Finally I got my prototype fully functional. Its agritech device, mushroom growing chamber. You can find similar things in biological labs called incubator,a more generalized name is CEA or building precision HVAC. The differences is size,cost, modularity, (hw components are compatible with industrial components), easy to reconfigure/use/ re-programing of software ( graphical programming), resizable, refit into container or building, economically viable . Details with numbers are in this post. There were few posts in this sub trying do the same but there is a huge difference in size, cost and unit economics. (their size is as big as CRT TV, My prototype is as big as 2000L refridgerator and mvp is 3 time bigger but the BOM cost is same same) ( I’d like to post pictures of device+graphical codes but it seems its not allowed in this sub).
I’ll start by telling my story how i decided to built it, follow is markets analysis: sizes, structures of the markets, markets strategy, a foray into future, also a lot of numbers.
Key markets: cordyceps / psychedelics mushroom (extract). possible extent to adjacent markets: Saas for machines, Software defined PLC, other agritech devices. Backbone of of my analysis is Zero to One, Paul Graham BL and Sequoia market thesis.
Please, criticize what ever you like, my first steps is very simple I’ll bootstrap, build a mini cordyceps millitaris farm indoor, I’ll try to be ramen profit from my first sale, ROI and margin is very high ( theoretically). But I’m very confused how to scale, funding or not funding, which is main market or adjacent market, in contrast with other fellows in this sub I think I have more choices and all seem to be good.
Long story short, I tried to build mushroom growing chamber for my neighbors as a act of kindness (edible mushroom of course). Requirement: must be economical viable minimum 300USD profit/months also low capex. I tried to cut cost with whatever i can, arduino HAT, Pi HAT chinese components etc… diy wood/alu frames, welding etc. It sound simple but its not, I ended up theoretically with some thing cost about 700USD BOM, 200USD profit (tax is zero), but I didn’t feel right. Desperately I tried opposite way, to ggl the most expensive mushrooms to grow and I found magic mushroom and cordyceps millitaris. Dig deeper and the concepts seem to be economically viable and I took it as my own.
Main markets : (all numbers are from googling).
Psychedelics market is tricky due to legal restrictions. There are scientific researches evidences to approve it is effective again MDD, usage is allowed with restriction or decriminalized in some states and Canada. From National Health Inst. : there are 20M life long users. Its seem like it will follow the path of medicinal cannabis industry. Just copy some business models and strategies from cannabis industry then let imagination run wild to get the picture. Only problem is its out of my reach for now plus timing.
Cordyceps sinesis is some thing well know in Asia as energy booster and for it expensive price. Its impossible to cultivate it at scale and economically, may be in the lab (recently somewhere in China). Commercial growers grow Cordyceps militaris instead, only recently (10+ y) scientist can grow it successfully in its nature form ( fruiting body). Key bioactive compound is cordycepin. There are great number of scientific research to confirm what it is good for. In USA people its used to increase libido, gym-er and athlete use it to increase endurance some people use it as coffee alternative. In Asia biggest customer segment are elders.
Total cordyceps market size is ~ 1B USD CAGR ~10%. USA ~275M, Asia Pacific ~600M. Retail price depend on quality but US grower charge ~2200-3300USD per kg dry 0.2%-0.3% cordycepin. wholesale price ~1100USD. To make 1kg cordyceps dry we need ~10 kg brown rice. substrate material cost ~11kg brown rice. In SEA for 0.6%( 6mg/g) cordycepin quality, retail price ~ 2500USD. It look expensive but daily usage for a adult is ~1-3mg cordycepin or 1-2USD perday, cheaper than Starbuck.
Market of the my device ?: When I found out what cordyceps can do, I want to built the device for myself for following key reasons:
- I don’t want to destroy my room or building structure
- quality of the mushroom very widely depend on how you control environment. By nature cordyceps militaris yield very low cordycepin concentration (0.02%-0.08%). In CEA lab its high as 2% (20mg/g). It solve both scalbility +quality vs capital at once. Local growers have problems with scalability vs quality vs CAPEX.
- lower CAPEX and OPEX (need less high skill labors)
- Direct to consumer marketing and trust.
Using alternative like Babylon-microfarm and Freight-Farm I think there is demand for the device but I can’t estimate how big it is => my strategy is to grow and sell the mushroom first.
Leverage Control software as SAAS*?* It idea is long…long shot and I have zero idea it can take off or not. When I built the device, I know what to control and how but can’t figure out how many of them and where, because my knowledge about HVAC or CEA is ZERO. I expect there is a lot of hw changes so I write my software as a browser and control algorithm like mark up language ( I use yaml). From control diagram ( like a labview or FCB) I create text file in yaml. Runtime will interprete text file as brower inteprete html. This design also enable me to do otherthing -> I can easily modified my controller soft+hard for other things like cannabis mini farm or green house or hydroponic, refit in to container or any CEA things, create alternative to freight-farm and babylon-microfarm. The key is low cost in reprogramming and redesigning controller IO. Other hardware just knock off. It enable me to control my devices like a SAAS. It also behave like a Software defined PLC. I can break a program into parts and run it separately in container or on difference Pi/cluster, like a distributed system. If one process is down other continue to function. I can add more process when other are running. I can have multiple controllers in one Pi working separately or together etc. But I don’t know whether its good business concept or not, whether other people want it. I wrote it for my own use. From business point view, it is not validated hypothesis, product-market fit or any real customer*. Only me need the features and I only used some of them for now.*
Business models.
The first one is very simple: build cordyceps micofarm. Market is validated,margin is high**.** Here are numbers. My MVP has size 0.8m*4.4m*2m, BOM cost ~1200USD designed for low volume manufacturing. Output ~5kg dried fruting body in 2 month = 11000USD revenue. 2 devices occupied 10sqm including space => revenue 550USD/sqm/month. Electricity cost is ~100USD max per device/month or 20USD/sqm/month (average is %50 of it) in USA its 3 time => 60USD/sqm/month. Labor cost 500-1000USD month. Rent 6USD/sqm/month.
scale the farm up
scale business like Uber for x. selling device +supply substrate to every one wanting make extra money but don’t have time. collect mushroom back and sell. Organization must be upgrade accordingly. One potential customer segment are empty office building. ( I chatted with one).
This model ease me from getting MVP user experience right at the first time, there are things need to tweak. All I need is functionality.
The second business model is like babylon-microfarm. Selling to office. every 2 month one device can supply ~5-10 thousand cups of alternative /energy booster for their employees. babylon sell their device for ~15KUSD so do I. ( US only)
The third business model is like freight-farm. Retrofit in container clone business model. The revenue and margin of cordyceps are higher than green. they sell their device for 150K USD so do I. (US only).
Thank you every one who had patience read through all this. My next step is remake the prototype into MVP and lunch microfarm ( bootstrap). Any input is appreciated I am confused about how to scale and to which direction, I’m in SEA now ,is it possible to expand to NA market (I’m Canadian)? Please help with your knowledge and opinions.
Thank you.
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How are you going to sterilize the substrate? How long does cordyceps take to fruit? Do you have wholesale buyers lined up?
Are you based in US or Asia?
To sterilize, autoclave is a must. Its labor intensive process => some small growers opt to buy substrate from big growers. Cordyceps take 2 average months to grow, some people may let it longer for higher cordycepin concentration. I don’t have wholesale buyer lined up yet, until the first batch harvest and after HPLC test to verify quality its hard to discuss about price. We have local whole fb group here. Once I get MVP and up and running I’ll post video/pics to get PR first.
I’m canadian by passport, curretnly reside in SEA. That the reason I know a lot about psychedelics and cannabis things. I know Bruce Linton founder of Canopy Growth do invest in codyceps and psychedelics too… He has a cordycep coffee shop in downtown Toronto. I don’t want to promote it here.
For me US market is like girl next door.
I’m impressed - this is the most detailed write-up I’ve seen on this sub in… well, forever!
I question your ability to sell devices to offices. I don’t see traditional offices buying into the cost + labor required for this, they’d rather buy the product direct.
I do agree that nobody want to buy into cost +labor but let me break it into details.
- Making the substrate require autoclave its labor intensive process, its all my shoulder. I’ll sell them substrates put into device, the device is automated so you don’t have any things. Daily just open it watch fill in some water then close it. My Pi can act as Iot gateway so you can monitor it locally or I can monitor it remotely.
- Let look about ROI. if you buy cordyceps from out side you will fork out 5K for 5kg dried or 50kg fresh. To grow 5kg dried you will need ~50kg-80kg brown rice or 300-400USD + other addtives ~50USD. You will need to sterilize it using huge autoclave for 2-3h 20kw -> 50khw of eletricity or 150USD ( USA price 30ct/kwh) so its 600USD. Adding labor cost transportation +administrative cost. Suppose I’ll it to you as 2000USD to make profit. Device need less than 600USD electricity you you have 5000-2000-600 = 2400 USD gain. Your get your capital back in 12 month if I charge the device 15K. if I charge 10K its <<9 month.
- This strategy I just copy from Babylon-microfarm, they sell 15k device to grow lettuce and microgreen worth couple of hundred USD. And they raised serie A already. The freight-farm start selling their 40ft container for 75K and raised it to 149K and ready for IPO, claim 20M revenue. May be they know some voodoo magic or in US you like to throw money this way, I have no idea.
- This strategy is out of mine mind too, but I do counting the beans so any viable idea despite how strange it look I do put on table including this and/or moving to Canada/US. I’m Canadian so its not out of option.
I agree with the poster above that companies likely want to buy a finished and reputable product rather than get into growing stuff themselves. They may not have the expertise or the risk appetite to get into this: What happens if something goes wrong and they end up giving employees a tainted product - they likely wouldn’t want to take that risk, but instead outsource to a reputable provider.
I think your idea/model may have more fit with the hobbyist market
their size is as big as CRT TV, My prototype is as big as 2000L refridgerator
The only thing I can think of is that you’re not necessarily going to crack the market that they’re selling to if their product can be carried through a doorway by one person and yours needs two people or a hand-truck (and potentially a larger vehicle to transport if they need to).
The overall idea seems OK, but you may wish to have a variant product of the exact size that the market is already used to. Or even two of that size, bracketing the existing product(s) with one that has all the same (or marginally better) specs with a noticeably lower price, and one that has significantly better specs for just a few dollars more than theirs. That way people who are looking to spend less will go for the former, and people looking for the most bang for about the same price level will go for the latter, creating a pincer move on the existing product range. Plus, of course, you’ll then have your 2000L model available both as a fully compatible upgrade for individuals who want more growing area than the current smaller sizes, and as a drop-in solution for business-level and microfarm customers.
You are correct about CRT size version, their target seem to by hobbyist segment. With this CRT TV size they can only control heating and humidity not cooling. In US/Europe its ok because cold weather.
FYI Hobbyist growers there using just a cheap tent in basement + central HVAC to control temperature adding cheap humidity controller to control humidity they reduce the cost to just couple of hundred. Other just drill a hole into refrigerator and added a pc fan as controller and voila. But the system require attentions and for living room you are limited to certain kind of mushroom.
Cordyceps need 18-20 Celsius not suitable for their system but some psychedelics +edible thrive well in 23-28 Celsius so I think there segment and my are different.
Also FYI to force cordyceps producing higher content cordycepin you need 23-25 Celsius+lighting which is not good for body grow. 18-20 Celsius good for grow but not good for cordycepin production. So local top grower all have their farm in mountain area.
You are also correct about the size. Its first challenge i have to tackle. I designed it as IKEA, you will assemble it once you get things in the door. For bigger version I can use eps panel + off the self hw hvac+ low cost cnc. But for smaller (400L) version I need to out source to chinese /local manufacturing in bigger volume. So for now I trying to make MVP for my self first/ refining it before actual selling. Smaller version only in cad file for now. From eps frame to mini farm/container or bigger farm is very straight but inversely is very hard.
A few months ago I was looking for a mushroom supplier if that adds any value
Great write up, good on you for doing your research and asking for critical feedback. Since you’re asking for criticism, my main (layman) feedbacks would be:
- I’ve never heard of anyone growing their own mushrooms, except a shady substrate of people in underground culture. That sounds like a tough market to reach/enter at scale.
- The concept of growing mushrooms is just… a bit niche. Tough marketing situation.
- The above will potentially make your product difficult to market/streamline.
I might be entirely wrong, and lot’s of great companies have been successful because they do novel stuff that nobody thought of. But it will require a strong vision and flawless execution. Make sure you have that.
I don’t know which kind of mushroom you think about, but for cordyceps many companies in US already growth as mycelium, extract and selling capsules. and recently fruiting body liquid culture. Amater growers you can find on etsy just do search cordyceps. In Asia we got in hot pot and soup.
For psychedelics at least two companies got permission from gov of canada, They build millions dollar facilities in Vancouver and Calgary. In Oregon its legally to growth for owner use. Of course its niche and tough marketing.
Does your technology have anything that 10x yield using the same resource input? if not, I don’t see how you can compete. aka are you bringing a tractor vs a rake and hoe farmer or are you already competing against a tractor?
I think yes.
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is substrate
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Cordyceps cordycepin production is sensitive to temperature fluctuation and lighting. good temperature for cordycepin is not good for growing and vice verse. So system have to switch between different conditions day and night. So local top quality grower all moved into mountain.
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I don’t compete with tractor I only make smaller cheaper easier to use tractor.
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TonUp, you’ve proven yourself as a reliable launchpad with the success of your first project. Excited to see more groundbreaking ventures from your platform.
First, I think of biotech startups doing mycelium and mushroom work interested in devices like this. It’s not a scalable model there but your costs might be low enough to invest into buying these systems.
But I think best route for you is to grow and sell the mushroom at this stage:
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Your financials will be clear cut, you’re not gonna spend money on marketing and sales.
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Incentivizes you to improve your system and get a detailed case study on how your system can help reduce the cost of production.
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Will help you to naturally network with other providers and get a better understanding of the challenges they face in the field
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You have a pretty decent top down market picture, but what really matters is the bottom up market sizing. Identifying and talking to potential customers without trying to sell your system.
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I’ve been thinking about this over the last week. I like the idea, but I’m not sure where the value is.
At the prices you mention, I could grab a pair of refrigerator-sized container. A heating element turns one into an extended autoclave. A RaspberryPi, a fan, ultrasonic humidifier, and a couple thermoelectric devices turns it into a perfectly controlled growing chamber. a SWE for a month to program it…
All this for, what, $5-$10k? Maybe a couple grand more to get some expertise from a local mycologist. I don’t see how the SaaS model or 1+2 business models are more profitable if someone wants to go mid-size.
refrigerator size 400L autoclave cost 20K minimum. If you can use heating element to turn a container into extended autoclave => you are god of physics yo can sell this autoclave to me for 5K and mass sell to any one . Thermoeletric device you mean peltier effect? Its good for hobby mini size box, using peltiers to cool refridgerator sized container? you are mother of god of physics, You dont need to grow mushroom to make money just sell this cooling devices and you are rich.
refrigerator size 400L autoclave cost 20K minimum. If you can use heating element to turn a container into extended autoclave => you are god of physics yo can sell this autoclave to me for 5K and mass sell to any one . Thermoeletric device you mean peltier effect? Its good for hobby mini size box, using peltiers to cool refridgerator sized container? you are mother of god of physics, You dont need to grow mushroom to make money just sell this cooling devices and you are rich.
Heating an insulated box isn’t hard. The expensive autoclaves do it faster and to a guaranteed temperature/pressure - I think a home business grower would be willing to wait longer or accept more risk.
Remember that for heating cooling, this device is already in a regulated environment (indoors). The additional heating/cooling isn’t crazy, and with a semi-sealed insulated box, very doable.
It sounds like you’re working towards “one device to rule them all” - something that works in an office environment, something that works as part of an array in a shipping container. If you’re trying to keep costs down, optimizing for the needs of just one of these will make a significant difference.
I do agree with you, from technical point of view, its not rocket science neither some things special, I look at it from business point of view, trying keep some numbers in check, maximizing some and minimizing others. Some agritech start-up belly up because they forgot to keep numbers in check despite crazy tech .