You have spotted a problem on your farm and have a solution in mind. Many farmers have come up with great ideas to solve problems, to make life easier for themselves and believe that there are many other farmers who would benefit from their idea as well. What now though? Who do you turn to and how do you bring your idea to the market?
Your potential customer
Understanding how your new product will save your customer time, effort or money is a critical first step. While many innovators focus almost exclusively on the product, it’s vital to understand the customer’s perspective and do your market research, so you are able to answer the following:
Who is your customer?What problem are you solving?How does your product solve this problem?What are the key features of your product?Getting the basics right
A good name, a strong brand identity and a contemporary website with a strong pitch are vital. It is worth investing in good design to create a professional impression. This professionalism should be reflected in your pitch deck which you can use as part of your funding initiatives.
With clarity on your customer needs, the next part of your business planning is to think about your routes to the market. Will you be a direct seller? Will you have a range of distributors. How will you internationalise the product? Will you license the solution or maybe you won’t do any of this and will sell the patent to an international player?
Product development
Creating a prototype to test on farm with potential customers is vital. The customer feedback will help you improve the product so that you can refine and create your minimum viable product (MVP). It also offers an ideal opportunity to seek market validation from your target customer segments. A number of innovation vouchers worth €5,000 can be used with participating universities to help get your product to prototype stage. Innovation vouchers are just one of many supports available to you.
State and tax supports
As you go on the journey to create your new business, your local enterprise office (LEO) is a key resource. Its feasibility study grant is a good place to start with up to €15,000 available for prototype development, consultancy and patent costs.
Normally, 50% of the costs incurred by you are available from the LEO. Once you have your first sales, a priming grant can be applied for to cover salary costs, capital investment or consultancy fees with a maximum of €150,000 available. Most companies are in receipt of much less than this, however – often around €35,000.
Another route to explore is the Enterprise Ireland competitive start fund (€50,000) or high potential startup (€250,000).
Enterprise Ireland takes an equity stake in your business unlike LEO but the sums available for your business can be significant.
From a tax perspective, the SURE scheme (startup relief for entrepreneurs) is useful for those who had a full-time off-farm PAYE role before starting their business. A refund of income tax paid in the previous six years is available. This helps with cashflow in the early stages of the business.
As the business progresses, research and development (R&D) tax credits are available in certain circumstances which allow the company to reduce the cost of R&D activity by 30% (updated in Budget 2019). This is a very worthwhile relief to any company engaged in R&D activity.
Further to this, the knowledge development box tax rate of 6.25% can be applied on all income earned from qualifying IP.
Finally, entrepreneur relief applies if you get to a point where you successfully sell your business. The current lifetime limit of €1m still applies despite calls in last week’s budget to increase this.
Funding your project is definitely one of the most stressful parts of the process for most entrepreneurs. It takes a lot of time, is challenging and can really take your eye off the ball of product development and business planning.
David Leydon
As we have all heard, cashflow is critical. Without cash you will go out of business. Bringing a new innovation to the market will cost more and take more time than you anticipated so a sharp focus on cashflow is vital.
There are a range of funding options available to you depending on what stage you are at. For the early stage entrepreneur, the LEO as mentioned is a good place to start but Micro Finance Ireland, credit unions, peer-to-peer finance, business angels (HBAN), bank debt and in certain circumstances venture capital can play a role.
Protecting your innovation
The IP in your agtech business needs to be protected. Registering your business name and using the appropriate tools to protect your IP could include a mix of patents, design protection, copyright, and trade secrets. Getting solid advice on this is worthwhile. A simple non-disclosure agreement (NDA) should be used when having discussions with any third parties.
Once you register, the clock is ticking on supports
Finally, employment contracts will set out the relationship between you as the owner of the company and employees. It is also a legal obligation. Non-compete clauses and non-disclosure clauses would also be common and prevent an employee disclosing sensitive information about the business, the customers and process. Taking the time to obtain proper independent legal and financial advice at the start of your new venture is time and money very well spent.
Company setup
One of our top tips is not to register your company with the Companies Registration Office (CRO) too early. Once you register, the clock is ticking on supports so, for example, high potential startup (HPSU) is only available within five years of company registration and the priming grant is only available within 18 months on company registration.
When setting up the company, a shareholders’ agreement must be drawn up. This will help to ensure that there is clarity between all shareholders in the business and it can help avoid future disputes.
Accelerators
There is a range of accelerators which agtech innovators can partake in including the NDRC, the Alltech Pearse Lyons Accelerator and Yield Lab. All of these support startups with either finance or, as importantly, mentoring and connections to help internationalise your business. The Enterprise Ireland Innovation Arena at the National Ploughing Championships is also a good place to exhibit as you grow your business.
Challenges
Taking an idea from conception to the market is not an easy road. With up to 90% of startups failing, there are inevitably many ups and downs and, unfortunately, no guarantees of success.
Some of the ways to prevent your ag-tech business from failing include executing at speed, laser focus on customer needs and product development, revenue generation, strong cashflow management and pivoting the business if market conditions or customer needs change.
Finally, build a strong team to include different skillsets from technical to business and also build your professional team with trusted legal, financial and patent advisers.
Start with the customer and clearly understand their needs.Don’t incorporate too early – wait until the time is right.Manage cashflow – stay on top of debtors and secure early stage grant funding, where relevant.Invest time in creating a brand (ie a name or logo) that suits your business and your customers.Don’t leave it too late to seek expert advice.Utilise free tools such as Google and social media to carry out initial market research.In partnerships, prioritise transparency and good communications. Shareholder agreements are key.
David Leydon is head of food and agribusiness in ifac. Ifac advises a range of food and agribusinesses on strategic and business planning, tax, audit and accountancy.
You have spotted a problem on your farm and have a solution in mind. Many farmers have come up with great ideas to solve problems, to make life easier for themselves and believe that there are many other farmers who would benefit from their idea as well. What now though? Who do you turn to and how do you bring your idea to the market?
Your potential customer
Understanding how your new product will save your customer time, effort or money is a critical first step. While many innovators focus almost exclusively on the product, it’s vital to understand the customer’s perspective and do your market research, so you are able to answer the following:
Who is your customer?What problem are you solving?How does your product solve this problem?What are the key features of your product?Getting the basics right
A good name, a strong brand identity and a contemporary website with a strong pitch are vital. It is worth investing in good design to create a professional impression. This professionalism should be reflected in your pitch deck which you can use as part of your funding initiatives.
With clarity on your customer needs, the next part of your business planning is to think about your routes to the market. Will you be a direct seller? Will you have a range of distributors. How will you internationalise the product? Will you license the solution or maybe you won’t do any of this and will sell the patent to an international player?
Product development
Creating a prototype to test on farm with potential customers is vital. The customer feedback will help you improve the product so that you can refine and create your minimum viable product (MVP). It also offers an ideal opportunity to seek market validation from your target customer segments. A number of innovation vouchers worth €5,000 can be used with participating universities to help get your product to prototype stage. Innovation vouchers are just one of many supports available to you.
State and tax supports
As you go on the journey to create your new business, your local enterprise office (LEO) is a key resource. Its feasibility study grant is a good place to start with up to €15,000 available for prototype development, consultancy and patent costs.
Normally, 50% of the costs incurred by you are available from the LEO. Once you have your first sales, a priming grant can be applied for to cover salary costs, capital investment or consultancy fees with a maximum of €150,000 available. Most companies are in receipt of much less than this, however – often around €35,000.
Another route to explore is the Enterprise Ireland competitive start fund (€50,000) or high potential startup (€250,000).
Enterprise Ireland takes an equity stake in your business unlike LEO but the sums available for your business can be significant.
From a tax perspective, the SURE scheme (startup relief for entrepreneurs) is useful for those who had a full-time off-farm PAYE role before starting their business. A refund of income tax paid in the previous six years is available. This helps with cashflow in the early stages of the business.
As the business progresses, research and development (R&D) tax credits are available in certain circumstances which allow the company to reduce the cost of R&D activity by 30% (updated in Budget 2019). This is a very worthwhile relief to any company engaged in R&D activity.
Further to this, the knowledge development box tax rate of 6.25% can be applied on all income earned from qualifying IP.
Finally, entrepreneur relief applies if you get to a point where you successfully sell your business. The current lifetime limit of €1m still applies despite calls in last week’s budget to increase this.
Funding your project is definitely one of the most stressful parts of the process for most entrepreneurs. It takes a lot of time, is challenging and can really take your eye off the ball of product development and business planning.
David Leydon
As we have all heard, cashflow is critical. Without cash you will go out of business. Bringing a new innovation to the market will cost more and take more time than you anticipated so a sharp focus on cashflow is vital.
There are a range of funding options available to you depending on what stage you are at. For the early stage entrepreneur, the LEO as mentioned is a good place to start but Micro Finance Ireland, credit unions, peer-to-peer finance, business angels (HBAN), bank debt and in certain circumstances venture capital can play a role.
Protecting your innovation
The IP in your agtech business needs to be protected. Registering your business name and using the appropriate tools to protect your IP could include a mix of patents, design protection, copyright, and trade secrets. Getting solid advice on this is worthwhile. A simple non-disclosure agreement (NDA) should be used when having discussions with any third parties.
Once you register, the clock is ticking on supports
Finally, employment contracts will set out the relationship between you as the owner of the company and employees. It is also a legal obligation. Non-compete clauses and non-disclosure clauses would also be common and prevent an employee disclosing sensitive information about the business, the customers and process. Taking the time to obtain proper independent legal and financial advice at the start of your new venture is time and money very well spent.
Company setup
One of our top tips is not to register your company with the Companies Registration Office (CRO) too early. Once you register, the clock is ticking on supports so, for example, high potential startup (HPSU) is only available within five years of company registration and the priming grant is only available within 18 months on company registration.
When setting up the company, a shareholders’ agreement must be drawn up. This will help to ensure that there is clarity between all shareholders in the business and it can help avoid future disputes.
Accelerators
There is a range of accelerators which agtech innovators can partake in including the NDRC, the Alltech Pearse Lyons Accelerator and Yield Lab. All of these support startups with either finance or, as importantly, mentoring and connections to help internationalise your business. The Enterprise Ireland Innovation Arena at the National Ploughing Championships is also a good place to exhibit as you grow your business.
Challenges
Taking an idea from conception to the market is not an easy road. With up to 90% of startups failing, there are inevitably many ups and downs and, unfortunately, no guarantees of success.
Some of the ways to prevent your ag-tech business from failing include executing at speed, laser focus on customer needs and product development, revenue generation, strong cashflow management and pivoting the business if market conditions or customer needs change.
Finally, build a strong team to include different skillsets from technical to business and also build your professional team with trusted legal, financial and patent advisers.
Start with the customer and clearly understand their needs.Don’t incorporate too early – wait until the time is right.Manage cashflow – stay on top of debtors and secure early stage grant funding, where relevant.Invest time in creating a brand (ie a name or logo) that suits your business and your customers.Don’t leave it too late to seek expert advice.Utilise free tools such as Google and social media to carry out initial market research.In partnerships, prioritise transparency and good communications. Shareholder agreements are key.
David Leydon is head of food and agribusiness in ifac. Ifac advises a range of food and agribusinesses on strategic and business planning, tax, audit and accountancy.
This is a subscriber-only article
SHARING OPTIONS: