Investing in AgTech: Lessons from Kilimo’s Journey

Tenacious Ventures has spent years unpacking why on-farm AgTech is such a challenging space. One startup that has lived through those challenges is Kilimo, an AgTech company tackling water efficiency. Founder Jairo Trad spoke to Tenacious Ventures Group CEO Sarah Nolet to share the company’s journey – from surviving near-death moments to finding product-market fit. His experience offers critical insights for founders and investors alike.

On-farm AgTech is challenging

Venture investors have poured billions into AgTech, yet success stories remain rare. The sector plays by different rules, and those who don’t understand them often struggle to see returns. As Jairo explained, AgTech founders face some fundamental barriers that make scaling particularly difficult.

First, agriculture is highly fragmented. Farms operate under vastly different conditions, making it hard to build a one-size-fits-all solution. This fragmentation also drives up customer acquisition costs – getting in front of farmers, let alone convincing them to change practices, is expensive and time-consuming.

Second, the physical environment is brutal. AgTech must function in unpredictable conditions – think dust, mud, rain, and livestock interference. Building hardware or software that survives in these settings is no easy feat.

And finally, margins in farming are tight. Even if a product works, convincing farmers to adopt new technology is tough if it doesn’t fit within their economic reality. 

“Farmers make decisions based on managing risk,” Jairo noted. “Even when technology offers potential savings, if it introduces uncertainty, adoption is unlikely.”

The psychology of risk for farmers

Jairo highlighted a fundamental challenge in AgTech adoption: efficiency doesn’t always sell.

“[In South American markets where we operate so far,] water is essentially free for many farmers,” he explained. “So, making them more efficient in using water doesn’t necessarily provide a strong enough business case.”

Farmers weigh decisions differently from other industries. In many cases, using more water—or more fertiliser, or more fuel – reduces risk, even if it isn’t the most cost-efficient approach. If a technology asks them to reduce inputs in a way that introduces uncertainty, they see it as increasing risk, not creating value.

For Kilimo, this insight was pivotal. They realised that selling water efficiency directly to farmers wasn’t going to work. Instead, they needed to look beyond the farm gate to find the real economic buyer.

Finding a business model that works

Rather than charging farmers for water savings, Kilimo asked a different question:

Who else benefits from reducing agricultural water use?

“We started thinking about how we could put a value on the risk that the farmer is taking,” Jairo said. The breakthrough came when Kilimo began working with companies that had a business interest in water conservation.

“Big corporations like Coca-Cola, Google, and Microsoft have made commitments around water sustainability. For them, paying farmers to save water isn’t just good PR – it’s critical for business continuity.”

By shifting their revenue model, Kilimo unlocked a new path to scale. They weren’t just selling efficiency; they were creating a system where multiple stakeholders benefited—and were willing to pay.

What investors can learn from Kilimo’s story

Kilimo’s journey underscores a key lesson for AgTech investors: the user and the economic buyer are not always the same.

Many AgTech startups fail because they assume farmers will pay for technology that improves efficiency. But as Jairo’s experience shows, unless a technology aligns with how farmers manage risk, adoption will be slow.

For investors, this means looking beyond the product to understand the broader system. Who else benefits? Where is the strongest willingness to pay? How can a startup design incentives that align across the value chain?

Technology alone won’t transform agriculture. But, as Kilimo’s journey shows, the right business model – one that acknowledges risk, aligns incentives, and finds the true economic buyer – can create lasting impact.

This article has been adapted from a piece by Tenacious Ventures. Head to their website for more insights, conversations, and stories from their expert team.