Niqo Robotics: Jaisimha Rao

when you're raising money and there's 100 investors in a room, it's changed a little bit, but if you say I'm doing agriculture, my product is targeted to farmers. I think out of the 170 will just leave the room saying, "I don't want to do anything in Ag." So I think hardware in Ag is such a niche sector that I don't think a traditional power law sector agnostic VC fund would understand it. It's not 2021 anymore. Record high-food tech IPOs have crashed and cheap interest-free money has become very expensive. Everything is different. In the investment climate podcast, we interview climate-tech founders of recently raised and they see it's worth deploying today. Each conversation is meant to give us a tools to succeed in 2024. Hi there, my name is Jay Samarau and I'm the founder and CEO of Niko Robotics. At Niko Robotics, our mission is to ship accessible and reliable robots for sustainable farming. And to date, we have raised $21 million in venture capital mining. Incredible. First of all, I am so excited because you already spoke about me visiting Darvasala. So I've never been in Bangalodore. But I clearly now have another reason to come to Bangalodore. I've always wanted to drive a tractor. So thank you. Yeah, please come. The invitation is open. I appreciate it. As long as I can drive the tractor, I'm in. So can you share with us when you'll raise your final round? Yeah, I think the last round closed in March of this year. So say three months back. May I congratulate you? And how did you meet the lead investor of that round? Yeah, I think there's an interesting history there. I think we had two new kind of equity investors come into this round. There's one investor, which is the draw ventures. The interesting part about them is when the fund got formed, we actually weren't raising money, but they generally were aligned with our mission. So we ended up raising a million dollars in convertible notes for them. So for them to keep track of our progress. And if they liked what we did, they probably kind of, you know, invest again. So that million dollar convertible note, they we ended up hitting our milestones in terms of the number of robots we're going to ship. In India and they ended up leading the 13 million dollar round that we just raised. And along with them, we also had a new investor based out of Kansas City, Falkram Global Ventures. And interesting enough, we met them at one of these agriculture robotic conferences. And it's a great conference to showcase all your, all your inventions. And, and we got talking to one of the folks from the venture funds and that ended up, that ended up almost co leading the round. So that's how it happened. That's how it all came together. Sounds great. But an NF first investor, are they Indian based? Now they actually, the headquarters is in Morocco. So they are part of the OCP group, which is a large fertilizer, one of the largest fertilizer groups. And the HQ is in Morocco. And the investment arm is based off the US. Okay. And then how did you meet them initially? Yeah, I think the, the interesting part for them is they, they had a mission for, I think I don't know what the exact mission statement is, but generally they had an affinity for supporting global South startups. So probably developing world, their mission is, you know, entrepreneurs in this part of the world, they're equally talented, they're equally ambitious in the markets, they're going after equally big. So, but maybe not enough for money, flowing, exploring India with our previous rounds investor. And that's how the entire round came together. Okay. Interesting. And you mentioned that they did not have a corporate venture fund in the past and they open one and you were one, the first investments of that corporate venture fund. Is that the case? Yes. Yeah. Yes. And they didn't have one, I think they're a core fertilizer company and this is a bit of a new business for them. Okay. Understood. And your technology directly or sink involved is involved with fertilizer and pesticides, correct? Or just the pesticides? No, I think we are doing trials right now, which is, how can you use spot spraying and target only plants by spraying liquid fertilizers? And you don't spray the entire field. So it's for both pesticides and fertilizers. Incredible. So, first of all, this is so cool. This is probably one of the coolest companies I've talked to and I haven't, you know, again, I can't wait to see it firsthand. In terms of the, you know, the convertible node you mentioned, it's certainly very fascinating. And I, by the way, have seen this as well with with the company. I work with California culture. There's that there's some milestones that pre-agreed on that make the investment dependent on those milestones. I used to say that they gave you convertible notes and then they told you if you reach X, Y and Z milestone, you will get, we'll lead the next investment or the convertible note was dependent on milestones. No, they gave us a convertible note and obviously there was a discount to the next round, but there was an implicit agreement, not an explicit agreement that, hey, if you like our progress, we do have the fun size. And we do have the mandate to lead the next round. But there was no explicit terms in the agreement thing. If you hit this milestone, we will lead the next round. So it was an on purpose that you did that that you either want to put the set milestones or did you have like some general understanding what the milestones need to be, but you didn't put on a paper. Now, actually, like during the convertible note discussions, I actually didn't need the money. So we had enough money in the bank and the question was, do we take this convertible note or not and was optional for that. And I think we have a board level discussion. Do we actually need this extra million dollars or not? I think from a founder perspective, I thought it was great optionality. So we get another, another fund who will keep good track of us for progress. And they have a fun size that they can write a $5 million lead check. And it's just pure optionality, whether they actually come through or not. We are not, we're not asking them to write in the document. So it's more of a probabilistic play that you as a founder have to take. And it gets tricky when you actually don't need the money and you just have to take that call. In our case, it actually worked out. So that million dollar convertible note actually became a $5 million lead check. That's incredible. But just to make sure that listeners understand you did not explicitly say with the milestones for next round or you didn't send those. It wasn't there in the convertible note per se. But I did give the convertible know guys are bored of service. So they were attending the board meeting and they knew what our milestones are. Okay, great. Okay. So basically the convert, they got boarded the observations so they can understand the update about where the business is at. So that the whole process they knew what stage you were at in terms of your promise. Yeah, they knew exactly. Yeah, they knew what the milestones were through through the board to the board meetings. Yes. Okay, great. Now that lead to diligence because they were an observer already. Was there a lot of deductions they had to go through or they already knew the business so well that really the diligence part was not really important. No, I think they did a pretty thorough job, you know, the the team flew over from Morocco. They spent two three days with us. I think for them seeing is believing. So they met the entire team. They saw the product in action. So it was it wasn't that hell of a seeing this and here's the lead check. So they did follow a very thorough diligence process in terms of seeing the product, seeing the team, seeing Bangalore, seeing interviewing a bunch of customers for us. So it was thorough even though they had the already knew what was going on through the board meetings. So was this a unique about that the diligence process of them, you know, visiting on site. Was there something you felt you had to prepare that was unique that would benefit our other founders from learning. Yeah, I think you have to be prepared. You can't win it. So even though we we had a bunch of products out there. When you have a team coming, we had a fully organized almost hour by hour agenda when they when they land where they stay when did they come. When did they arrive at our office? How much was for lunch? When do we take them for lab? How do we have a dinner? And then how do we do the demo? So I think even though we were comfortable with where we were as a product, it did require a lot of planning in terms of who does what number one number two is only within our team. I think a lot of the questions that they were concerned about is is there a bench strength for this company who are the other folks. And we did we actually did a very thorough job in terms of prepping for for the DD meeting. So what are the speaking roles, who's talking what. How does the backslide look? So, I think long story short, huge preparation and I'm a strong believer in prepping for everything and only when you get those things right does everything turn out to be quite smooth in the end. Yeah, that, that, that, of course that makes perfect sense. Did you ask them for questions before they arrived? Like what you want to see what's important for you to understand was where you asking some prep questions, the needed answer for you? No, we didn't ask that, but they had, they had explicit us in terms of hey, we need to talk about your patents, we need to talk about the code tag, we need to talk about where things getting manufactured, we need to talk about, you know, the field visit what we want to see in the field visit. So, I think there is one side for them, we didn't ask them explicitly what we wanted, I think they are a question for what they wanted was pretty clear enough. Okay, just a funny question, but you know for companies is very interesting, who paid for that visit? They entirely paid for it. Who paid for that? We paid for snacks on the field, so I think that we, we are in some taxis. There was a lot thought about which restaurant you're going to take the guys to. Yes, yes, there was, and you always have to balance it between how much it will cost versus can we show them a good grade? Okay, and now your second, your second large investor at Kansas City, you met them at, at the show, were they already looking for solutions like yours? How did the mandate of that investor and did they fit the mandate geographically, did they meet the mandate in terms of technology? How do, how do both sides know as a figure? Yeah, I mean, I don't think we either one of us knew it was a figure, it was seemingly the geographical distance between Kansas City and Bangalore is quite vast. I hadn't heard of that. I hadn't heard of them until I met them at the conference, I don't think they heard of us. So, I think it is new for both of us. I think what's interesting about Falcon Global Ventures, a capital sorry, Falcon Global Capital FCC is they are LP based, so they are investors are mainly farmers in the US. So it's not your traditional pension fund. So they are real farmers who are backing this fund. And they have a core AG DNA when looking at investment. So we ran a very interesting process with Falcon, where we met them in Salinas, California. We had a subsequent, you know, zoom call trying to explain to them where we were. And then they actually expose us to their investor base, which are big farmers in the US. And farmers obviously look at products very differently from investors. So really good questions around what is this technology, what is this camera, how are you going to price it, what happens with this dirt. So I thought, Palkram was a very different due to the business process from a traditional financial only we see. We enjoy that process since they were backed by farmers, they knew the realities of act tech. So, act tech doesn't grow month over months. And finally, it's seasonal. It takes a little longer. So I think we really like that they had core AG DNA in them and they like what we were doing. And they tried to ask they never invested in India at all. So considering a India investment was a bit risky for them, but they were okay with making global plays. And I think from a spot sprained technology standpoint, they were excited about that space of agrobotic. So I think that that was going for us in our favor. Well, I think it's really fascinating. I see this trend is that both of the elite investors were really from the field in all ways. One of us was corporate, but in understanding the business and also of the farmers who are, you know, they interacted with technology, these challenges directly themselves. It's not a VC who has got an MBA from Stanford, the university Stanford business school and has been just doing finance so he's life and making bets. Is that was a surprise in here? Or did you expect that? No, I think like the jokes that I like to say is, you know, when you're raising money and there's 100 investors in a room. It's changed a little bit, but if you say I'm doing agriculture, my product is targeted to farmers. I think out of the 170 will just leave the room saying, I don't want to do anything and ag. And then the second killer thing that that turns off a lot of people is we want to do hardware. So the out of the remaining 30, I think I don't know 25 will go up and leave. So I think hardware and ag is such a niche sector that I don't think a traditional power law sector agnostic VC fund. I mean, there are exceptions. I think we do have blue, blue ventures who's, you know, not an ag and who likes deep tech. But it's hard for them because it's you got you got to have either passion for deep tech or ag. So I'm not surprised that both all the participants in this fund, whether it is. Vidra or Falcon Global or our seed on investor omnivore who also participated in this round. They're all ag, ag first investor. I think the good thing about agriculture is there are dedicated funds for this sector. So yeah, I'm not surprised, but yeah, it is hard. Like I think if you're a D2B SaaS software, your menu of investors is, I don't know, 50 times more than what we have. Yeah, yeah, I agree with you 100% 100% is that the SaaS world and its margins is ruined it for the rest of us in a way, but I do. I don't know how B2B SaaS founders get up in the morning and go to work. It's so boring. Like what do you go? I know I couldn't never. I sold SaaS. I sold SaaS and I can know what I'm sure you. I sold very expensive SaaS and I have to say it was a very nice paycheck, but boy, do I love food tech. I'm in love with what would I do? My question to you is, I'm turning to the point of these, I think you just kind of right went into what I'm curious about hardware. I think that's why I think I want to talk about how the SaaS world and what I'm curious about is how the SaaS world and the SaaS world are. Yeah, I think that's why I think this is a very good idea. Yeah, I think that's why I think this is a good idea, but I think that's why I think that's why I think that's why I think this is a good idea. CapEx investments, how do you manage inventory? How do you manage fabrication, etc. So that's a true like signs. How do you as a hardware robotics startup? Most startups don't fail because the product wasn't good. They fail because cash flows don't come on time. So I think we were acutely aware that we need to be smart about that and the good thing about India is, you know, India's the number one tractor manufacturer in the world. India is probably the number one to like a bike like a scooter ecosystem. So the economy is your scale for manufacturing India are probably better than China and and I think so we definitely. You know, picked Bangalore, which is also close to a good manufacturing hub where we don't spend all our money on CapEx. So that's one. So we optimize on that. And since we are also a camera company, there's a you need to be in an ecosystem where you have access to. Talent when it comes to designing a camera designing and closes, etc. So I think since we have a good defense ecosystem here in Bangalore, a lot of the electronics guys were already ready. So that's one part internal. The external part is, how does the farmer buy this? I think the farmer doesn't buy this for no farmers bought this yet. We deploy something called a village level entrepreneur. This is someone who leases the each one of these big sprayers from us who pays us yearly fee. And then he in turn, obviously, the farmer on a per acre basis. So the end farmer doesn't end up buying this technology then farmers just a user of this technology. They end up paying per acre to the VLE, the village level entrepreneur, the village level entrepreneur pays us yearly licensing fee to use the technology. So that's how we have made this relatively high end piece of technology. More farmer friendly, even for the five acre farmer or the 10 acre power. Okay, so now we're going to go deep. Okay, so and the way to the listeners probably this is going to take us to the end of the podcast. I just want to tell you just because I am probably the Jason is probably going to say I'm not going to ask him most of his questions, but I'm really curious about it because again, I am so curious about how to create alternative financing or for for these type of ventures. Please, if you're not interested in hardware and financing that you probably want to turn off at this point. So, but here we go. So, first of all, are you selling what I understood was you're selling a camera that goes on top of an existing tractor equipment. Are you saying you're selling a tractor as well or you're just selling a camera. So we so we don't sell we lease. So what the village level entrepreneur right now gets is we got a website. There's this big sprayer with a yellow color boom. They get this prayer as well as the camera. The reason for this is if you just put a camera on any sprayer, it doesn't work. You need to calibrate the boom. You need to do a bunch of things. So I think for your listeners, this is one of those classic founder questions. Do you just sell cameras and be done with it? Because that's where the IP is. And the answer was, that looks good on paper, but there are so many other variables that even if your camera works perfectly because the tractor is not stable or the boom is not stable, you won't be able to spot spray. So we quickly decided if we want to make a market in this market, you need to do the entire thing. So as of now, the village level entrepreneur leases the entire tractor plus the camera plus the boom from us. And they then offer it a service. Going forward, I don't think this is a business model that we want to scale. But we did prove that the camera works, and they're saving for the farmer and the entire business model works. OK, so let's assume we stay with this business model for now or what you probably will do is maybe you'll show that it works in the following three types of models and those are the models you're going to target. But let's at this stage today in 2024, let's follow this model. Do you own-- again, the answer is, but I'm just going to discuss the own tractor yourself, or do you lease that from somebody also? The ideal way would be to lease the tractor as well. But for our deployment, we did buy it. And that's a decision that I regret. We shouldn't have done that. OK, so great. See, well, I love about the Citrobertor. Well, he has a luxury of say he regrets something. Now there's raised the money. I've never-- a lot of times the entrepreneurs would say, they never do regret anything. That usually means they're raising money at the moment. No. Look, you have the luxury of someone who tells you the truth. Now, OK, so let's go with-- imagine you would have leased it whatever it is-- is the government somehow supporting that entrepreneur in a village that lowers risk for them? Not yet, but I mean, I think what we are seeing is a bunch of governments are subsidizing or offering financing for these village-level entrepreneurs to buy the tractor. So they give them either a subsidy on the tractor or give them lower cost financing. So yes. So instead of them leasing from you, they'll just lease the camera in the software, but they'll own the tractor. Correct. Exactly. OK. And did you have the lobby for that? Or did that fall under a certain type of program that exists in India? The tractor manufactures lobbied for that, not me. So we-- So that's the-- Yeah, we are a technology company. We care about the camera in the software. The actual tractor subsidy program and the leasing is in the interest of the tractor guys. So I think they are better at lobbying than we are. So they secured-- so they secured some form of support of financing. But what that allows the entrepreneur in the village-level to do is get access to this tractor. And on top of that, they're able to make it more effective by deploying your-- Your camera. Exactly. Yep. Perfect. And did you-- A lot of founders, what I've heard them do, is try to do exclusivity, would say, the tractor companies. So they're basically actually making money from the tractor company. It was that-- was that a consideration in your side? Or were you thinking, no, we're going to make money from directly from the entrepreneur? Exclusivity stocks, especially when you're young. So I think you need to be careful. That's one of the reasons why we've just bought the tractor. As soon as you go and strike a B2B deal with a big tractor company, and they-- and it's quite lopsided. They have something you want that you want that something they will tie you into exclusivity. And I don't like that. So that's the reason why I say, OK, forget this B2B engagement. How much is your tractor cost? And he gave me a price. I said, OK, let me buy 50 of those. And that's it. And that's real. We own the equipment. We own everything. And we just focus on the N Farmer or the VLE. We don't care about this B2B. Eventually, if a big tractor OEM is listening to this, and they want to give us tons of money to sign exclusivity, we're open to it. Yeah. OK. OEM, you better be listening. Because you got to deal. Now, how did you identify this village entrepreneur? Yeah, that's art by itself. So I think we-- I have a couple of folks on my team are who kind of arrange this call. Her full-time job is just scorecarding who's a good village lover entrepreneur. So there are very, very diverse metrics in terms of-- we want someone who's already in the business, who's doing maybe harvesting as a service, who has some downtime, palms of income, past track record, et cetera, et cetera. So there's an entire hiring program for the VLE that it's quite detailed in how we pick our VLEs. So that's interesting. You think you're very picky about your partner, even though he's paying you? Yes. Because-- No, you're a flowy. He's your customer, correct? Yes, he's our customer. But we are giving our equipment to him on a lease. So it's an R-interest to do that basic KYC to make sure he doesn't wreck the entire system. So that's our problem. So number one, we'll take care of the equipment. And number two, is the easy trustworthy enough for us to lease this thing to him? And is there one other thing? Because obviously, this also leads to potentially some cash flow challenges, right? Because of this, you may be waiting on money to come to the entrepreneur. The entrepreneur may be waiting on money to come from the farmer. And the farmer is waiting to sell his product to pay the entrepreneur. So there may be a lot of gaps there. Do you require some alternative financing from banks for that, or the cash flow is non-issue? No, I think cash flow is always an issue. I think banks are getting educated with how this business model looks. And I think after our successful season last year, we are talking about banks right now for alternative financing. OK, that's really, really fascinating. So OK, that was, I think, just bold. And the listeners should be able to consider all these factors, which are really truly unique to your business model. I'm curious the last couple of questions that have for you, which is knowing what you know now, looking back at your investment process. What do you feel like you did really well? And what is something you wish you would have known that you would have done differently? I think what we did well is we really articulated what the problem is for the end customer and how our solution solves that problem. Number one, number two, at scale, how big can this business get? So I think we didn't sell the AI story too much. I haven't even sent AI on this podcast so far. We didn't sell the robotics story too much. We just kept it very simple and very truthful in terms of, where are we, what is the savings, and how does the scale up? So I think that we did a really good job. Things that we didn't do well is like what I said. We are necessarily, you know, now it seems unnecessary. But we bought 50 factors on our books to showcase that we are technology can scale. That obviously affected our runway and put a little bit more pressure on the fundraiser than it should have. So I would have not spent valuable equity money and buying capex. I would have been more conservative than that. Yeah, that makes perfect sense. And last question, that's going to be an interesting one. For, you know, you probably a lot of founders reach out to you and they ask, you know, can you mentor me? Can you give me some perspective of what I should do or how I should learn, how should I improve? What is the question you feel like they're asking way too much, which is not that important? And what is the question you wish they asked you? Like, no, you guys are missing the point. This is really the bottom line. This will need to be thinking about it. Nothing about it enough. Yeah, I think, look, I think starting your own company definitely is more glamorous from the outside in. And that minus one to zero story, which is, hey, I want to pick this sector. I want to do this and answering why I want to do this. Not many people, not many to be entrepreneurs are asking like the why, like why not why the product works or why am I in it? And I think getting clarity on why you want to start a company, that is super clear. I mean, that needs to be super clear. And because it's a messy, it's a messy journey. People are generally entrepreneurs generally want to solve problems. All that is like basic table stakes. So I think the why of starting a company, not many people are asking that. Is it about disrupting the big guys? Is it about building a team? Is it about the money? It can also be about the money, which is fine. Getting that clarity. I don't hear that enough. Why do you want to do this? And it just can't be like, okay, I'm doing this because it's fun. Because it's not fun. I think with Elon Musk said it's like starting companies like eating glass. Yeah, yeah, yeah, it's even worse. And then curious to you, what if you don't mind sharing, what is that why for you? Why did you start this company when you go back to that core question? I think I wanted to be a businessman personally. My was raised in a family where the entire family did service. So you would work for somebody else. And I wanted to be my own boss as simple as that. And that's what took me on to the journey. And I'm living my dream right now. Well, I appreciate you sharing your wisdom and the really being open, so open about your your journey and the business modeling, unique things that you really come across. And I, you know, be an honor to to support you and I'm sure the listeners along the way. So thank you so much for sharing everything you shared. No, thank you then. Thank you so much. Thanks for giving me this opportunity.