU). These issues don't prevent entrepreneurs from building companies but provide context for the country's modernization and innovation journey overall.
Lack of local investors. Even though there's EquiFund and local venture capitalists, 73% of total investments in 2022 were made by foreign entities. Competing for foreign capital means vying not only with other local startups but also with startups from any country where a particular fund may invest, which can substantially decrease the chances of securing an investment.
Talent shortage. There are 15,000 software engineers in the Athens metropolitan area, according to LinkedIn. In comparison, there are 69,000 in Munich and 36,000 in Amsterdam, which are both smaller than Athens in population.
Lagging startup infrastructure. Athens faces a shortage of affordable founder consulting, insufficient educational services for founders, and a tax environment that's not favorable for startups, among other things.
In the end, Athens's startup industry is growing, but there's still a long way to go.
The total number of startups listed by Dealroom may differ from the count of active startups reported by Crunchbase. Reasons for the disparity include bankruptcies, acquisitions, public listings, and whether a startup has received venture backing. Moreover, the data on individual funding amounts may not be available for some startups on Crunchbase, while Dealroom might provide aggregate funding information.
The higher the number, the better.