Closer To The Ideal

Sarah Lacy writes about an interesting startup that is building farm machinery in rural Argentina:

The idea was born back in the late 1990s. Argentina offered a tax benefit to encourage the planting of some 70,000 hectares of olive trees in poor areas of the country. Argentina had less than 20,000 hectares before the change. The catch was these groves had to be high density, a minimum of 300 trees per hectare. The incentives have worked well enough that Argentina’s Ministry of Economy and Production estimates that the country could be a top ten producer of the world’s olive oil supply within the next decade.

Olive groves take about three years to mature and Bonadeo—a self-proclaimed “soybean man” and long-time farmer—noticed a problem before a lot of other people: Who was going to harvest all these olives? Harvesting olives is expensive and time-consuming and has to be done in a 70-day window. There just wasn’t the labor in Argentina, especially given the high-density plots. It would take 800 people to harvest 1,200 hectares. “That’s more like a military operation than agriculture,” Mourelle says.

So began years of trial and error building the Colossus, a huge machine that, crassly put, looks like it’s having its way with an olive tree. The machine straddles a row of trees and rubber tentacles gently swat off the olives at rapid speed. The arms can move in and out to hug the canopy of the tree—all controlled by a joystick in the air-conditioned, comfortable cab. The company is doing roughly $4 million a year in revenues and sells the machines in six countries. The Colossus increases productivity ten-fold and cuts harvesting costs by a third once the cost of the machine is paid back.

It was a humble beginning. Bonadeo barely had a working prototype and no customers. There’s no such thing as venture capital in Argentine farm country. Without money, he couldn’t build more machines. Bonadeo used to befriend olive farm managers to find out when the owners would be in town. He and his team would crowd into a van and tow the Colossus over for cold calls. Sometimes he was laughed at, sometimes the owner wouldn’t be there after all. “There’s no way you guys can build this business from here,” potential buyers said, even when they saw the machine working. It was disheartening.

The only reason the first Colossus was sold was luck. Two farms were close to signing, but not quite ready to commit to the pricey $500,000 sticker price. So the smaller one called up the larger one and offered to split it with him and share the machine. Simply out of Argentine machismo the owner of the larger farm decided he wasn’t going halfsies on any farm equipment, called Bonadeo into his office and said he had five minutes to make a sale.

“What’d you say?” I asked.

“Hamana…hamana…hamana…” he joked.

It didn’t matter what he said, the man bought one anyway. Soon after that an Australian company placed and order for three machines. Three! “Not bad, fat boy,” Bonadeo said to himself. MaqTec was in business.

It will be fascinating to see if this company survives. It has everything going against it – distance from centers of innovation, lack of capital, limited domestic markets, a nation with a historically broken political system, a culture that till recently valued conservative social traditions over innovation, etc. 100 years ago Argentina was the 12th wealthiest nation on Earth, per capita. Its decline was due to several factors, though the biggest of all was probably the lack of education of its citizens, which fed a series of social pathologies that lead to a broken political system and then dictatorship. I would love to see Argentina revive. I don’t doubt that innovators like Bonadeo will play a crucial role in any revival that happens. But, wow, talk about an uphill fight.

On a different topic, I’m glad to see TechCrunch escape from the suffocating provincialism of most American business news. It is appropriate that a weblog devoted to cutting edge subjects should show leadership in recognizing the amount of innovation going on in the developing countries.

I am concerned about that provincialism. It is an ominous sign of where America’s thinking is at. With the economy in a coma, and competent economists suggesting the coma will last another 5 years, it is clear a lot of the most important innovation of the next decade will be happening elsewhere. So why is Sarah Lacy such a relatively rare figure? Why aren’t there a 100 Sarah Lacys, or a 1,000 Sarah Lacys? Why aren’t more writers going overseas to tell the American public what is going on over there?