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- Brainstorms Issue #8
Brainstorms Issue #8
Brainstorms Issue #8: Big Opportunities in... Herdshares?
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Brainstorms Issue #8
My name is Keevin and business ideas are my thing. For over 7 years I’ve been working with early-stage companies, and have learned that a quality problem is worth more than 100 “good” ideas. Each week, I scour the web, engage my network, and use a few top-secret tactics to find unmet needs. I then outline the business opportunities behind them. Here’s what you can expect:
I’m all about quality over quantity - I’ll send you (1) well-researched, hand-selected business idea every Thursday.
All of the problem data synthesized, with meaningful context for why this idea is worth building or pursuing.
A short, tactical game plan for how to turn the idea into a revenue-generating company quickly and efficiently.
Pretty straight forward, right? Last thing - as your host, it’s my job to make sure your time spent here is valuable. So please, reply to this email if you have any questions or suggestions!
Let’s dig into this week’s Brainstorm!
"I view my farm like a business, and that means I'm always looking for ways to maximize profits. I've been trying to sell my product directly to consumers, but there's a lot of legal work and operationally it's tough. On top of that, I don't even know how to get customers to come to me rather than the grocery store."
- Rural Livestock Farmer
Market Background/Opportunity Size
Over the last several years, there’s been a huge push towards buying local and eating organic for both the economic and health benefits. One way to accomplish this is to participate in a herdshare (don’t worry, I’d never heard of this either and I grew up in Iowa).
A herdshare is a contractual arrangement between a farmer and an owner of livestock (shareholder) through which the shareholder is able to obtain raw milk, meat, and other profits of the livestock proportionate to the shareholder’s interest in the herd. For example, a framer may sell as little as 1/25 of a cow (or other livestock) as a share. The owner of that share is entitled to 1/25 of that cow’s meat, milk, or other profits.
Herdshares are attractive to farmers because it allows them to sell directly to consumers, ultimately, making the farmer more money. On the other side, consumers love getting fresh products from local farms they know and trust. It’s a win-win.
Unfortunately, getting a herdshare set up can be a difficult process and the legality behind it is a bit murky. Even though herdshares are profitable, these challenges have made many farmers stick with the status quo model.
As it stands today, there are 365 herdshares active in the US, but that likely doesn’t represent the total addressable market. In comparison, there are over 600,000 farms in the US alone with livestock that would qualify for a herdsharing model.
Major Players
Weston A. Prince Foundation: The Weston A. Prince Foundation is a non-profit focused on funding and helping educate consumers on the benefits of natural food consumption. They are big advocates of herdsharing and focus on educating the public on its benefits. It appears to operate similarly to a trade association as they offer memberships and host events. However, they don’t directly help farmers set up herdshares.
Farm-To-Consumer: Farm-To-Consumer is a legal defense fund that protects the rights of farmers and consumers to engage in direct commerce. They focus on legal representation, policy work, and offer all of the documentation you need to set up direct to consumer operations at farms - for a fee, of course. They are the go-to source for getting everything you need to legally operate a herdshare.
The Pain Points
Even though herdsharing dates back to 1995, little to no innovation has been brought to the space, thus creating a lot of headaches for farmers who want to pursue this path and consumers who want to participate. Here are some of the biggest challenges:
Pain Points for Farmers:
The process to set up a herdshare is unclear. Much of the legality around herdsharing is varied and depends on what you’re selling and where you’re located.
Setting up a herdshare can be expensive. The formation of a herdshare can cost anywhere from $1,000 - $5,000+.
There’s no easy way to advertise your herdshare or attract customers who want to participate.
Setting up delivery to customers is logistically challenging and expensive.
Pain Points for Consumers:
There’s no directory to find farms offering a herdshare. If you don’t know someone directly, you’re out of luck.
This industry has little automation. If you find a farm that does offer a herdshare, you need to manually fill out a form that looks like this.
Getting the meat or milk from the farm is difficult. Most farmers don’t ship their goods, so you need to drive out to the farm to pick up anything you’re owed.
Note: This can also be problematic due to spoilage.
Let’s take these pains and turn them into an opportunity!
The Opportunity
There are likely 10 or more ideas I could come up with in this space, but for the sake of brevity, I’ll give you what I consider my three best:
Streamline the Herdshare Setup + Operation Kits: As mentioned above, setting up a herdshare isn’t an easy process. A productized service that sets farmers up with everything they need to operate and manage their herdshare seems like an easy win.
A Marketplace for Herdshares: An easy idea is to create a site that helps connect farmers who offer herdshares with individuals who want to participate in herdshares. This idea eliminates many of the issues listed above for both consumers and farmers.
Shopify for Farmers: Whether a farm operates as a herdshare or not, farmers are looking for ways to sell their products directly to consumers. Imagine easily setting up sites like this. I’m certain there are distinct features farmers need that Shopify wouldn’t come with as default.
Personally, I see the most opportunity in ideas two and three as they have a consumer play and that opens up the market.
Current Solutions
Crowd Cow started out by allowing people to buy shares of a cow, and once all the cow was sold, they’d butcher the cow, package the meat, and ship it out to consumers. Since then, it appears they have become an online meat market using ethical sourcing.
Barn2Door makes it easier for farmers to sell their products online. Essentially, they set framers up with an e-commerce store and the things they need to sell online. While they have raised about $10.4M, their product is a bit pricey and it looks pretty basic.
Herdshare School is an online course built to guide you through the business launching herdshare program. The site itself is poorly done and looks pretty basic. It’s unclear if they have traction, but they are one of the only courses like this I found.
How to Execute
If I were building this business, here’s what I would do -
Find Your Early Adopters: I’d target farmers that are currently operating herdshares - these farms have already made the investment, so they’re the perfect buyers of a better solution. With a quick Google search, you can find a lot. Use these people as a pilot group to nail your solution.
Build Partnerships: Unlike most ideas, the major players are the perfect partners. Both Weston A. Price and Farm-To-Consumer have a lot to gain from more farmers being set up as herdshares or with a DTC model. It’s likely that you could work with them to find farmers and grow the industry together.
Go To Conferences: I’ve got a bit of an industry secret here. Having worked with a few Ag Tech companies, I can tell you that conferences work well for business development in this industry. Also, this will give you a chance to learn more about the industry and have 1:1 conversations with your target market.
Build a Community: There appear to be no online communities for herdshares or D2C farm operators. An easy way to grow a targeted audience quickly is to create a space for these farmers to connect with one another and share tips and tricks. I'd start with a Facebook Group. When you’re ready to scale, the community you build will help you get traction early on.
Challenges
Tough Market: Farmers likely aren’t what you picture when you think of as an innovator, but they are a target market that quickly adopts new technology (like drones that regulate crops and self-driving combines). While they definitely use tech, it could be challenging getting the first few farmers to work with you before you’ve got a proven track record. Additionally, they work a lot, so getting the time of day might be challenging.
Educating the Market: Depending on the direction you go, you may spend a lot of time educating the market - for both consumers and farmers. This is one of the disadvantages of being a first mover, but it’s critical if you’re going to build a big business.
Legal Challenges: Herdshares have been the source of much legal drama. Due to the potential harm that selling raw food brings, it’s not surprising that herdshares are banned in some states. I’d highly recommend doing due diligence and understanding the legal landscape before jumping in.
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Thanks for reading - now get out there and build it!
Catch ya next week,
Keevin ✌