SaaS Interviews with CEOs, Startups, Founders
1590 Why Farmes Are Buying This $1000 IoT Device to Increase Crop Yield
01 Dec 2019
Chapter 1: What parameters can farmers measure with the Stuk IoT device?
Launched the company, a group back in 2014, helping farmers really measure five parameters on the farm so they can grow crops more effectively. Currently, you serve about 60 farmers that have deployed 120 of these kind of hardware measuring stations called Stukes. They pay about a thousand bucks for the piece of hardware. It costs Bruno 450 bucks to produce.
He's looking at driving that cost down over time. And then once they install the hardware, they pay 200 euros or 220 USD per per year for the software. They're doing about $1,100 per month right now just in the software, burning about $20,000 per month as they look to scale.
They got about $800,000 from crowdfunding campaigns, which is fueling and funding their team of 10 in Portugal as they look to scale. Hello, everyone. My guest today is Bruno Fonseca. He is an ambitious tech entrepreneur building a technological solution for crop monitoring. Bruno, are you ready to take us to the top?
Yeah.
Okay.
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Chapter 2: How does the pricing model for the Stuk device work?
What does that mean? Technological solution for crop monitoring?
So basically it's a technological solution, a very scalable one, basically to help farmers in two fronts. Basically, we want to help farmers to monitoring their crops, what their needs in the more efficient way. And we want also to help them to monitor and to prevent damage some risk factors like pests, diseases, or fungus. So basically these are our two value propositions.
And what does the technology do? So I'm a farmer, I sign up, I install, you call it the Stuk sensor, I install the Stuk sensor or stock sensor on my farm, then what?
Exactly. So basically we develop a very innovative sensor called Stuk. So basically it's a sensor that can collect as an IoT device that can collect five different parameters, solar radiation, air humidity, air temperature, soil temperature, and soil moisture.
So, and then based on that parameters, we built some algorithms exactly to allow our customers using, through the use of our app, to understand exactly the water needs of their crops and also to prevent some and to build some models to prevent some diseases.
So how many of these physical sensors do you have in the wild today? How many have been deployed?
So at this point, we have 120 more or less.
And how do you pay for those? Do you make the customer pay for the hardware or did you raise capital to fund the production?
We charge the Stuk, the IoT device, a one-time fee of a price of 1,000 euros.
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Chapter 3: What are the two main value propositions for farmers?
Exactly. Exactly. Exactly. That's great. So here's what's interesting about this model. You're seeing a lot of ag tech products taking off right now, which have this kind of model where it's hardware up front and then their software on the back end and the retention rates are typically through the roof because the farmer actually has to install the thing in the farm. They never churn.
Have you lost any customers?
Until now, we don't.
Yeah. What I was saying is retention is typically through the roof once people actually install, farmers to install the physical software. So churn is usually really, really low. That's great. So, I mean, look, the next question is most of these companies that pair some IoT device plus software, their number one priority is driving down retention.
the manufacturing costs of the physical component, because then you can drive much wider adoption and charge more subscription fees. What are your costs right now to produce one of these things? And how do you plan to drive the cost down over time?
So until now, the production cost is more or less 450 euros per sensor. So the idea is, of course, with the increase of our critical mass, with the increase of our customer base, The idea is to be able to produce more sensors and of course the unit's price will decrease with that.
Okay, so what volume do you have to hit to get the price down to 200 instead of 420 euros?
When you reach, for example, the 500 units, that cost can decrease significantly.
I see. Okay. So right now it's costing you 420 bucks to build one of these stock or stuke sensors. You charge a thousand. So you have a $580 essentially margin on that. You've sold 120. So 120 times 580, that's like 70,000 bucks in cash, which I'm assuming you're using to help fuel the growth of the company. Is that accurate? Exactly.
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Chapter 4: How does the Stuk sensor help in crop monitoring?
Oh, I thought you said rainfall was already one of the five parameters you collect. You don't collect that?
No, no, we don't collect rainfall.
I see, okay. And help me understand growth. So a year ago, how much were you doing per month?
In terms of revenue?
Yeah.
It's about, at this point, 7,000.
uh, wait, well right now you're doing about a thousand dollars per month, correct? 7,000, 7,000 per month. Well, how do you get that number? If you have 60 customers paying $200 a year, that's 18 bucks a month. 60 times 18 is about a grand a month right now.
No, but we have to count with the, with the, um, the cost of the, um, we are selling the sensor.
So sorry, sorry. I'm just, I just meant, I just meant software revenue. So a year ago, just the software.
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Chapter 5: What challenges are faced in scaling the business?
Okay, so that's good. So I mean, again, it sounds like you know what your target is. Why don't you have 30 of these groups signed up today? Like what's challenging about getting them to sell your software and your hardware?
I think that the biggest challenge right now is the fact that our company is not new in the market. So we need to build some trust level with these kind of agents, because for them it will be very important to represent the products that they know that will work 100%. So of course, the product is we are in the beginning, so we have still some things to improve.
Uh, so we need to build this kind of, uh, relation for a while and that it takes always sometimes to, to build this kind of trust.
Uh, so what's your team look like today and who's in charge of those relationships?
So we have a, our team is, is, is constituted by 10, 10 people, uh, working at full time. Um, and basically we have two, uh, business developers, uh, responsible to, to, to have and to create that connection with, uh, with the potential channels and potential potential partners.
And so how are you paying everyone? Cause you're not doing a ton of revenue yet. Did you guys raise capital?
Exactly. We raised capital. We were the first Portuguese startup that successfully completed not just one, but three crowdfunding campaigns on Cedars.
Oh, great. How much have you raised to date total? More or less 800K. Oh, wow. Okay. I mean, so you had a pretty successful Kickstarter campaign then.
was it kickstarter or which what was the site it was a platform a crowdfunding equity platform called cedars cedars yeah from uk okay so there's 10 of you guys and where's everyone based is everyone in portugal yeah for now everyone is in portugal that's great and then and then i mean you know you obviously have to manage your cash as you as you you know fund the team and the hardware costs and all that i assume you're burning capital right now is it accurate
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