Original article appeared in Miller Center for Social Entrepreneurship on November 16th 2020
After a challenging 2020, Miller Center alum Extensio is set to transform smallholder agriculture in Latin America and the Caribbean through a successful acquisition by social business builder Acceso. This is how they made it, as told by Extensio founder and CEO Diana Popa.
2020 has not been kind to small businesses and Extensio is no exception. However, thanks to the challenges, Extensio will leave 2020 much stronger and with a brighter future than we had ever planned for. This is our story, hoping that our learnings can benefit other businesses assessing their options during the pandemic.
By 2050, agriculture will need to double worldwide food production to sustain our growing population. Meanwhile, today 78% of the world’s poor live in rural areas and struggle with climate change, unsustainable practices, poverty, emigration, and violence. In Latin America and the Caribbean, 60 million people live in poverty while bearing the responsibility of producing our food, and maintaining local supply chains.
This is why, in December 2015, together with Mexican social business builder Connovo and software expert Gustavo Mendoza, we created Extensio, the “Digital Field Agent”. Through our proprietary information and communication platform, we provide smallholders with parcel-level information on weather, pests and diseases, training on best practices, and market connections. Since then, we have impacted the lives of over 300,000 people in Mexico, Colombia, and Ecuador, in partnership with international research centers and agricultural companies dedicated to increasing farmers’ yields and livelihoods.
Our learning curve over the last five years has been exponential, leading to a solid strategy for scale with the objective to reach one million users and positively impact 18 million lives by 2025. We started structuring our first round of investment at the end of 2019 to fuel this vision and entered due diligence with several investors in February 2020. Then the pandemic hit. Investments were delayed and our main contracts for 2020 suspended. By June, we were facing the hard decision to close operations but did not want to end our engagement with rural communities. Extensio could stop operating, but we knew our impact had to go on.
Therefore, we focused 100 percent of our efforts on finding alternative ways for our impact to continue and were surprised by the result. These are our main learnings:
- Information on how to structure a successful exit when things are tough is hard to find. There was no readily available information on how to make sure your impact will continue even if your business may not. This is the reason why we are sharing this experience with you today.
- Grow and care for your network. We cannot stress enough the importance of networks for the success of a business — when things go well, and when they don’t. Our network of advisors, investors, and fellow entrepreneurs proved to be an invaluable resource in this process.
- Dare to be vulnerable and communicate transparently. We activated our network through a call to action, in the form of a personalized email to every partner, investor, and competitor. Our email summed up the impact realized to date, the reasons for closing operations, and our will to find the right partner to continue our impact. Besides the pride we felt as a team by listing the results obtained in five years of hard work, this email attracted a world of opportunities: expert legal and financial support, invaluable mentor advice from Miller Center (thank you Alex and Steve!), and three incredible partnership opportunities looking to buy the company and keep building on our impact.
- Value your work and experience. Defining your ask is difficult when raising investment under normal circumstances, so you can imagine how hard it was for us to value our business with no active contracts and a set of debts. We learned that contracts are of course an asset, but they are the natural result of a system, a network, a technology, and a good understanding of the market problem and a solution well designed to solve it. We realized that we had a unique platform that could serve smallholders in Latin America who did not have access to data and internet connectivity, a talented team, five years of experience in understanding farmers, a recognized brand (certified B-Corp, elected “Best for the World” 2019), and (again!) a network of partners sustaining us. This is value and, well invested, it can bring the right contracts.
- Know what you want and what you don’t. It is important to know what you are looking for in order to find it. Define the ideal partner, the ideal deal structure, the criteria that are important for your business, and, importantly, your limits as a business and individuals. Are you willing to stay with the new business? Is your team willing to? Under which conditions?
- Be ready to let go. Some would argue that you are in a weak position when negotiating an acquisition. I would argue that it depends on your mindset. Negotiating when you made peace with losing gives a lot of clarity and power. In our case, we had made our peace with the idea of closing the business; we had received great mentoring and advice that helped us clarify our criteria and our negotiation limits. We knew what we wanted, and we were ready not to close any deal without these minimum criteria.
- Be honest and build trust. While it is great to value your business, do not oversell. Be transparent and honest with your potential buyers from day one. Maybe they will not close the deal, but they are definitely interested in your work. So build a potential long term relationship and give them the information to propose their best solution. You do not have all the answers.
In our case, our “call to action” revealed three interested partners in buying Extensio, each with their own vision and value proposition. After following all of the above steps, in only two months, we closed the deal with the organization that was most aligned with our vision and deal criteria and with whom we are thrilled to build the future.
Acceso builds and operates social businesses in Colombia, El Salvador, and Haiti with the mission of creating lasting economic change in the lives of rural smallholder farming families. These businesses work along entire value chains to ensure that smallholder farmer production reaches large domestic food companies including supermarkets, retailers, and restaurants, as well as international markets. They have generated over $50M for 15,000 farmers and farm workers through targeted technical assistance and inputs, crop aggregation and processing support, and guaranteed market linkages. By combining forces, Acceso and Extensio will now offer smallholder farmers an unparalleled and holistic solution, providing them with both digital and in-person information and training, agricultural inputs, affordable credit, and guaranteed market access to boost productivity and increase income levels in an efficient and cost-effective way.
In the name of all our team, I offer a special thanks to all who supported us in this journey, especially Steve White and Alex Pan from Miller Center for Social Entrepreneurship, lawyer Elena Espinoza from Ilexlu, Natalie Vergara from Kaya Impacto, Nicolas Lafaye from Kiva and, of course, James Jenkin and Rob Johnson from Acceso. We are excited about the years to come and grateful to 2020 for putting Extensio to the test and making it stronger.
Diana Popa’s bio
Diana Popa is founder and CEO of Extensio, Mexican B-Corporation and “digital field agent” dedicated to consolidating farming as a sustainable activity for present and future generations, through timely mobile access to critical information for decision making. Diana is a problem solver and risk taker who believes in the power of entrepreneurship to build sustainable social impact. She has 17 years of experience in social venture building, management, and business development in energy, agriculture and information technology across Latin America, Europe, North America, and Central Asia.
Diana is also a passionate mentor and impact consultant, helping social businesses and NGOs strengthen their impact strategy, access funding, and grow sustainably, including at MIT, the Miller Center’s Global Social Benefit Institute (GSBI) at Santa Clara University and New Ventures in Mexico. Diana holds an MSc in International Business from INSEEC Business School Paris, France. She is a frequent public speaker at events focused on entrepreneurship, technology, agtech, and B-Corps.
It is important to know what you are looking for in order to find it. Define the ideal partner, the ideal deal structure, the criteria that are important for your business, and, importantly, your limits as a business and individuals.– Diana Popa, founder and CEO of Extensio