Hello Tractor has been compared to an Uber for tractors. Like the ride-hailing app, it uses technology to connect farmers with tractor owners but there are differences. Agents assist with the bookings and tractor owners need to buy the company’s GPS device to attach to their tractors to track movements and accept booking requests.
Founder and CEO, Jehiel Oliver, recognised an opportunity when he learnt of the lack of mechanisation in the African agricultural industry.
“Rapid urbanisation is depleting the available labour,” he says. In this environment, machinery typically fills the gap. Yet, small farmers in Africa can seldom afford it.
“In smallholder farming systems, collaborative consumption is the only way to make tractors affordable. It makes no sense for an individual farmer to own a tractor,” notes Oliver. “But if you can share a tractor, the cost of the service is significantly less than you would pay a human to do the same work.” It’s also faster, more efficient and produces higher yields.
Oliver was born in the United States and started his career in investment banking and private equity but slowly became interested in emerging markets and agriculture. Microfinance institutions have not been particularly good with supporting small farmers, so he investigated agriculture and how mechanisation can transform things.
Oliver adds that he wanted to use his finance skills to do good.
After some research, he decided to move to Nigeria where he founded the company six years ago.
How the business works
The typical Hello Tractor client is a small farmer with one to five hectares. “The vast majority are men,” says Oliver. “They are typically a little older and about 86% live at or below the poverty line ($5 a day) according to our customer records.” They have never used tractors before using Hello Tractor’s service and traditionally relied on manual labour.
There are also the tractor owners, who vary from individuals with one tractor to large companies and private equity funds with sizeable fleets. The company currently has over 3,000 tractors and combines on its platform. Tractor owners usually get paid a deposit to deploy their tractors and then receive their balance payment after service is completed. They make 90% of the revenue whilst the other 10% goes to the booking agent.
Hello Tractor sells a GPS monitoring device that is installed onto a tractor. Owners can subscribe to the software-as-a-service solution app to track their tractor and monitor the work it is doing, the operator’s performance, fuel usage and maintenance needs. Hello Tractor doesn’t earn revenue from the booking of tractors; it makes money from selling the GPS devices as well as from the software subscriptions.
“Our GPS device collects important data from tractors while they work on the field and pushes this data to our mobile and web applications where it is displayed in a user-friendly format and grants tractor owners insights into their tractor’s activities on the farm, maintenance needs, fuel consumption and operator information. These valuable insights allow tractor owners to make informed decisions and increase their profitability which is why they pay for the device,” Oliver explains.
There is a separate app where farmers connect with the tractors on the platform which Oliver calls “the marketplace part of our business”. Agents are recruited from the community and paid commission to sign up farmers and provide assistance. “As the season approaches, the agent will book the farmer’s field for service. Once that booking occurs, the platform will connect that request to the nearest available tractor with an applicable implement,” Oliver explains. “We don’t really talk to the farmers about apps, because they connect through the booking agents who use our apps to register them.”
Previously, farmers were required to send an SMS to the app, which connected the request to a nearby tractor owner, but they were hesitant because the size of the transaction wasn’t something they were comfortable with doing electronically. Farmers preferred human interaction.
Oliver says customer acquisition through agents is slower but is far more sustainable; “Trust matters.”
Nigeria – a fertile market
Oliver chose to start the business in Nigeria because he liked the country when he first visited and it provided a fertile environment. There is a low level of mechanisation on farms, a sizeable farming community, as well as one of the largest surface areas of uncultivated land in the world. The people are also receptive to new ideas. “If something works and Nigerians see the value in it, they jump at it. They are keen on experimenting with new things and technologies,” he says.
He did the groundwork to attract clients. “It was initially about understanding who the players are and who represented the lowest hanging fruit.”
Finding the money
Oliver started Hello Tractor with a mix of savings and investment. “We bootstrapped in the beginning and then I exhausted my savings.” He then raised “a bit of money”, less than $2 million, most of which was subsequently paid back to the investors with interest. The focus then turned to sales and organic growth.
In hindsight, Oliver says he wouldn’t focus so much on raising investment again. “There’s not a lot of money going into the venture space in Africa. As a result, entrepreneurs go through so much due diligence for relatively small raises.”
Launching in other African markets
Oliver and his family moved to Kenya, which Hello Tractor is using as a springboard into Asia; a project slowed down by the Covid-19 pandemic. He hopes to use profits from Asia to subsidise expansion in Africa, where current volumes are too low to invest in growing overheads such as operating infrastructure or hiring more data scientists. He mentions India, where 730,000 tractors were sold in 2019 as opposed to only 14,000 on the entire African continent.
Currencies, Covid-19 and other challenges
Some of the macro challenges facing the company are impossible to overcome, such as currency volatility, he says. There is also the pandemic. “We started the company during the Ebola epidemic and now we’re in the midst of Covid-19. The way you mitigate these risks is to protect cash flow, move slowly, tighten your belt and taper some of your growth plans to weather the storm,” maintains Oliver.
Human resources is another challenge. Hiring experienced technical managers within the markets where the company operates hasn’t always been possible. People are committed but not always experienced at the senior level. “It’s hard to find people who are comfortable managing those high-level relationships.”
“There is so much space in the market for farm equipment that competition is not a huge worry. For now, we don’t feel threatened by similar businessess,” Oliver says. “There is enough space for someone to thrive and do incredibly well if you get it right.”
It’s still a big challenge to ask people to invest in tractors as an asset class. “Africa is full of opportunities for investment and people tend to expect returns quickly,” he says. “Our biggest competitor is the attractiveness of buying an Uber vehicle or investing in class-A real estate.”
Hello Tractor recently entered into a finance project with Mastercard to use Hello Tractor’s data and card payment rails as well as Mastercard’s banking partners, to launch a tractor finance product. “We’re excited about getting more tractor finance and equipment into the market,” notes Oliver.