Linear Capital News | Linear Capital-led Pre-A round portfolio company "Akenong" announces over 100 million RMB funding round, with Linear Capital continuing to increase its support

Agtech sees another new funding round.

On June 23, 2022, AIcronos (爱科农), China's first smart crop decision-making service provider, announced the completion of two consecutive rounds — Series A and A+ — totaling over RMB 100 million. Source Code Capital led the Series A, while IDG Capital and Hillhouse co-led the A+. Linear Capital and Bits x Bites participated in both rounds.

Agriculture was never exactly a "sexy" sector in the eyes of VC/PE investors. But with shifts in the international landscape and policy guidance, multiple agriculture sub-sectors have recently begun attracting primary market attention, with several top-tier firms placing their bets.

AIcronos is among them. Founded in 2016, the company is China's first smart crop decision-making service provider. It builds agricultural algorithm models based on big data from remote sensing, meteorology, and satellite positioning, then generates automated planting plans for different regions by inputting data from specific farmlands.

Currently, AIcronos serves 26 million mu (roughly 4.3 million acres) of land. But agriculture remains a grueling business. The founder gave up a seven-figure salary at a multinational in his forties to start a company in the fields. How did the firm go from near-bankruptcy to having "no real competitors"? And how did it transform from investors tearing up term sheets to becoming capital's darling?

With these questions in mind, we sat down with Dr. Jianming Guo, founder and CEO of AIcronos.

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From Five Years on the Bench to "Basically No Competitors"

ChinaVenture: The company was founded in 2016. What was China's agricultural startup environment like then?

Jianming Guo: A few entrepreneurial companies saw how relatively backward Chinese agriculture was and wanted to change the industry through various approaches. For example, Dafengshou (大丰收) built an agricultural inputs e-commerce platform, Nongfenqi (农分期) entered agriculture through finance, Nongtian Guanjia (农田管家) tried to create "DiDi for agriculture" by bridging farm machinery and farmers, and Jiagetianti (佳格天地) used remote sensing technology to transform agriculture.

Some survived; many failed. The main reason for failure was a lack of genuine understanding of actual agricultural conditions. For instance, for low-frequency services like crop spraying, farmers would eventually bypass the platform and transact directly.

ChinaVenture: How large is China's smart agriculture market?

Jianming Guo: Agricultural companies can't grow that fast, and there are no clear statistics, so you have to build models to project where the market could be in five to ten years. Considering factors like population and urbanization, we can think of northern China in the future as resembling the US today, and southern China as resembling Japan today. In other words, we can extrapolate total market size from these two countries.

Japan, for example, has small-scale farming with high-end crops — take the trendy cream strawberries of recent years, selling for over RMB 300 per jin (roughly $22 per pound). Southern China's climate and geography are also suitable for cash crops like citrus, which can fetch relatively high prices.

As for the US, Bayer's last disclosed figures showed that its Climate Corporation subsidiary alone served over 30% of all American farms, with farms paying annual subscription fees for its services.

Following this logic, the future smart agriculture market could exceed RMB 1 trillion.

ChinaVenture: As China's first smart crop decision-making service company, did you experience a "cold bench" phase?

Jianming Guo: That happened constantly. The concept of "digital agricultural management tools" was too ahead of its time — it only emerged in the US around 2015. Many people couldn't grasp it. The idea of using data to guide field planting was met with skepticism. Even when our first customers came through personal connections, getting started was extremely difficult.

ChinaVenture: How did you eventually solve the customer acquisition problem?

Jianming Guo: We had to find "seed customers" — villagers who farmed exceptionally well and commanded respect in their communities, essentially KOLs. We connected with them through agricultural input dealers, communicating with each one personally to convince them to use our planting protocols. We had to demonstrate concrete savings in water and fertilizer, yield increases, and additional profit per mu. Then we'd invite neighboring farmers to observe, gradually building the market this way.

We also established our own "demonstration farms" to create showcase effects.

ChinaVenture: How does the company monetize?

Jianming Guo: Two channels. For large-scale farmers, we use direct sales. Large farms are typically run by professionals willing to do the math — if our technology helps them earn more per mu, they're willing to pay us a portion as service fees.

Smallholder farmers are the hardest. We mainly serve them through agricultural input dealers, charging the dealers for our technology. We use dealers for two reasons: first, customer acquisition costs for scattered smallholders are too high; second, smallholders won't pay for technology directly, but they always need to buy seeds, pesticides, and fertilizers from dealers.

We enable dealers to advise farmers on better use of these inputs — which seed variety suits this particular plot, optimal planting density, ideal planting dates, fertilizer formulations, and the most effective timing for pesticide application.

When farmers see their crops actually perform better with these methods, they become willing to buy more inputs from that dealer. Customer stickiness increases, the dealer earns more, and we collect a portion from the dealer as our service fee.

ChinaVenture: How long did this process take?

Jianming Guo: About two years per region. From initial contact with dealers to getting their customer referrals takes one to two months. Once we identify seed customers, we have to follow the entire growing season for a full year. Only at harvest can the seed customers verify the technology actually works; in the second year can we expand to more customers.

ChinaVenture: How many farmers does the company currently cover?

Jianming Guo: Over 300 dealers, more than 30,000 individual farmers, and over 80 B2B clients.

ChinaVenture: Which regions do you mainly cover domestically?

Jianming Guo: Currently 10 provinces, 26 million mu, with more concentration in northern China.

We started in the northwest and northeast, then gradually moved south. Market analysis showed that regions with higher degrees of scale and net population outflow tend to have greater appetite for and acceptance of new technology. The northeast and northwest have the largest population outflows and the highest scale of operation.

ChinaVenture: AIcronos's business model feeds on scale effects. At what point does the "flywheel effect" kick in?

Jianming Guo: Next year. The business model is basically proven now; next year we enter rapid growth phase.

We've already achieved profitability in several major provinces — Xinjiang, Heilongjiang, Inner Mongolia. A few other provinces are slightly loss-making, but we estimate minimal overall losses this year.

Actually, the losses are small change compared to our tens of millions in R&D spending. We could be profitable tomorrow by cutting R&D, but we certainly won't sacrifice R&D for profit. The company's cash flow remains very healthy.

ChinaVenture: How competitive is the domestic industry currently?

Jianming Guo: Very few domestic competitors, because algorithms carry extremely high barriers. Even in the US, this was only recently developed successfully. It's a multidisciplinary integrated technology requiring massive data accumulation.

For example, studying plant photosynthesis requires knowing solar radiation, which demands astronomical knowledge; calculating how photosynthesis produces carbohydrates and how dry matter accumulates, distributes, and transfers requires plant biochemistry; determining how much water and nutrients roots need to absorb requires soil science.

Our R&D staff are specialists in plant physiology, soil science, satellite remote sensing, drones, and other fields. Co-founder Xubo Zhang has 10 years of crop model development experience and can organically connect technical talent across these domains.

ChinaVenture: International agribusiness giants are also transitioning to digital agriculture. How much impact does that have on you?

Jianming Guo: From a technology standpoint, Bayer is the industry leader — whether measured by technical strength, valuation, or service scale, it's undeniably number one. But our greatest advantage is that we're a Chinese local company.

Agricultural data is extremely sensitive; foreign enterprises face severe difficulties entering China's agricultural sector. We're rooted in China, serving local farmers and agricultural ecosystem clients.

We've been developing for six years, accumulating substantial data and experience with first-mover advantage. Through our algorithms, we know what crops should be planted on each plot of land in China and can calculate yields for each field.

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Foreign Executive Gives Up Seven-Figure Salary; Company Once Ran Out of Cash, Executives Paid Out of Pocket

ChinaVenture: You had reached VP level at the world's largest multinational agricultural technology company. What made you leave the foreign corporate "comfort zone" to start an agriculture business yourself?

Jianming Guo: In my forties, I realized I couldn't do anything except agriculture — this was the only industry I knew (hahaha). I'd already become head of R&D for Monsanto China, basically hitting the ceiling there. Staying at the foreign company would have been very comfortable. But I always felt unfulfilled — if foreigners could do agriculture well, Chinese people could too.

I hoped to use digital tools to unlock greater crop yield potential. Because we've clearly developed excellent crop varieties, but in actual cultivation, farmers don't grow them well in the field. The problem is lack of scientific growing methods — issues with sowing timing, density, depth, fertilizer rates, and so on — preventing the full potential of seeds from being realized.

My previous American employer, Monsanto, acquired a company called The Climate Corporation in 2013. This company had developed an algorithm that could study weather patterns to infer impacts on crop yields. In 2015, Monsanto combined its own environmental modeling research with this to develop a digital agricultural management tool called "FieldView."

But the American bosses were unwilling to bring such products to China. I thought we could develop something similar domestically ourselves — and that's how AIcronos was born. So despite earning over a million annually at the foreign company, my current income is lower than ten years ago. But I still feel this endeavor is more meaningful.

ChinaVenture: Where did the initial startup capital come from?

Jianming Guo: The founders pooled our own money — several million RMB. Frankly, we had zero concept of fundraising back then, let alone channels. We just wanted to see if we could develop the technology with our own money. It wasn't until 2018 that we realized the importance of financing — that self-funding would make development extremely slow — and started fundraising.

ChinaVenture: The first few years of entrepreneurship are usually the hardest. Did you ever want to quit?

Jianming Guo: Definitely. I regretted leaving, because the company had gathered so many colleagues and I was terribly worried about letting everyone down. The worst was during the 2020 pandemic when the company's funding chain broke. We executives basically took every penny we could from our families, pooling nearly RMB 5 million.

At that point, I thought: I've done everything I can. If the company still can't survive, it probably means I'm simply not capable. But if we survive this, I'll definitely keep going.

Back then, executives received 50% salary, employees 70%. I was completely transparent with staff: the company has no money, so this is what we can do. If you want to leave, I'll personally pay the 30% we owe you — not a penny less.

That period was incredibly hard but also deeply moving — not a single person left among our 60-plus employees.

ChinaVenture: In six years of operation, what other turning points stand out?

Jianming Guo: The first pleasant surprise was in 2018, when we got our first order for RMB 130,000. It came through a connection, but it genuinely boosted our confidence.

ChinaVenture: Is fundraising especially difficult for agriculture projects?

Jianming Guo: In 2019, we engaged a financial advisor to introduce us to investors. But several relatively well-developed agriculture companies suddenly went bankrupt around then, causing the entire capital market to become very negative on agriculture projects. We met with some investors, but everyone was cautious — nobody invested.

Around 2019, dealers started becoming willing to pay for our services, so we decided to begin our second funding round. That round also faced many challenges. Some investors even issued term sheets but then hesitated, saying they'd decide whether to invest after we earned our next dollar from a stranger.

When 2020 hit with the pandemic, the investors we'd been talking to all disappeared. One investor said: if your company survives the pandemic, we'll invest; if you can't survive, saving you would be pointless — the money would just go down the drain.

When the pandemic situation slightly improved, Linear Capital came to the fields to see how our algorithms performed, then immediately provided bridge financing. This was a huge morale boost, and the company gradually got back on track. Hillhouse later participated and has now supported us through three consecutive rounds. Source Code, which led our Series A, has also consistently believed in us — this gave us tremendous confidence.

ChinaVenture: What will this funding round be used for?

Jianming Guo: About 30% for R&D, plus hiring more R&D personnel, and part of it for replicating our business model.

ChinaVenture: Capital markets have become more active in agriculture over the past year or two. Have you distinctly felt this sudden attention to agriculture?

Jianming Guo: Capital started becoming active around the first half of 2021.

Because starting from 2020, the state placed greater emphasis on agricultural industry development. National leaders visited farmland production sites multiple times, repeatedly stressing that "the rice bowl must be firmly held in our own hands."

Capital markets are always the most sensitive — they noticed this immediately, and subsequently more investors started paying attention to us. The interest hasn't waned since.

Especially since early this year, numerous financial advisors and investors have wanted to talk with us. I've even seen FAs writing agriculture industry reports recently — something unseen in previous years.

ChinaVenture: What are your criteria for selecting investors?

Jianming Guo: For us, they must be reliable investors who can provide resources and help during our development. For example, Source Code helped us refine our business model, build our team, and persistently recommended we establish test fields and managed farms — which later proved quite effective.

We don't meet with too many investors now; our existing shareholders also help filter out unsuitable ones.

ChinaVenture: Looking back now, what do you think you did right?

Jianming Guo: If I had to do it over, I'd probably walk the same path, because there was no road ahead — you have to blaze your own trail.

The only thing I knew was that similar technology had succeeded abroad. Their business model was charging service fees directly to large farm owners, but China simply doesn't have that market. The technology definitely had value; it was just that how to monetize it — nobody knew the answer yet.

Investors also gave various suggestions based on successful experiences in other industries. Some applied to agriculture; others didn't fit well. We just had to figure it out ourselves.