Indigo AG Company Profile

August 29 2022

Indigo AG


This is part of my ongoing series where I explore Technology companies through a financial lense, analyzing the respective companies through a combaination of fundamentaal, swot, and market analysis

Click here to learn more about Indigo AG

Company Introduction

Indigo Ag, an agrotech company, improves grower profitability, environmental sustainability, and consumer health through natural microbiology and digital technologies. In addition, it uses using AI and machine learning technologies to advance the field of agronomics.

Business Segments

  1. Microbial Seeds/Indigo Production
    • Grower Segment
      • Profit off the spread between purchased grower’s crops and contracted selling prices with buyers
      • Indigo Treated Seed: Indigo purchases seeds from legacy seed manufacturers, treats them with microbes, and then sells the enhanced seeds to growers at a markup.
    • Product Line
      • SOYBEANS: WATER/NITROGEN EFFICIENT
      • SOYBEANS: WATER EFFICIENT
      • CORN: WATER/NUTRIENT EFFICIENT + HEAT
      • CORN: WATER EFFICIENT
      • COTTON: WATER/NUTRIENT EFFICIENT + HEAT
      • COTTON: WATER/NUTRIENT EFFICIENT + HEAT

  2. Indigo Research Partner
    • Revenue stream generated when Indigo monetizes intellectual property through partnerships
  3. Indigo Marketplace
    • Buyers
      • One-time fee for joining platform
      • transaction fees
    • Marketplace Grower Side
      • Free sign-up
      • transaction fees
  4. Transport 
    • The technology-enabled Indigo Transport® platform connects carriers with shippers to move grain more efficiently.
    • Simplicity: Grain shippers can opt to leave the hassle of logistics to the Indigo Transport platform, while carriers experience a seamless and supported way of finding new loads
    • Access: Carriers have access to demand generated on Indigo Marketplace, a grain platform with $1B+ in transactions
    • Reliability: Carriers are vetted for the quality of their equipment and services, assuring the reliable transfer of grain so farmers and shippers can ship with confidence
    • Farmer Profitability: Farmers have the means to transfer grain anywhere and access to a wider geography of buyers in Indigo Marketplace
  5. Grower Side 

    • MARKETPLACE 

      • Farmers enter their grain into Indigo Marketplace to broaden the network of potential buyers who will bid on that crop.

    • BID 

      • Farmers receive bids from buyers and can select to haul their grain with the help of Indigo Transport. 

    • CARRIER MATCHED 

      • An Indigo representative confirms order pick-up details and begins matching with a local carrier.

    • DELIVERY 

      • Indigo handles the coordination, logistics, and payment with that carrier, guaranteeing delivery to the buyer.

    • PAYMENT 

      • Farmer receives check in the mail for their sale on Marketplace.

  6. Carbon marketplace

    • Growers 

      • global effort to leverage agriculture as a climate solution by creating financial incentives for “farming carbon.”

      • Indigo Pays farmer to reduce their carbon footprint and then sell carbon credits to businesses to meet their sustainability goals

    • Pricing Scheme 

      • Potential price per verified carbon credit - $15 

      • Potential verified carbon credits sold / ac. / yr.- Up to 2 credits achieved through sequestration or abatement

      • Potential gross income from enriching your soil - Up to $30 / acre / year paid in 5 installments 

  7. Indigo Atlas

    •  DATA CLEANING

      • Indigo's systems collect raw imagery and weather data, clean it and normalize it into a single consistent map.

    • CROP MASKING

      • We then create masks to ensure that we are looking at the right parts of the map for each crop

    • 3. CLEANING METRICS

      • >Indigo'software then summarizes metrics by geography to create historical data streams.

    • CREATING MODELS

      • Indigo introduces these data streams as variables to our machine learning models, which take the best of each metric to inform predictions.

Management Team 

  1. Ron Hovsepian – CEO
    1. Experience:
      1. 16 years IBM
      2. CEO
        1. Novell 
        2. Intralinks
      3. Board of Directors
        1. Several public and private companies
      4. Executive Partner 
        1. Flagship pioneering
    2.  Expertise: 
      1. Partnerships 
      2. Large-scale project management
      3. Technology
  2. Brian Birtwistle – Chief Product Officer
    1. Experience:
      1. COO Tilt (acquired by Airbnb) 
      2. VP of Marketing at Zynga
      3. Early executive at Amazon
  3. David Potere – Head of GeoInnovation
    1. Experience:
      1. co-founder and CEO of TellusLabs
      2. co-founded and grew Boston Consulting Group’s analytics practice 
      3. Surface Warfare Officer in the US Navy
    2. Expertise:
      1. Provides actionable agriculture intelligence to customers across the food value chain
  4. Geoffrey von Maltzann, Ph.D. is a co-founder and the Chief Innovation Officer
    1. Experience
      1. co-founder of multiple public companies, including Anacor (sold to Pfizer for $5.2B), Seres, Therapeutics and Sienna Biopharmaceuticals
    2. Expertise 
      1. invents new technologies and starts companies to address global nutrition, environmental sustainability, and medicine challenges.
  5. Robert Berendes, PhD – Chairman of the Board
    1. Experience: 
      1. head of business development for 7 years at Syngenta
      2. A venture partner at Flagship Pioneering (formerly Flagship Ventures)
        1. Private equity firms invest in companies that are transforming human health and sustainability.
        2. Investments: 
          1. Editas Medicine
          2. Seres Therapeutics
          3. Moderna Therapeutics 
          4. Denali Therapeutics

Swot Analysis

Strenght 

 

  1. Value Proposition of Indigo’s seed
    1. Using healthy bacteria (micobes) to protect crops and increase yield
      1. By using endophytes (microbes that enhance the plant from the inside out), the plants have naturally selected to incorporate these into their own tissue. Indigo are applying them to the seed at a high concentration to increase the benefit.
    2. Proven to provide plant defence against drought and heat, increase water and nutrient use efficiency 
      1. Increasing demand due to climate change
    3. Tailorable products for differing purposes
      1. Indigo’s biotrinsicTM is designed for easy application and compatibility with the germplasm and many other seed applications.
  2. Online Marketplace Strengths
    1. Indigo’s disruptive marketplace is the first digital agriculture platform 
      1. First Mover advantage in low digitization industry (agriculture)
      2. Indigo connects farmers directly with the buyer.
      3. transparent 
      4. efficient 
    2. Indigo’s expert assistance 
      1. Increase profitability for farmers
      2. Reduce risk for farmers and growers 
    3. Indigo marketplace reduces paperwork 
      1. A built-in feature of Indigo marketplace allows for simplifying the selling process 
    4. Indigo marketplace has built-in transport pricing 
      1. Better farmer decision-making
      2. The only platform with built-in transport options
      3. Bid and ask process for pricing
    5. Indigo marketplace allows for network creation for farmers (negotiations and more buyers)
      1. Connecting many buyers and sellers on an open marketplace allows for more options for farmers 
      2. In-platform negotiations allow you to immediately work on a bid without needing pre-existing relationships. Easily keep track of back-and-forth discussions with multiple buyers at once.
  1. Indigo Carbon Strenght 
    1. Improve Profitability
      1. Increase income with Indigo Carbon by increasing the carbon in your soil or reducing emissions
      2. Reduce herbicide and fertilizer inputs with more resilient soil
      3. Reduce fuel usage from tillage passes
      4. Increase income with livestock grazing on cover crops
    2. Improve Soil Health
      1. Improve water availability during drought
      2. Reduce erosion and retain more nitrogen
      3. Improve field accessibility
  2. Indigo Transport Strenght
    1. Inefficiencies in transportation cost the agriculture industry billions annually
    2. The entire supply chain experiences pain points with the outdated state of transportation. Farmers face inefficient logistics and difficulty finding trucks, while carriers deal with time-consuming and cumbersome processes.
  3. Value Proposition for buyers
    1. Access more growers directly to buy high-quality, identity-preserved grain
      1. Reach more growers in a more efficient way
      2. Reduce costs through a more efficient supply chain
      3. Purchase quality-tested crops that meet buyer specifications
      4. Maintain grain identity through on-farm storage and direct delivery
      5. Indigo manages payment and can split among lien holders
  4. Financial
    1. Exceptional traction (booked +$1B sales volume in under 2 years of product launch)
    2. 40% YoY growth rate
    3. Over $1.3B was invested in Indigo by global investors  , including Investment Corp of Dubai (AUM $233 Billion), FedEx, Alaska's Sovereign Wealth Fund 
    4. Proven management team with a track record of M&A exits and IPOs 
  5. Grower Network
    1. Indigo Ag has over 5,000 food producers growing food on 1 million acres.
      1. Guidance: It expects 25,000 growers using its technology to produce food on 4 million acres by the end of this year.
      2.  Operates outside the US, in Argentina, Brazil, and Australia. It also has a joint venture with Mahyco Grow in India.
  6. Competition
    1. Indigo has no direct competitor as it is the only fully vertically integrated agribusiness
    2. Indigo Ag’s seeds are proprietary
    3. The fastest growing and largest company in the agriculture tech space will get even larger as the company experiences network effects.
  7. Worker welfare: 
    1. Seems to provide many benefits 
      1. Attractive workplace
      2. Worker retention 
      3. Increased productivity 
  8. Buyer default risk bonded and insured by Allianz 
    1. Increase trust between buyer and seller 
  9. Microbial usage increases soil health
    1. A farm's worth lies in its soil; therefore, increasing the soil strength increases the value proposition to farmers.

Weakness 

  1. A relatively small company in the agricultural sector
  2. Not yet Profitable 
    1. Numbers Unknown 
  3. Cash Flow Unknown 
    1. Most likely negative 
  4. Unknown Debt Load 
  5. Lack of agricultural experience in C-suite 

 

Opportunity 

  1. The total Addressable market is 2.4 Trillion -- agricultural industry currently
  2. Focus on Farmer welfare and relationships can accelerate the company’s adoption
    1. Farmers are generally poorly treated and dissatisfied with the large agricultural company
  3. Coordinates the logistics to preserve the identity of the crop all the way to the food company and then to the consumer.
    1. Taps into growing sustainability trends, environmentalism, and farm to table
  4. Lack of AI and machine learning techniques in farming
    1. Indigo Ag’s use of AI and Machin learning can boost farmland sustainability and farm yield
  5. Joined the World Bank- to supply real-time satellite agricultural data to advance food security worldwide
    1. PR opportunity
  6. Bull trends 
    1. ESG
    2. Agriculture
    3. sustainability
    4. Priorities for governments and corporations worldwide with strong institutional
    5. support from public/private sectors
  7. Indigo Carbon Challenge: 
  • In-house venture capital fund opportunity 
  • Products from the challenge seek to address climate change through innovation
  1. Research and Development - Indigo Partners  
    1. Partnering with other farmers allows Indigo Ag a pathway to accelerated development time, important knowledge sharing and business opportunities. 
    2. Opportunities to create the largest agricultural lab. 

Threat
  1. Competition from legacy agricultural giants
    1. The scale of the agriculture giants enables them to kill competition very efficiently 
  2. The usage of microbes in legacy agriculture giants seeds 
    1. Bayer’s Microbial seeds
  3. The creation of new GMO variants which are better than microbes

Investment Conclusion

Indigo Ag is an agrotech company that looks to improve growers' profitability, environmental sustainability, and consumer health through natural microbiology and digital technologies. It uses AI and machine learning technologies to advance the field of agronomics. Indigo AG's foundation lies in its microbial seeds, where it leverages the naturally occurring beneficial bacteria to enhance plant health and improves yield, ultimately increasing the farmer's bottom line. Microbial seeds can enhance the health of the farm's plants and soil. As a result, it allows for reduced use of chemical fertilizer and other environmentally destructive practices. An analogy would be healthy bacteria that enhance the immune system instead of relying on extensive antibiotics and other modern drugs.

Indigo AG is unique because the company is building a full-fledged value proposition scheme to lure in farmers, buyers, and transporters through its digital software. Its marketplace easily connects growers and buyers, and the company also has a secondary marketplace that ties in transport pricing. This hugely benefits farmers as the platform is efficient, easy to use, and decreases the associated paperwork for farmers. Moreover, their expert assistance program further increases the grower's profitability and reduced risk. Essentially, the company can democratize the agricultural industry, an industry historically favouring the agricultural giants.
Moreover, the company offers a compelling value proposition for buyers as well. The company's marketplace allows buyers to reach more growers and reduce costs due to the market forces inherent in their marketplace. The company's extensive vertical integration further reduces costs for all parties. Moreover, the company allows buyers to purchase crops to their specifications. Lastly, the entire marketplace is insured against default risk by Allianz, which increases trust between buyers and growers. The strength of the market is reflected in Indigo's rapidly expanding grower's network; currently, the company has 5000 growers on 1 million acres and is projected to grow to 25,000 growers on 4 million acres by the end of 2021. The company also has extensive operations outside the US in Argentina, Brazil, and Australia. It also has a joint venture with Mahyco Grow in India. This diverse grower's base reflects the company's opportunities for growth in emerging markets and positions it well to compete against legacy agricultural giants. The company's financial side is also very promising, as it has booked over 1 billion in sales volume in just two years, with a 40% YoY growth rate. The company is backed by over 1.3 billion venture capital funding by big names like Investment corp of Dubai or the Alaska wealth fund. Direct competition in the agricultural technology sector against Indigo's ag is minimal as it is the only fully vertically integrated agribusiness. Moreover, their microbial seeds are proprietary.

However, the company has weaknesses, as it is a relatively small company in the agricultural sector. Furthermore, as they are a private company, much of the company's full financials are also unknown. There is also a lack of agricultural experience in the C-suite, with most of their executives coming from the tech and consulting sectors.

Having said this, Indigo Ag does have many growth opportunities. The TAM for the agricultural industry is at 2.4 trillion dollars, and a disruptive company like Indigo Ag can change and revolutionize agriculture. Moreover, their focus on farmer welfare through their product suite, resources, and education segment can accelerate the company's adoption. Farmers are generally poorly treated and dissatisfied with large agricultural firms. Furthermore, their usage of AI and Machine learning techniques through their Indigo Atlas and indigo partner initiatives allows for shortened seed development cycles. Atlas's proprietary algorithms also generate a range of high-resolution, real-time, and actionable outputs. Atlas information enables growers to make more informed planting, harvest, and marketing decisions. It also grants buyers and consumers greater control and choice over their supply chain. The company is also poised to benefit from overall trends in ESG, agricultural sustainability, and environmentalism.

Future threats for Indigo are possible competition from agricultural giants and their adoption of Microbial seeds.

As an investment opportunity, Indigo Ag is named CNBC #1 Disruptor in 2019 and the #3 Disruptor in 2020; this certainly poises the company to generate hype for any eventual IPO, raising prices. Moreover, as the company does more funding rounds and eventual IPO, its valuation would appreciate even more. The company's overall analysis points to a buy rating on the stock due to its vertical integration, disruptive platform, and vast opportunities to disrupt the agricultural sector.

Thanks for reading, and until next time,

William Nguyen