David: Welcome to the “Manitoba Business Podcast,” featuring interviews with business leaders and entrepreneurs based right here in Manitoba. I’m David Noël-Romas. Today’s guest is another perfect example of why I started this podcast in the first place. He runs an incredible, high-growth, fast-paced technology company with over 100 employees and offices around the world. They’ve raised venture capital from some of Silicon Valley’s most notorious investors, the same people that funded Google and Facebook, and they’re based right here in Winnipeg. I’m willing to bet that only a tiny fraction of you have ever heard of them before. If you can’t tell, I was super excited about this interview. I hope you’re excited with the result. If so, please tell your friends about the show. The show is available in all your favorite podcast platforms, including iTunes, and a transcript of every episode is also available on our website at www.manitobabusinesspodcast.com. Now, without further ado, here’s Wade Barnes.
All right. So, Wade, thanks so much for taking the time.
Wade: I’m excited to have you in our offices here at Farmers Edge.
David: Totally. Can we start by having you tell us a bit about who you are and what you do?
Wade: My name’s Wade Barnes. I’m the president, and CEO, and co-founder of Farmers Edge, and, obviously, I’m in charge of kind of from soup to nuts of all the things that are happening at Farmers Edge.
David: Awesome. What is Farmers Edge?
Wade: So Farmers Edge essentially started out as a precision agronomy company that’s been transformed from, you know, just doing and focusing on precision ag, but we’re also highly focused on using farmers’ data and information to create tools that really enhance their decision-making on the farms. So big data, analytics, machine learning are all key things that we do here on a day-to-day basis.
David: Sure, very cool. How did that get started? How did you get into that?
Wade: And so I’m a farm kid and worked as an agronomist in agriculture throughout Manitoba, you know, providing recommendations to farmers of what type of seeds, and chemical, and fertilizers to use and essentially got a taste of precision agriculture early in my ag career. And that foundational experience really helped push me along in the journey with Farmers Edge as we started the company.
David: So what was the driving force behind starting the company at the time?
Wade: Yes, so I worked for a company that sold seeds, and chemicals, and fertilizers. You know, I went to a meeting where they were using some precision agriculture techniques with satellite imagery and had an idea, came back, implemented where the company that I worked had a lot of success early on. I think at those early stages what we were seeing is increased yields but a reduction in fertilizer, and so the people I worked for were a little more focused at that time on selling fertilizer, and the idea of reducing fertilizer to key clients was not really exciting to them. So you would say that I became unhired from that company and then, you know, decided to kind of go out and start my own business with the other gentleman by the name of Curtis MacKinnon that we worked in the fertilizer retail together. And Curtis, he was very focused on the technical side, I was much more focused on the sales side, and really started out with, you know 20,000 acres that first year and grew the business from there.
David: Interesting. Were you initially selling, like, a service where you were helping farmers increase their yields and reduce their cost, or was it some kind of a product that you had, or how did this start out?
Wade: It was 100% a service. So what was happening at that time was that farmers had a lot of the technology to do variable rate or precision ag on their farms, they just weren’t using it or weren’t using it effectively. And so what we did is we brought sort of an agronomic solution and then incorporated it with the technology that was already on the farm to provide them with a solution.
First one was, you know, changing the rates of fertilizer according to productivity areas of the field. We kind of evolved from there, because we got inundated with information, and so we were kind of big data, ag big data, before it was cool. And so we took a lot of the profit that we made, and we rolled it back into the business and started to create our own platform. And from there the business kind of grew. We expanded throughout Western Canada. We ended up in places like Eastern Europe. And so there was a real key thing that happened to the industry. Monsanto went in and acquired what we would consider a company similar to Farmers Edge in the U.S. for about $250 million. And it was sort of interesting and scary that a huge genetics company suddenly started to look at the precision ag space with interest. And why would Monsanto want to acquire a company that focuses on precision seed placement?
So from there, we decided, “Look, you know, as these big giants are gonna move into our arena, we’re going to have to grow and grow fast.” And we were growing at the time as fast as the profits that we made, but we realized that we needed to raise some capital. So I think that was in 2012. We went out and raised our first venture capital to kind of fuel the business.
David: Interesting. When did you start the company? What year was that?
Wade: So the company was founded kind of in the summer of 2005, and then we raised our first capital in 2011.
David: And so when you went to raise, where did you go?
Wade: There was a company based out of Calgary called Avrio Ventures, which was… Really, there was very few venture capital groups in Canada, less that were focused around agriculture, so we were really lucky to run into them. They put the first amount of growth capital into the business, which kind of fueled our next level of growth. But as we were growing, Monsanto struck again, and they acquired another company called The Climate Corp. And Climate Corp was essentially a weather derivative company or weather company that was using weather derivatives for ag insurance in the U.S., and it really focused on how big data analytics would power that.
And suddenly now Monsanto acquired that to incorporate that into their precision ag strategy. And so we realized then that we needed to move again, and we went out looking for new capital but more of a focus around tech capital, and so we ended up closing on investment round with a group called Kleiner Perkins, who is a real historic large venture capital firm Silicon Valley.
And, you know, because, you know, we were a bunch of farm kids, we understood the power of what data could do in agriculture. But what we really needed was somebody that could help us along with the tech side of it, the transformation of an ag consulting company to a data company, and Kleiner seemed to be one of the groups that could do that. You know, the past investors into Google, and so that was, I would say, a significant game-changing thing that happened.
And then after that, we took some more capital in from Mitsui Corporation, which is one of the largest Japanese corporations in the world, one of the largest companies in the world. And then David Thomson’s family office, the Osmington Group, who owns the Jets here in the city, and as of recent also took a significant capital injection from Fairfax Financial.
David: Interesting. Okay, cool. And so, with all those raisings, how have the operations changed?
Wade: Yeah, we are very much a data company now. We focus on providing solutions to growers about, one, getting data, using that data to make their lives easier. And then as we get that data, looking to bring new products to market that can only enhance the growers’ lives. Today we work specifically on agronomics. We’re hoping to bring out products that will be more effective for them around grain marketing, insurance, things of that nature.
David: Sure. Very cool. Getting started, what were sort of the challenges… Like, when Farmers Edge was largely a consulting firm, was it kind of boots on the ground to get sales [inaudible 00:09:39]?
Wade: Yeah, absolutely. We were a company that used other people’s technology, but we were really a consulting firm. We evolved in developing our own tech, but, I mean, yeah… So, I mean, it was…at that time there was lots of opportunity for growth, but you could only grow as fast as you had money in the bank. And there was no room to make a mistake, because in agriculture you’re so weather-related, and so farmers have a tough time with weather and affects their business, that affects your business. So you always have to be careful about growth when you don’t have investors to back you. So I would say that, you know, Farmers Edge probably could have grown even faster in the early stages if we would have had maybe access to funding that just wasn’t available.
David: What does the sales process look for you guys now? Do you have reps in kind of every country type thing or…
Wade: Yes, so we work in five of the largest grain-growing areas of the world, so Canada, the U.S., Brazil, Australia, and Eastern Europe. And so we have sort of a sales element that we go out and we work with channel partners, who are, you know, fertilizer dealers, agronomic people, seed salesmen, and then establish relationships with farmers, get the product out, and then an operations team that goes out and executes in the field. We also got an R&D group that builds the software products, does the data analytics, creates the products. So it’s really kind of three pieces that come together. So, you know, Canada, we’ve had, you know, good brand recognition. We’re kind of the 800-pound gorilla in the room here in this marketplace. The U.S., we’re growing quickly. We’ve had huge growth there. Specifically, we’re in 17 states.
Brazil, we’re really focused in the Mato Grosso region. So we’re really getting our legs underneath us. We think we’ll have over 70 employees in Brazil by the end of the year. We’re in Australia and in Eastern Europe. Probably, by the end of this year, we’ll have close to 18 million paid-for acres, 10,000 connected machines around the world, I think, over 5000 weather stations collecting data. So yeah. So it’s a significant footprint of ag tech, you know, around the world.
David: No kidding. I imagine, with that kind of scale, there was probably even some organizational challenges. What would you say were kind of the trickiest parts of growth?
Wade: I mean, I think it’s all at different levels. One is financing, you know, financing the growth, because we really believe ag tech is sort of winner-take-all and first to the field is important. So you’re trying to gain acres really quickly. So you have to be backed by venture capitalism, the capital to get you there. Funding was always difficult specifically in Canada and being a Canadian company.
David: Just to dig into that for a second, because I think it’s an interesting one, and I think a lot of Canadian companies feel it. What were some of the lessons you learned in terms of getting in front of the big guys that you ended up getting in front of and actually closing a deal with them?
Wade: Yeah, it’s culturally in the U.S. venture capital is much further ahead. Canada’s much more reserved. So I think it’s a real problem that Canada has that they’re gonna lose a lot of great companies to the U.S., because one of the things that venture capitalists in the U.S. do, they feel that the place to be is in the Valley or in the U.S. And so we were really lucky that we had a strong board that was aggressively trying to keep the company here in Winnipeg, but that was a big challenge. And there really wasn’t a lot of people to speak to on the… You know, you have big pension funds, you have big private equity groups, but…
David: They don’t have the kind of [inaudible 00:14:11].
Wade: Yeah. And everybody essentially looks at you and even banks that if you’re losing money, that’s a scary place to be and not realizing that, well, the only reason you’re losing money is because you’re growing so fast. And we are, you know, truly a SaaS-type model, you know. So the reality in the Canadian side, you know, investors and banks alike, the idea of the J curve and losing money is a scary thing, but the reality of it is that if you’re investing in an early stage SaaS-based company that has money in the bank, they’re probably not growing nearly as fast as they should be. So that’s a challenge to get over that, and how to get over that is that you raise money in the U.S. and generally you see a path to these potentially great Canadian companies to find themselves in Palo Alto, or Chicago, or, you know, Boston, and these other hotbeds of tech in the U.S.
David: You mentioned the SaaS model. Your services are largely delivered just through software now, or is there still a very sort of human high-touch component to it?
Wade: So our initial service, we sign a four-year contract with growers. So when we initially sign up a grower, we have to put the sensors in the field. We have to what we call create the zones in their farmland. So, year one, it’s pretty heavy touch. Generally, the most expensive part of our business is that year one component, but by year two we become very much a digital service. But we’ve become very sticky and very embedded.
So we generally don’t make a lot of money the year one, but we make our money year two, year three, and year four, and then with the plan that the product should be strong enough to stand on its own feet and then be able to get a renewal for the next four years. And so, you know, our biggest issue, because of the cost of the year one service, we’ve been growing so fast. And this is an example. You know, in 2014, when we were more of a consulting business, we were on 500,000 acres. By the end of this year we’ll be on 18 million paid-for acres. It’s a lot of acres in a short period of time that has a pretty significant need for capital. But the year after suddenly it’s the profit margin is much much less.
David: Sure, and you mentioned [inaudible 00:16:56]. Your retention must be really good.
Wade: Yeah, we got a retention rate of about 96.5%.
David: Wow, that’s great.
Wade: Yeah, I mean, we would honestly like to see that better. I mean, we’re not… I think, to be honest with you, we’ve had a few glitches in product that if that wasn’t the case, I think our retention will be stronger. I think you’ll see our retention grow next year. I think our products are getting better and better, so expect higher expectation for retention in the future.
David: Very cool. Where do you kind of see the future of the company? There’s obviously a lot of technology developments, but what’s sort of the end goal for…not end, but what do the next five years look like for Farmers Edge?
Wade: I mean, currently, you know, our main competitors are little companies. You might have heard of them before, Monsanto, DuPont Pioneer, and…but, you know, we’re doing really well against those guys. And the first level is on the agronomic acre, but we see that ag is really ripe for disruption. And once you get on these acres, and you control those acres, and you start using the farmers’ data and information, and the farmer says, “Well, this is great. I can grow a better crop, and I’m not beholden to these big companies,” well, suddenly, you know, how they do business, how they sell their grain, how they buy crop insurance, how they work with farm equipment could all change. And you’ve seen this happen in other industries. And so our view is that Farmers Edge could be sort of the tip of the spear of a real mass disruption in ag, and I wouldn’t be so bold to say the Uber of agriculture, but I think we could do similar things.
And I think that…an industry that is kind of like a sleeping giant. What I mean by that is that I think big data and analytics have done big things in other industries. I think big data, and analytics, and machine learning could do things in agriculture that could really make a big difference and a bigger impact. But it’s been later coming to the party on some of this stuff. Some of it is, you know, when you’re in the middle of the Mato Grosso, it’s hard to have your John Deere tractor connected and moving data from the field, because you don’t have any cellular reception.
In Farmers Edge, we’ve had to overcome that. So we’ve build mesh networking in order to be able to do those things, but I think, you know, that’s some of the reasons why ag’s a bit slower to see these big disruptions. But ag’s a big business, and I think if you can disrupt, you know, disrupt it in a big way, and I think that’s what you’re going to see from us in the future, is being the company that’s connected to big disruption in ag and be sort of a tip of the spear that enables that and sort of being a bit of the pain in the side of some of these big multinationals. So we kind of like that space.
David: Yeah, that’s a fun place to be, for sure. The Uber of agriculture. You heard it here first, folks. A couple more questions for you. It sounds like this whole thing has been quite the journey for you personally. I mean, coming up as kind of a farm boy, and then doing agronomy consulting, and now heading a giant and growing company. What were the big lessons for you along the way?
Wade: Yeah, I think one thing I’ve learned is that at the end of the day, you know, the things that you learn growing up in rural Manitoba as a farm kid is actually pretty valuable when you start negotiation with some of these big CEOs from other companies that have their MBAs from Harvard, and I am just not really all that intimidated by it so much anymore. And I think the view is, you know, foundationally, just, you know, it comes back down to the same key elements, hard work, determination, sacrifice, and the will and the want to get into the fight.
And I think all those things are kind of key ingredients to success. And you don’t have to be, you know, in New York, or in London, or in Silicon Valley to be successful. You can compete against giants, you know, right here in Winnipeg even if some of those people that you meet don’t know exactly where Winnipeg is.
David: Cool. Final question or maybe final question depending on your answer. Are you a reader?
Wade: I do some reading.
David: Okay. Then this is going to be the actual final question. Do you have any book recommendations to the listeners?
Wade: Oh, well, mine is the “David and Goliath” from Malcolm Gladwell. That’s a little bit of kind of my theme.
David: Cool. Awesome. That’s a good one. All right. Well, Wade, thanks so much for your time. It’s been a pleasure.
Wade: Great. Thank you.
David: That’s it. Thank you for listening to the “Manitoba Business Podcast.” Once again, this episode was brought to you by Black Chair Consulting. We use social media to help businesses sell more. If you wanna find out about Black Chair Consulting, go to www.blackchair.net. Thanks so much. Have a great day.