Even If You Have A Solution That Solves A Problem, Startup Is Not A Sure Thing
A very interesting and worthwhile repost from AgFunder
Tales of a Failed Agtech Startup: “Everyone thinks they’re an early adopter; few actually are”
The Poultry Exchange was a chicken meat marketplace founded by Janette Barnard in January 2016. Barnard started the business after realizing the inefficiencies that exist in the spot market for chicken, which accounts for between 10% and 30% of the $60 billion chicken meat industry.
The spot market is where suppliers sell the extra chicken they produce that’s not been purchased through the typical forward sales contracts they arrange with the big food companies.
Because the poultry industry is so integrated, the live birds go to the processing plant whether they’ve been pre-sold or not and then sales representatives have to make quick work of finding a buyer for excess.
Barnard raised seed funding from an angel investor who knew the problem she was trying to solve well. But after struggling to get an intractable industry to change its ways, The Poultry Exchange ceased operations in July 2017 and Janette Barnard is now sales and marketing director at DecisionNext, a prescriptive analytics startup for the meat industry.
We caught up with Barnard to find out how she discovered that the industry she was looking to disrupt wasn’t ready, the decisions around pulling the plug, and what she’s learned from failure.
What made you believe that the poultry industry was ready for a shakeup?
That’s a complex question. We designed The Poultry Exchange from customer feedback and hearing people in the industry describe the problem and what they would need from potential solutions.
All signs indicated that the industry was ready to adopt this model for transactions. But there were two dynamics at play. One is that the majority of frontline buyers and sales reps have been in their roles for decades and are very comfortable with the status quo. They’re reluctant to change – I underestimated how deep this resistance ran. The second is that a couple of months after we launched, there were some antitrust lawsuits brought against the industry around poultry pricing practices. The result of that was that an already cautious industry became even more cautious in the face of significant legal uncertainty.
Perhaps we should have anticipated the first dynamic but the lawsuits were just one of those things we couldn’t have anticipated. That wasn’t something that we could build a strategy around.
How was your experience setting it up and getting started, getting funded?
It was really two-fold. Number one was getting a sense of what does this problem look like, how big is the problem, what are the real drivers of this problem? I put about 20,000 miles on my personal vehicle in a five-month time period just getting in front of anyone from either the buyer side or the supplier side to talk about the problems and the challenges and the inefficiencies in that market when it came to buying, selling and pricing chicken meat.
And the second piece of that was trying to identify what are considerations we need to take into account for in finding solutions?
If we go and build a two-sided marketplace, what’s going to be important to suppliers or what could be things that could keep them from using it, versus what would be things that are more attractive to them?
As to the second piece to your question around funding— I was really fortunate in that pretty early on in the process I actually stumbled upon an angel investor who used to be CEO of one of the chicken companies. He knew the problem we were trying to solve firsthand and had seen it play out for years. He was really excited about the idea of creating a solution to that problem.
That’s the thing — it’s not like I woke up one day and thought, ‘Wow, wouldn’t it be great to build an online trading platform for chicken?’ That’s not what happened. I heard people say, ‘This is a problem, it costs my business significant revenue, significant profit. It costs our sales team multiple days each week. ‘
And they said, ‘Yes, we want a solution, here’s what we need in a solution.’ We went and built it and then they said, ‘We’re not quite ready to change yet. How we do it today is good enough.’
That was a really hard lesson for me— there is a difference in what people say they want versus what they’re willing to pay for. Everyone likes to talk ideas and think of themselves as an early adopter, few people actually are. And the only way to tell who is and who is not is whether they put dollars behind their words.
And even when they tell you that they’re willing to pay for it, that’s different than when they’ve actually written a check. Until the point where they actually write a check, I don’t believe their words. Their words are meaningless.
How did you know when it was time to close up shop?
It wasn’t a hard line in the sand, but I had set some pretty specific milestones; both revenues generated and new customers per month. But the most important metric that would determine success, was the number of trades per month.
Increasing number of trades completed was the metric my team was most focused on. We tackled this by focusing on bringing on new buyers, and bringing on new sellers, as well as building a robust onboarding process to get the people who were signed up and had accounts to be more active in the platform.
We constantly asked ourselves, How do you get users to log in more frequently and when they do log in, how do we get them to switch from just creeping around and looking to see what was out there to being active? In order for a marketplace to work, each side has to derive value – and the only way for each side to derive value is if there are transactions happening. So we needed users to actually place a bid or actually try to buy a load of chicken or sell a load of chicken.
We spent a lot of our time focusing on that specific problem. And ultimately, it was a lack of progress around that specific metric that was what led me and my investors to make the decision that we did. We didn’t have evidence that users would actually take action.
And as we saw that metric not improving month after month, we decided there is not enough evidence that the industry is actually ready for this technology.
Both I and my investors, we all still believe that this technology will absolutely be adopted by the industry widespread in some shape, form, or fashion. But it will likely be as more tech-savvy people enter buying and sales roles at meat companies where they’ll instinctively look for tools to make them more effective, instead of fearing tools.
How did you communicate around The Poultry Exchange when searching for your next opportunity?
That’s a great question. I knew I wanted to stay at the intersection of meat and technology so I was really fortunate because it was an advisor to DecisionNext that connected me with the CEO, so he kind of messaged it for me. From a messaging standpoint, it was really, “Hey, I’ve been trying to build something. I’ve been trying to solve some problems in a similar space, but in a different way. Let me take what I learned through that experience and apply it to helping build your company.”
I don’t believe having launched a startup is something that comes through well on a resume or if you’re just applying online for jobs because there’s so much depth to the experience. It’s hard to describe and if you’re talking to someone who hasn’t done it, it’s hard to understand. But the people and companies who want to hire entrepreneurial-minded individuals, I think that’s where your informal networks really come into play because we all want to hire people who can think for themselves and who have ambitious goals and want to build around growing businesses.
On the topic of failure, it’s kind of funny because I think that the whole time I was launching The Poultry Exchange, my biggest fear was that it wouldn’t work. And the day my investors and I decided to fold, I was like, “Wow, this is terrible.” But then the next morning, it was kind of like … I woke up, I’m still alive. I have this great experience under my belt. I still want to start another company. This is not the worst thing.
I am very proud of what we did in dialing into a worthy problem that deserves a solution. People who think that a failed product or startup was a waste of time, those are not people that I want to surround myself with. It’s people who see the valiant effort and a worthy use of time and great learning experience to make the next time successful. Those are the people that I want to work around. I don’t think failure should be glorified, but it also shouldn’t be feared.
Do I wish the poultry exchange had worked out? Absolutely, of course. More so for my investors and employees who took risks than for myself. But at the same time, I learned a lot the hard way and wouldn’t trade the experience for anything.