💡Investment Notes: Why we invested in Agros
Serving farmers across South East Asia, for climate mitigation and adaptation
The Agricultural sector is coming to a crossroad:
It must decrease its associated emissions, to mitigate the extent of climate change (Agriculture currently contributes 22% of all global emissions, according to the IPCC);
It must also adapt to the increasing number of extreme weather events such as drought, which threaten agricultural production and supply.
Solutions to any one problem must be done carefully, to avoid creating any negative consequences for the other.
Let’s take the issue of droughts as an example (given that drought is among the most destructive force for agriculture, having caused US$37 billion in crop and livestock production loss from 2008–2018.)
In April 2023, Southeast Asia experienced record-breaking temperatures sweeping across the region. This once-in-200-years heatwave was reported as ‘virtually impossible’ without human-induced climate change, and an increasing trend of droughts has been predicted to continue.
One possible intervention to this rising problem is irrigation, but irrigating fields often requires significant amounts of energy, typically in the form of electricity or fossil fuels.
Technologies and products such as solar-powered irrigation systems can offer a more balanced solution to this pressing problem.
But the availability of technology is one matter - how can these solutions be made accessible to the people and regions that need it most?
This is one of the lenses we used when evaluating the opportunity to invest in Agros, a Singapore-based startup supporting farmers across Myanmar and Cambodia adapt to climate change while minimizing emissions.Â
Agros offerings include:
Agrosolar, high quality solar water pumps, coupled with technical advisory support, installation and after-sales service. Agros provides farmers with the option to pay post-harvest; Because these irrigation pumps rely on solar energy, farmers are able to save 100% on fuel costs; and
Agrosoil, digital soil tests completed in 10 minutes, on-field, to deliver crop-specific soil improvement reports. Through Agrosoil, Agros also creates customized fertilizer package that include the required macro and micro nutrients and organic fertilizer products to promote soil health and crop growth, to minimize the risk of run-off and nutrient pollution. Agrosoil has helps to increase yields by 20% and reduce water usage by 30%. Insights are currently shared via SMS reminders to farmers, and in company is also working to incorporate greater advisory insights on adopting regenerative farming practices.
Pictured above: Agros customer Daw San Aye, who purchased 2 solar pumps for her farm in Myanmar. Agros products helped Daw San Aye turn a profit in a period when her neighbours were unable to, affected by rising fuel prices.
These are some of the reasons we invested into Agros:
1. A farmer-centric business model, designed with a strong understanding of the market challenges in South East Asia.
With razor thin margins and many pressing issues to respond to in their day-to-day lives, upfront financing can be an issue for many farmers looking to invest into their land.
To address this issue, Agros provides post-season financing in select geographies, which reduces the initial upfront downpayment pre-season, helping farmers to cover some of the upfront costs associated with their products. The Micro-Finance Institutions (MFIs) that Agros works with including Rent2Own (based in Myanmar), LOLC (Sri Lanka, Myanmar, and Cambodia), AMK (Cambodia) and Crowde (Indonesia).
This work is all supported by Agros in-house underwriting work and app, which has allowed Agros to keep its portfolio-at-risk low relative to industry benchmarks.
Besides their financing work, Agros has a strong local presence in the areas in which they operate, lowering logistic costs and increasing access to Agros’ services. As of 2023, Agros has 9 hubs in Myanmar and 5 in Cambodia. By providing excellence in customer support, Agros has been able to maximise their impact and reach.
Pictured above: Agros has 9 hubs in Myanmar and 5 in Cambodia. The plan is to expand the reach in four additional regions in Myanmar and six regions in Cambodia by having a total of 12 hubs in Myanmar and 6 hubs in Cambodia by FY2024.
2. Proven ability to execute, and strong impact track record.
Despite the tumultuous journey facing Agros since inception, including COVID-19 and the Myanmar coup, the organisation has been able to consistently demonstrate strong traction and the ability to manage market challenges, even entering into a second market in Cambodia and beginning expansion into Indonesia. This is no mean feat for any team.
To date, Agros recorded an impact across 8,405 ha of land, over 10,000 total beneficiaries, and almost 3,000 farmers serviced. The company enabled savings of 2.6 million litres of fuel from the use of solar pumps, equivalent to over 9,000 tCO2e in emissions reduction and US$2M collective cost savings for farmers.
3. A capable management team, comprising of industry veterans with complimentary skills to scale successfully.
Agros’ Executive Director, Max Nelen, is a serial entrepreneur who previously founded a Medtech startup which was acquired by Abbott. He also has four years of experience in venture building, and and providing strategic as well as operational advisory to Fortune 500 Companies.
He is supported by Nicolas Legroux, Chief Operations Officer, who brings 25 years experience of business unit development (10 of which were in South East Asia); Sandra Bos, Head of Product, who brings 10 years of experience working with farmers and rural development; as well as country directors Thet Win Naing (Myanmar) and Soeng Vay (Cambodia), who have 12 and 15 years of experience in sales and agribusiness respectively.
In their management reports to investors, the Agros team demonstrates a sharp focus on honing their unit economics, hitting product and technology development milestones, market expansion strategy, and more. Their key areas of focus and asks of their network are always clearly articulated as it relates to the business.
The management team oversees a strong network of 122 staff, including 67% in the field. These community networks demonstrate strong commitment to growing in the region.
Overall, we believe in this team’s leadership and operational expertise have put them in a strong position to growth.
Agros is tackling important but underserved communities in South East Asia, addressing environmental and livelihood challenges one step at a time. As they grow their reach and continue to stack their technology and capacity building offerings in the longer term, we believe they are well positioned to scale other regenerative practices. We look forward to supporting them on the journey.
Thanks for reading! Interested to learn more about Agros? Read more about Agros at their website and Linkedin, as well as their feature on the Silverstrand Linkedin.
If you enjoyed these notes, please consider sharing it with your network and subscribing for future updates.