May 22, 2018

By Michelle Pelletier Marshall

After more than a decade in executive positions at global investment banks – Goldman Sachs, Lehman, Nomura Securities, and Standard Chartered Bank – and successfully founding fintech and mobile technology startups, David Davies was working on creating cryptoledger communication protocol for financial data. Over the course of a weekend in April 2016 an idea was borne for helping the very opposite end of society, which set him on a journey – one he says is the “most exciting and fulfilling venture of his life”.

Enter AgUnity, which seeks to improve the lives of millions of the world’s poorest farmers by providing a low-cost blockchain and smartphone solution to build trust, enabling farmers to work cooperatively, dramatically reduce waste, and improve efficiency. His team, which is spread across Asia and Australia, is currently operating pilot projects in Kenya, Indonesia, Solomon Islands, and Papua New Guinea, and have, in two cases, tripled the income of farmers in just one growing season.

GAI News caught up with Davies upon his return from Istanbul where AgUnity was crowned winner and “Agrepreneur of the Year” at the 2018 Future Agro Challenge (FAC), which recognizes and promotes global agtech innovations and creates opportunities for startups to access expertise, investment, and new markets. In this two-day, shark-tank-style forum, AgUnity beat out top agtech startups from 62 different countries across five continents, and in a highly-contested race, prevailed over Israel to win.

1. It is our understanding that the inspiration for AgUnity came from an attempt in 2016 to win a prize for the most impressive world-changing idea. Can you explain this further? 

Yes, when AgUnity started, my co-founder John and I had invested a number of years building a new type of cryptotechnology aimed at disrupting the stranglehold Bloomberg and Reuters have on financial data, so we had a deep understanding of building Blockchain technology from the ground up. We got invited to a fintech conference in London and entered a “FinTech for Good” weekend hackathon on a bit of a whim. We are highly competitive people and set our eyes on a prize from Singularity University. In line with their mantra of think big, “don’t do something for a million people, do it for a billion”, we tried to come up with the most wildly ambitious idea we could.

I grew up on a farm, but most importantly, I had also spent a year working on a UNESCO project in Africa in the 90s so I had a direct understanding of the key difference. If I was to sum it up I’d say the biggest impediment in developing countries is a lack of cooperation and trust, and so we focused on a cheap and practical approach to improving that. Over the course of the weekend we started to realize that our idea was not only viable, it was also unique – there wasn’t really anyone focusing on the trust issue with really low income farmers in a scalable way.

We won the prize but Gates Foundation happened to be there and they just loved the idea and gave us the encouragement to take it forward very seriously. We soon found that virtually all the major NGO’s immediately understood and wanted to help us.

So the other banking technology we had spent so many years on got sidelined while we set about trying to lift people out of poverty. It was a much more noble cause and we never really looked back.

2. AgUnity streamlines operations by providing a simple distributed cryptoledger mobile app for every small farmer in the countries in which you serve. Can you explain more about this process?

What’s important to understand is that at first we were skeptical if it would really help them, so what we did next was key. We sent the lawyer (John, my co-founder) off to live in the African jungle for a year – something I frequently say every startup should do. It makes a great joke but that’s really what we did. I also spent as much time in the villages and jungles as I could get away with whilst not getting divorced.

Our farmers are extremely low income, living on only a few dollars a day, and most of them can’t read and most have never had a phone before, certainly not a smartphone. So designing something for them was highly challenging and had not been done before. We really broke new ground in many ways. It was through getting very close to these farmers, helping them with work and discussing challenges over meals that we really came to understand the problems and were able to create something that really helps them. I often say what we really are is the world’s simplest record keeping or accounting system. That sounds so simple to us because we’ve taken these things for granted for over a century so we forget how important simple things are.

A lack of records made it hard for farmers to trust one another, and without trust there was no cooperation, and because they are so small scale, doing everything independently was inefficient and wasteful in many, many ways.

The final key to how we operate is you’ve just got to give them the $30 phone at first, because we found it costs more to try to support them installing an application themselves.

3. You are “creating a new type of global enterprise from a market where others saw only an economic wasteland”. How is AgUnity fostering economic development and advancing food security through this new agtech offering? 

It’s really more of a network than a venture; what’s important are the bonds we create between farmers. By solving the trust issue we can get about 100 farmers to work together in a farmer-owned cooperative, which is the optimum number as it’s village-sized and they mostly all know each other.

When 100 small farmers work together and share resources they become substantially more efficient and in a much stronger position for both buying and selling. Even we initially underestimated how much of a difference that could make. I was expecting we might raise income by 20 percent or so and that would be a great result, but what we discovered is that they are at such a huge disadvantage that much higher gains are possible. In Bougainville, Papua New Guinea we quickly saw income triple, and that really came from just eliminating waste.

In a few more years, I believe we can have the Bougainvilleans earning up to 10 times what they were previously. We could literally transform the island. And that’s what I mean when I said others see an economic wasteland. The farmers earn so little that companies or startups don’t think you could possibly make any revenue, and that’s true in a way, so these billion farmers get ignored. What they don’t see is if you invest a little, like giving a free phone, you can drive real economic growth, lift their income, and then you can make a good return mainly because you’ve earned their trust.

4. You are closing on a multimillion dollar second-seed round soon. Who are the participating investors? How will this funding be utilized? 

This phase is about creating a scaling strategy: how do we get this to a million farmers? So we are taking two projects in Papua New Guinea and Indonesia and testing our scaling strategy in with thousands of farmers. We are also starting a few new projects in Ethiopia, Mekong region, and John is in Latin America now looking at projects in Ecuador and Colombia.

We actually turned down a lot more investment than we accepted. We do a level of reverse due diligence on investors to ensure they are philosophically aligned to our big vision. Fortunately there are a lot of genuine good people that want to invest in a way that has a positive impact on the world so we have nearly 10 individual backers and two small funds.

Our fundamentals as a business are solid so it’s not too difficult to raise money, but what’s most important is being all on the same mission to help lift as many small farmers out of poverty as we can. If we achieve that goal then as a side effect we will be a successful and profitable company.

5. New investors are welcome on your journey – what are the three things you are looking for in that regard, and what type of ROI can investors expect?

We are looking at an untapped market of a billion farmers and we have no real competition as yet. If we execute well then any returns are going to be a ridiculous level of multiples. We are a global platform play and so we look for investors who believe that could be possible and want to help make it a reality.

Most importantly we want to be a model for ethical business, and do something good and meaningful in the world, and have our investors align with that way of thinking.

~ Michelle Pelletier Marshall is managing editor for Global AgInvesting’s quarterly GAI Gazette magazine and an occasional contributor to GAI News. She can be reached at mmarshall@globalaginvesting.com.