Dmytro Mykhalchuk on the Rules of the Game in the AgTech Market, New Directions for GrainTrack, and Expansion into Foreign Markets

According to statistics, 9 out of 10 IT startups fail. In the AgTech (agricultural technology) sector in Ukraine, these numbers could be even worse. The inability to attract investments at the early stages of a project often becomes the main reason for this.

The founder and CEO of the Ukrainian IT project GrainTrack, Dmytro Mykhalchuk, whose team developed a specialized program for automating the business processes of grain traders, shared in a blog on the Latifundist website the secrets of how to bring a new product to market with a minimal initial budget and secure its position.

Choosing the Right Niche

When starting a new project, the most important thing is to choose the right niche for the startup, one where you will invest your time and resources. If the choice is right, the advice in this article may not even be needed, as investors might quickly show up for the project. However, if for some reason this doesn’t happen, or if the investments are not as substantial as needed, the project will still have a chance to make it on its own.

At the same time, it is essential to clearly evaluate the value of your future solution — how significant it is for the target audience to be willing to pay for it.

The decision to create my own project came after thoroughly studying the field of future operations — grain trading. Before this, I worked as a manager in a large company in this industry and personally experienced the gap in quality management software in this niche.

Today, the operations of trading companies, whether in wholesale or retail, are largely automated — order processing is automatic, there is a unified database of clients and orders, inventory is tracked, and planning and calculations are carried out.

In grain trading, until recently, all processes were still largely managed using Excel spreadsheets. Standard ERP and CRM programs are not suitable here due to the specific nature of this business, including price volatility in the market, which requires a completely different approach to purchasing and selling products, complex contract execution processes, and increased demands for evaluating trading positions and financial flows.

When we started, there was no specialized solution in this niche — only isolated attempts to create something similar for specific clients.

The financial capacity of the target audience is also crucial for the success of the project. For example, we considered that grain trading has been dynamically developing in Ukraine over the last few decades, with grain production and export volumes growing year after year, thus increasing the financial capabilities of businesses in this sector.

Margin of Safety

In most cases, early-stage startups can only rely on themselves, so it’s beneficial if the founders have some margin of safety that allows them to develop a basic version of the product to present to the market.

By margin of safety, I don’t necessarily mean money. Our project was able to “get started” because I personally had basic programming skills and began working on the product independently. Later, I found a partner – a like-minded person who also contributed to the development and, later on, to the promotion of the platform. All of this, of course, was done for free, in our off-hours from regular jobs.

The second important point is that we had a minimal level of expertise in the field we were developing for, based on our own experience. This is a critical factor because, without such expertise, you might “imagine a problem and invent a solution” for an issue that doesn’t actually exist.

Relying on your own experience isn’t always necessary, but it’s helpful if you have someone in your industry who can act as your insider. As a last resort, you’ll need to study your niche deeply using specialized literature or publications.

The overall idea here is to be able to release a basic product that addresses the pain points of your target audience and satisfies them, while you maintain your interest in development and promotion until you acquire your first customers, which might not happen as quickly as the founders would like.

Define Your Audience Correctly

In the early stages, we made mistakes in identifying our target audience. We initially thought that our client base would be the entire grain trading market, from small to large companies. Only after some time did we realize this was not the case. Small companies with two or three employees showed interest in the product, but most of them ended up dropping out.

Based on the presentations we gave them and the testing of the free demo version of the program, it became clear that it was too early for them to use the software, as their business processes were not yet complex enough, and they could handle everything in Excel spreadsheets.

However, interest from larger companies began transforming into actual users about a year after the first release of the basic version.

Generating non-viable leads took time and effort. However, we drew the right conclusions and adjusted our marketing strategy to focus on reaching companies that would be more likely to show interest in the program.

Prepare for a Long Game in Promotion

It can take a long time to get your first client.

In the early stages, startups often don’t have enough funds even for development, let alone marketing. Therefore, the focus should be on free PR.

We used all available free communication channels. We started a blog on our website, set up social media marketing, began sending mass email newsletters, writing expert articles for the media, and speaking at industry conferences. For niche IT products, it’s crucial to choose platforms where your target audience is — these are specialized resources and communities.

All of this, combined with word of mouth, which spread quickly, delivered good results.

To do all this, you don’t necessarily need to hire a PR agency — you can learn the basics of this profession online, where there is plenty of educational content on the subject.

You should avoid falling for offers to place paid advertorials about your business. These will make money off you, but they won’t deliver the expected results. We also thought that a paid article with paid advertising could help us make a name for ourselves. After gathering some funds, we ordered such a piece in one of the media outlets, but it didn’t change much. PR for a new startup can only bring results with systematic work. You simply won’t have enough money for paid content.

Instead, systematic work with free tools will improve your website’s indexing and make your company recognizable.

Help from Accelerators

At the beginning of our journey, we decided to apply for a startup development program organized by the MHP accelerator in 2018.

We didn’t win the competition, but thanks to making it to the finals (out of 184 participants, 13 made it to the finals, including GrainTrack), we were able to gain media exposure, including coverage on national channels, which later translated into attracted clients.

In addition to the specialized agro-accelerator, many accelerators, incubators, and hubs have opened in Ukraine over the past few years to support the development of the IT industry, such as UNIT.City, SECTOR X, 1991 OPEN DATA INCUBATOR, and others. These help promising projects get off the ground. If you have a good idea for a startup, don’t sit still — try to become a participant in the programs these organizations offer.

Proper Work with Clients

Ineffective sales strategies, especially for niche products, can waste all the efforts spent on lead generation.

Like many product startups, we began selling our development through presentations and offering free demo versions. Here lies a potential pitfall. To sell the product, it’s not advisable to give demo access for a long period.

Initially, we offered access for two weeks, but it ended up with potential clients not even logging into the application. What is given for free and for a long time is often undervalued — so, in the end, most leads never got around to testing it.

We shortened the trial period to 3 days. After the trial period, we didn’t hesitate to call and ask directly whether they liked the system and if they were interested in testing it further. This allowed us to focus our efforts more efficiently.

However, if the answer was negative, we didn’t rush to move the lead to the “Lost” folder. If the presentation was done correctly and the main aspects of the program were explained, there’s a chance that this lead would come back to you later.

In our experience, this happened multiple times. Implementing a product like ours is a significant decision for a business, as it involves restructuring many internal processes, and sometimes companies need time to think and mature.

Also, don’t hesitate to create video and text instructions so that leads who are getting familiar with your product can truly understand it, rather than just opening and closing it.

Creating a Universal Product for Different Markets

There’s no point in limiting yourself to a specific market—this narrows your opportunities for growing your customer base and scaling.

In the niche where GrainTrack operates, there’s one important point — today, we are no longer the only provider of such services on the local market. Other local developers have appeared, but they build their programs based on a popular accounting system used in the CIS, which gives them certain advantages for domestic consumers but makes it impossible to export their services to Western markets.

We, on the other hand, built our program from scratch. After analyzing the situation in Western Europe and the US, we saw that local developers offer grain traders services similar to ours, but due to more competitive pricing, we gradually began to capture our share of this market. Today, in addition to grain traders from the CIS, our client portfolio includes large grain traders from Canada, Switzerland, the UK, and Egypt.

Being Flexible

For a startup, the ability to adapt to the situation is crucial. Large, established companies are often slow and unresponsive to external changes, and bureaucracy can start to eat them from the inside. In this context, the ability to flexibly respond to changes and requests can be a significant advantage for a young IT startup, adding to the value of a quality product.

When we first started developing our product, we envisioned it as a tool for managing grain trading operations. However, over time, we began receiving requests from representatives of other businesses. First, we signed a contract with a gas supplier — to account for gas release operations, we had to make some modifications, and thus our sub-product, GasTrack, was born.

Later, we realized that the functional capabilities of our development were not limited to just these two niches but could also be used for businesses trading other commodities. Only a few adjustments were needed. That’s how we acquired our first international client, a large Asian company engaged in wholesale coffee trading. We are also negotiating with a large Western company that trades metals and other materials.

In conclusion, I’d like to advise people who are already developing their startups in narrow niches within the agro-sphere, or are just considering it, to approach their projects thoughtfully.

Sometimes, for a project to take off, significant initial capital investments aren’t necessary. It’s enough to take a balanced approach to choosing your field, not inventing a problem, but offering a solution to an already existing one. Ideally, you should personally understand the problem or have acquaintances who can provide valuable insights, have two or three like-minded individuals from development and marketing, and properly allocate your efforts toward promoting the product.