The story goes like this: An impact investor considers a new social venture’s grand vision and feels moved. The entrepreneur persuades the investor that the company is worthwhile, highlighting the novelty of its approach: new technology and a new method rooted in meeting customers where they are. The venture has demonstrated strong traction and tapped into substantial demand with notable efficiency. Meanwhile, competition is thin on the ground, and the size of the market is practically limitless.

The investor is clearly impressed, excited even. But then comes the common refrain: “You’re doing too much.” In other words, your undertaking is too ambitious. Your business can’t take on everything that’s missing, everything that stands between your customer and success.

As both a seed-stage impact investor in frontier markets with Factor[e] Ventures and a cofounder of smallholder agriculture start-up Apollo Agriculture, I hear this all the time. It’s an alluring response. It sounds prudent, sober, wise. But it is flawed, and the setting for a recent meeting I had of exactly this type—a posh coffee shop in Nairobi—largely reveals why. The investor’s perception was riding on a popular, though partial, understanding of the tech economy and lacked context for smallholder agricultural systems. Though we were not in Silicon Valley, where the progenitors of digital social networks have recently discovered the farm and found it to be ripe for “disruption,” we may as well have been. As we sipped our precious coffee and tea, the smallholder farmers who grew the beans and leaves for our beverages and whose lives we were trying to improve could not have felt further away.

Why “too much” is totally necessary

Had we met on a small farm or in an informal market, it would have been hard to reach the conclusion that an aspiring business was “doing too much” to serve its customers. Smallholder farmers are among the most underserved producers in the world. They often lack basic tools and new technologies. They don’t have the distribution networks to access them, the financial services to afford them, or the markets to profit from their investment in them. To succeed in these environments, agricultural enterprises need to develop comprehensive offerings—packages of products and services that allow their customers to reach across supply gaps and get what they need.

Want to sell an irrigation solution to a farmer? Good luck if your customer doesn’t have sufficient funds or a distribution point to purchase your system nearby. Ultimately, you’re going to have to bring your irrigation solution to them and find a way to finance it. You will also have to prove to customers that—unlike the big promises they hear from governments and NGOs—your venture will actually deliver and produce the benefit you’ve advertised.

That’s an awful lot, especially for entrepreneurs who really just wanted to engineer a great product. (Sorry about that.)

As an early-stage investor, I generally find that new businesses disqualify themselves not because they do too much, but because they don’t do enough. They chase theory or money at the expense of chasing their customers, understanding the challenges they face, and delivering the value that the agricultural enterprise and farmer can create together.

A few not-doing-enough narratives:

  • “Check out my great toy—it’s going to change the world! I’m going to build an exciting business selling a $20 hunk of plastic to the world’s poorest and hardest-to-reach people.”
  • “Look at my great app—it’s going to change the world! Hey farmer, I want to tell you how to farm. And you want to pay me to do it! What?! You don’t have a smart phone?”
  • “My platform is the uber-solution—it’s going to change the world! Once everyone is on my platform, agriculture will work better, and I’ll get a cut of every transaction.”

These are caricatures, but they also capture actual pitches I have heard and others have invested in.

These kinds of narrower businesses may have a chance to succeed in industrialized settings, but only because they sit on top of agricultural systems that are highly optimized (for yields, if not resource efficiency or stewardship) and benefit from a mature and more-complete ecosystem of private and public-sector actors at every link in the value chain. Many farmers in the United States have ready access to farm finance, high-quality inputs, agronomic advice, insurance, and infrastructure (including universal electricity access that can power refrigeration from farm to table). Yet even with these systems in place, being a small farmer in the United States is risky.

Pull all that infrastructure away, and remove all of the public and private actors from the landscape, and you can begin to understand why the yield for African maize farmers is a sixth of that of US farmers, why half of the crops farmers grow in tropical countries can be lost to spoilage before they reach a customer, and why hundreds of millions of farmers around the world go hungry.

The “too much” way forward

Of course, that doesn’t mean we shouldn’t bet on new social enterprises in agricultural development. Investors can help small-scale farmers improve their productivity, reduce post-harvest losses, and connect with high-value markets by backing comprehensive solutions and investing along entire value chains. A more holistic approach rooted in local contexts can prove both impactful and commercially viable.

Fundamentally, more investors need to look for enterprises that merge appropriate technological innovation with effective delivery—technology that offers small-scale farmers financial and physical access to the tools to grow their own ways out of poverty. At Factor[e], we’ve organized this thinking around inputs, assets, and markets, and against two core investment theses: one that emphasizes sustainable intensification (the process of creating a step-change in production using similar levels of natural resources), and another that stresses loss reduction and market access.

Sustainable intensification

Sustainable intensification reflects the need to balance increasing production, product quality, and farm incomes with the imperative to steward limited resources and build production systems that natural systems can support over time. This logic embraces, for example, the use of soil management regimes that incorporate modest, targeted use of synthetic fertilizer in exchange for meeting the need to boost farmer incomes and production without expanding the land area under cultivation.

At Apollo Agriculture, we enable smallholder farmers to increase their yield by providing inputs like quality seed, fertilizer, and simple storage technology on credit. Though these inputs can more than double a small farmer’s productivity, without additional services, the loans (a couple hundred dollars at most) and the costs of reaching remote customer bases would require that we offer them a perpetual subsidy to make a profit. Apollo changes this dynamic by also offering a combination of a mobile-based digital infrastructure and a data science approach to building individual credit scores.

With mobile phones and mobile money, Apollo efficiently acquires, onboards, and collects loan payments from its customers. In addition, mobile vouchers allow us to extend the reach of agrodealerships (existing agri-input distribution networks), and recorded trainings allow us to reach farmers with engaging, high-quality content over the phone. As a result, Apollo has built a portable operational structure: digital pipes that enable the delivery of physical goods and tangible services smallholder farmers need to improve their productivity. Organizations like the One Acre Fund have invested in a wide network of field staffing and farmer groups to achieve the same kind of distribution and finance infrastructure at an extraordinary scale.

Using advanced statistical techniques and machine learning, Apollo generates actionable insights for its lending business using everything from high resolution satellite imagery to comprehensive farmer registration information. This removes the need for group liability—a hallmark of traditional microfinance—and allows each farmer to control her own destiny while lowering Apollo’s costs.

And there is more on the horizon: We hope to use remotely-sensed information alongside other agronomic data to offer increasingly optimized input regimes for customers, an approach to precision agriculture that is not only relevant to the lives and farm businesses of Africa’s smallholder farmers, but also capable of actually reaching them and impacting their lives.

In terms of further investment in sustainable intensification, businesses that offer scalable models for agricultural asset finance, and bring agricultural mechanization within reach for smallholders through financial (such as mechanization-as-a-service) and technology (such as off-grid appliance development) innovation hold a lot of promise.

Loss reduction and market access

Even as we seize opportunities to intensify production sustainably, massive loss rates—sometimes exceeding 50 percent—in certain tropical agriculture value chains often prevent smallholder farmers from profiting from better yields. This challenge is infrastructural—particularly related to refrigeration and electricity—and market-based. A farmer who cannot reach demand centers or whose product prices are artificially suppressed by distortionary policies will not invest in expanding their farming business.

Apollo Operations Manager Benjamin Njenga explains the terms of loan fulfillment to an agrodealer that stocks and distributes to Apollo’s farmers. (Photo by Seth Silverman)

In response to this need, Factor[e] has invested in InspiraFarms and CroFarm. InspiraFarms produces cold storage and agriprocessing facilities for agricultural value chains in developing world markets. Its food safety-certified units help shift small commercial farmers from low-value, loosely integrated value chains (categorized by high rates of spoilage) to high-value, tightly integrated value chains (with systems that minimize losses and costs). Where electricity is unreliable or where there is no electricity at all, InspiraFarms units use thermal storage technology to provide continuous cooling to horticultural crops and dairy. Information systems built into its facilities capture data about the agricultural products. This allows customers to manage their operations and value chains more efficiently, and improves traceability for those products across the value chain.

But InspiraFarms must do more than offer high-value facilities. While some “not too much” investors in the sector have warned against becoming a finance company, InspiraFarms has deliberately and efficiently put its technology within financial reach of the businesses it serves with a credit facility that allows customers to pay for units as they realize their value.

Crofarm, also in Factor[e]’s portfolio, similarly tackles the value chain inefficiencies and infrastructural gaps that lead to high rates of post-harvest loss and low profits for producers. Unlike the if-you-build-it-digitally-they-will-come caricature described earlier, Crofarm is building a marketplace and logistics platform that efficiently matches and directly connects small-scale producers with small retailers in India, cutting out several value chain links (and sources of produce and value loss) in the process.

Crofarm does not just provide a digital marketplace. It has built applications (including some that work without a smartphone) that get all relevant players onto the platform with limited friction. Importantly, Crofarm adds logistics to this marketplace function, aggregating supply at produce hubs and developing sophisticated routing functions to ensure speedy delivery. As a result, farmers get better prices, on-time payments, and guidance on market demand while retailers receive higher-quality produce, longer shelf life, and lower loss rates. If it didn’t physically aggregate and move produce, Crofarm’s solution would not be sufficient. By “doing too much” Crofarm creates the gravitational pull to get retailers and farmers onto its platform and the stickiness to keep them there.

Beyond these examples, business models that offer food loss reduction technologies and services at a dramatically lower price point than current off-grid refrigeration solutions offer a lot of promise, as do integrated business models that provide energy and equipment for agriprocessing to serve booming urban and international markets.

How to do too much in agriculture and beyond

So how can a resource-limited startup take on this kind of mandate? The first step is recognizing that a comprehensive offering is not discretionary. As I mentioned above, you won’t be able to sell your irrigation solution if it isn’t within reach—physically or financially—of your customer, or if you can’t ensure that your offering creates enough shared value for both your business and your customer to profit.

InspiraFarms’ new solar dairy-chilling and agro-input supply unit in Thika, Kenya. (Photo by Seth Silverman)

But there are eight other important steps to putting social ventures of all stripes—not just those focused on agriculture—in a position to succeed:

1. Work harder and smarter. Organizations become highly impactful and distinguish themselves only when they tirelessly pursue excellence. It is a moral and commercial imperative to treat socially driven work as seriously as any other enterprise treats potentially more lucrative undertakings. Hire the best and expect the most from your team. Do not settle.

2. Start, develop, and refine your work in the field. There is no such thing as a wasted day in the field. The more time you spend in the field, the better your instincts will be—over time, you will develop “field sense.” Listen at the feet of your customers, and spend enough time with enough of them to truly understand their needs.

3. Vertically integrate where you have to. If you are focused on emerging systems, your enterprise will have to fill a wider range of roles, but you must also stay clear-eyed about its core mission and what differentiates it. For example, are you operating in an environment where local bank financing is progressive and available? Then find a way to match your product or service to the available financing. If you are lucky, and there is another organization competently and affordably serving a function critical to the delivery of your offering, integrate it into your operations as a vendor and focus on what gives your business its competitive edge. This will also make your model more adaptable to different contexts.

4. Partner sparingly and thoughtfully. Partnerships with other companies and organizations seeking their slice of the pie can potentially rob your business of the margin you are working hard to create or sap the value you are working hard to provide to your customers. Indeed, your only true partner is the customer you serve. Focus on creating shared value with your customer, and make sure you’re sharing that value with her. Instead of partnerships, buy the services you need when necessary. Shy away from expensive entities with high overheads (the ones based in capital cities with high-cost management teams), and instead work with organizations like traditional distributors. Just remember that distributors are not technicians and won’t provide after-sales support (you have to do that). They are also not marketers (again, you have to do that). These companies will stock your stuff on a shelf in their store. And you will pay them to do it, because they are near your customer.

5. Constrain your service territory. Too many early-stage rural enterprises get fooled by impressive early sales figures, because they are operating in a vast and unconstrained service territory without discipline. These results often reflect sales to only the earliest adopters. The business has not actually learned about reaching deep into their markets to collect the “late majority.” Basically, they’re selling to the equivalent of the person who camps out in front of the Apple Store to be among the first to have the latest iPhone without figuring out how to capture the interest or motivate the decisions of the whole population they are trying to reach. Eventually, your sales team will have sold your product or service to all of their uncles. They will be out of uncles, and you will be none the wiser about how to make a cold sale to what is probably a largely uniform, discoverable customer base. Constraining your service territory in your early days is more operationally efficient and manageable while you are otherwise doing too much. In the process, you will learn what your customers need, how to reach them, and how to unlock that shared value.

6. Operate with a “lean startup” mentality. Learning quickly from putting minimally viable products and services on the market is still the place to start, but delivering them will require minimally viable systems. To state the obvious, minimally viable systems are not perfect systems; at the start, you should be doing just enough to learn. This requires strategic planning and a steely commitment to cutting out non-essential elements, because most of the time there is too much you have to do to leave room for much else.

7. Recruit investors who “get it.” Find investors who appreciate the difference between big numbers and sustainable growth. Seek investor-partners (in this case thinking of your investors as partners is productive) who can truly add value in the moments where you are making tough decisions. Find the right investors, and you should never have to explain why your venture has decided to distribute and finance, even though you never wanted to be a logistics company or a bank.

8. Seek blended finance. Particularly in the early days, also look for funders who know that a value-sharing mindset (whether with a for-profit or nonprofit structure) is essential for scalable solutions to development challenges. Find funders who are not squeamish about providing developmental grants to businesses that, if successful, will improve the lives of the rural poor. Lean on your investors to point you in the direction of these sources of valuable funding. (And funders: Know the most important thing you can do is vet a team and their approach. Everything else you ask for taxes the young enterprise. If the business serves smallholder farmers well, for example, you will see your impact. And if you lead a young enterprise on for endless months of strategy and process and frameworks and conjured impact metrics, you will harm its ability to serve poor famers.)

Getting it done

In the tropics, it is imperative to build compelling ventures serving poor farmers and agricultural systems while delivering impact and shared value. We need smallholders to thrive so they can:

There truly is plenty of opportunity for social ventures willing to do too much and for the investors brave enough to back them. Don’t take my word for it: Just ask a maize farmer in Kenya, a rice farmer in India, a coffee farmer in Guatemala, a horticulturalist in Nigeria yourself. Indeed, whether you’re an investor trying to evaluate what a farmer needs and whether a new venture can provide it profitably, or an entrepreneur wondering what you have to do to help a farmer improve the profitability of her small farm business and lift her family out of poverty, my advice is to put on some gumboots and go ask her yourself. Smart money says she’ll tell you to do too much.

Listen to her.