Big interview for DigitalBusiness.kz about COWMAS
Askhat Zhanibekov began his career in the banking sector. He worked for about 10 years as a risk manager at a subsidiary bank of the UniCredit Group in Kazakhstan and at the Development Bank of Kazakhstan (DBK). Both banks financed projects in agriculture. Immersed in the industry, Askhat realized that food production could be as promising as oil extraction. He resigned from his position as Director of Risk Department at DBK, moved to the Netherlands, and enrolled at Wageningen University & Research, one of the world's leading universities in agribusiness economics. He then launched the startup COWMAS in Kazakhstan—a platform for remote management of livestock farms. Askhat shared details about his project and how the industry in Kazakhstan could significantly improve efficiency in an interview with Digital Business.
«It's better to be a startup monopoly in a niche market on a small scale than to dive into massive competition»
– Why did you choose the Netherlands for your studies?
– The country ranks second in the world in agricultural exports after the USA. Besides numerous greenhouses with flowers and vegetables, the livestock sector is well-developed there, especially dairy farming. I was curious to see how everything is organized there. To understand supply chains, feeding technologies, veterinary practices, animal husbandry, and other processes. I wanted to gain experience to later apply it in Kazakhstan, where I planned to return after my studies.
– What did visiting local farms gave you?
– A clear understanding that without agrotechnologies, well-established business processes on farms, and a streamlined production chain 'from grass to glass/fork,' the prospects for agriculture in Kazakhstan are very uncertain.
“Today, agricultural business cannot be managed using old-fashioned methods. Our lag behind developed countries may be measured not in years, but in decades. However, with the advent of digital technologies in the agricultural sector, there is a chance to catch up on missed opportunities or even leapfrog certain stages of development.”
I decided that I needed to develop in this direction. That's how the idea of creating a technological startup emerged, which could facilitate the lives of livestock farmers.
We developed a prototype of a sensor with our partner - an ear tag equipped with special sensors. With their help, it is possible to track the cow's temperature, geolocation, and all its movements to understand how many hours it sleeps, eats, and ruminates (chews cud - ed. Digital Business). In combination, the data provides tremendous opportunities for analysis. For example, if rumination lasts less than 7-8 hours, it could be a sign of illness or stress. However, the farmer's eye may not see the problem until a week later. Thanks to the information obtained, it is possible to determine everything by the second day, separate the cow from the main herd, and take necessary actions.
– How relevant was this idea for the Netherlands?
– It's difficult to answer definitively. Roughly speaking, we improved the characteristics of existing solutions in terms of durability and the unique method of transmitting information. This allowed us to use sensors not only for animals in confined spaces like barns but also for livestock grazing freely.
“My university offered financial support. It turns out that graduates with good business startup ideas are provided loans on ‘soft’ terms: if you make a profit, you repay the money, but if the project fails, the debt is written off. They allocated 9,000 euros to me. We spent them on developing prototypes and validating the business idea with monitoring and data analysis of cows.”
Presented our prototype at various startup competitions in the Netherlands. Won twice.
– Why then did you decide to launch a startup in Kazakhstan?
– I knew right away that after finishing university, I would return home. During my studies, all my activities were dedicated to Kazakhstan's agriculture. I wrote my thesis on small livestock farms, conducted stochastic simulations to optimize their efficiency. I researched the problems and the market thoroughly. All of this determined the country for our startup launch. We decided it was better to be a monopolistic startup in a niche market on a small scale than to compete in a huge market in Europe.
«In a startup where there is hardware, high costs, low margins, and weak scalability.»
– Who did you approach with your solution?
– Ninety percent of our agriculture is financed by the National Managing Holding 'Baiterek'. We went to them first. We explained that with our solution, they could monitor all financed livestock 24/7 and obtain data for advanced analytics. This would increase program efficiency and reduce livestock financing risks. They were interested in our product, but the holding's management indicated there would be challenges with direct procurement and support of a private company's solutions due to their tender rules.
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To be honestly, I have the impression that people are afraid to take responsibility for making non-standard decisions. For example, initiating changes in procurement rules, implementing new collaboration programs with the private sector, and fostering corporate innovations. In Europe, billion-dollar corporations build research centers on university campuses and acquire innovations in the startup environment. In Kazakhstan, however, state monopolies, which control half of the economy, often remain inward-looking and closed to external innovations. It was only with the arrival of Bagdat Musin at MCRiAP that movements began.”
– Let's get back to sales. After receiving a refusal from "Baiterek," what was the next step?
– We turned to private farmers. But selling to them turned out to be no easier. It turned out that they had entirely different kinds of problems. I thought, based on what I saw in the Netherlands, that in Kazakhstan's agriculture, we needed to address issues of operational efficiency. However, in practice, it turned out that many farmers still struggle with basic survival issues for their livestock (proper feeding, veterinary care, adherence to animal husbandry practices, as well as calf survival and health). On top of this, there's the issue of technical unpreparedness: many remote farms lack internet and even electricity. Plus, the sensors themselves aren't cheap. In short, it was a dead end.
– How did you manage to overcome it?
– We realized that we needed to shift from hardware to software. In a startup where there's physical equipment involved, there are huge costs, slim margins, and weak scalability. But that's only half the problem. Selling the device might be possible, but then you have to maintain it. And the issue was that we would have to travel 500 kilometers just to reach one farm. For a fledgling startup with limited resources, that's very challenging.
As a result, we created a platform for monitoring data in collaboration with our partner, where all information about the animal is collected: where it was born, its medical history, administered medications, offspring, and so on. We developed a beta prototype. By that time, we had won a grant of 10 million tenge from the National Agency for Innovation Development "QazInnovations."
“They invested a total of around $45,000 in the project, of which about half was ours. The funds were spent on refining the platform’s functionality, which included design and technical development of new features.”
– And how should information be transmitted to the platform if you've moved away from hardware? Plus, there's still the issue of farmers' weak technical equipment.
– We decided to digitize cows using RFID ear tags (a miniature chip that stores a unique tag number and information, capable of transmitting data to an RFID reader - ed. Digital Business). Starting from January this year, if a farmer wants to receive subsidies from the government, cows must have RFID ear tags. They are inexpensive (costing around 500-800 tenge), accessible, and most importantly, with a special reader, we can collect the information of interest and upload it to the platform for processing.
“But we encountered the fact that not all farms have these tags. Moreover, there is generally a lack of infrastructure for livestock management. Thus the idea arose to provide not only a platform but also a service. Visiting the farm and assessing its needs. Conducting a sort of audit and offering turnkey solutions.”
– Why is an audit necessary?
– To determine the current state of the farm and identify existing issues. Depending on the farm's needs, audits are conducted by specialists in infrastructure, animal husbandry, and veterinary medicine. I also personally visit farms myself.
“Based on the audit results, we create a risk map and assign ratings on a 5-point scale. We assess each area: veterinary care, animal husbandry, feed supply, infrastructure, and so on. Depending on the indicators, the farm may fall into the “green,” “yellow,” or “red” zone. “Green” indicates everything is excellent. “Yellow” signifies some issues. “Red” means critical improvements are necessary in these areas to preserve the animals and the business as a whole.”
We provide farmers with information and then offer options: either deal with these problems yourself or we can help you. If the farmer is interested in working with us, we assign them a supervising manager and specialists. Many of them later return.
«Due to poor management, meat livestock farming in the baseline scenario loses about $300 million annually»
– Who do you work with?
– We work with small livestock farmers. These are private individuals who do not have sophisticated systems. They only have tags, notebooks, and pens. Everything is old-fashioned. During the vaccination season, when cattle vaccination events take place, the stockman shouts out the number of the cow that received the injection, and another person writes it down. This leads to many errors because the animal is not properly identified: the person might have misheard the number or written down the wrong information. As a result, the history is not preserved. One cow may miss vaccination and pose a threat to the entire herd. Under such conditions, it is impossible to carry out breed improvements. The problem of lack of accounting is typical for the whole of Kazakhstan.
– How do you help solve problems?
– We provide the farmer with an action plan developed by zootechnicians, veterinarians, and other specialists. And if the farmer adheres to it, we can collect a wealth of data using sensors, and then generate high-quality analytics. If I know the details about a cow—its characteristics and the actions taken with it—I can make informed breeding decisions.
“The main goal of the farmer is to get at least 80% healthy calves from their herd. By establishing accounting practices, other processes in veterinary care, animal husbandry, feeding, personnel management, and so on, improve. It becomes possible to calculate the farm’s economics and plan ahead.”
– How much can you improve farm efficiency?
– If we look at global indicators, business in meat livestock farming starts somewhere at 80% calf yield and higher. This means that 100 cows should yield 80 calves, while in developed countries these figures reach 90% or higher. In Kazakhstan, it's only 50-60%. And all this primarily due to poor accounting and failure to comply with livestock farming technologies.
“Today in Kazakhstan, there are approximately 2.3 million heads of beef cattle breeding stock. Assuming one calf costs 200,000 tenge. Multiplying by losses of about 30% due to inefficiency from poor management, we get colossal sums: 138 billion tenge or approximately $300 million in annual losses in the baseline scenario.”
Even today, solely through adhering to technology, we can increase calf output by 20-30% on an inefficient farm. That equates to an additional 21 heads, considering an average farm with 72 heads. Multiplying by 250,000 tenge per good calf yields an additional revenue of 5.2 million.
– It sounds simple, but many farmers simply lack the financial means to implement technology.
– We understand that in Kazakhstan, there's a shortage of professional and competent veterinarians, livestock specialists, and not every farmer can afford them. We suggest, for example, remote veterinary services. After reviewing the herd and examining platform indicators, with an interested farmer on-site, a specialist can provide recommendations for improvement without needing to visit. This format allows one veterinarian to serve far more than the 5-7 farms possible in traditional formats, making experienced veterinary services much more affordable for farmers.
– So, much depends on the farmer's responsibility and willingness?
– Exactly. We won't work with farmers who aren't genuinely engaged in their business. For instance, where a farm is managed by an employee-manager and the owner acts merely as an investor, staying detached. To achieve efficiency, it's crucial for the owner to actively manage the farm or have a manager who is somehow invested in its development—whether through ownership stake or another financial mechanism. Such farms have prospects. Otherwise, there'll be deceit, theft, sabotage of tasks, and so on.
«For now, we offer free subscriptions to our farmer partners, earning revenue through service provision»
– How much does your platform cost?
– For our platform with basic functionality, we charge around 50,000 tenge per month. This includes continuous monitoring, accounting, a personal manager, veterinarian recommendations, and zootechnics. For comparison, a livestock worker's salary is 100,000 tenge per month, and farms typically employ 2-4 such workers who often work inefficiently. In contrast, we can optimize processes so that the work of three livestock workers can be handled by one. We delve into operational management: providing advice on infrastructure, maintaining records, and conducting monitoring visits.
– Does it mean you're already making a profit?
– Currently, there is significant interest in COWMAS. We are currently in touch with 15 farms, out of which 3 are paying customers. Our veterinarian is involved, and we provide operational management. The others are currently using one-time services in a trial mode to understand the benefits of our platform. Right now, we offer free subscriptions to our farmer partners and earn revenue through service provision. The service includes initial audits, consulting, and operational management.
– Why are you willing to provide the platform for free to many?
– Our goal is to gather a database of professional farmers interested in developing their businesses. Afterward, we will consider monetization. We have clear plans for scaling and business development. There will be features offered as additional paid services. For example, a veterinarian who either provides advice or takes charge of all processes. We may also offer feeding advice and so on.
– What are your plans by the end of this year?
– To attract a major corporate partner and work successfully with 5 farms. Having 5 paying farms and a corporate partner will allow us to refine our product and move to the next stage of scaling. To achieve this, we need funds to enhance the software. Approximately $20,000 for basic functionality and $100,000 to $150,000 for premium functionality.
“Our global goal is to integrate all farm processes into a mobile phone with remote farm management capabilities 24/7.”
Currently in negotiations with an agricultural holding that operates a large fattening area, as well as with private investors who own farms. We want to collaborate with these partners because, in addition to smart investments, we can gain an excellent foundation for scaling.
For investors, we are prepared to offer several collaboration options. The first involves no equity concessions in the project. We request their specialized experts to work with us and grant access to partner farms. In return, we will provide data and insights that enable the fattening area to ensure traceability throughout the cycle and improve planning quality. The second option involves investments in exchange for equity, a highly skilled team, and joint development of a new business model in livestock farming.
– Why is it difficult to develop a digitalization product for agriculture in Kazakhstan?
– Firstly, the industry itself is very problematic and complex. While other countries focus on improving efficiency and business sustainability for farmers, we lack a developed industry model and have a fragmented production chain. Farmers here are forced to tackle numerous problems independently.
Secondly, there's unstable government policy in livestock farming, which shifts the industry from side to side. This includes constant changes in state support measures, export restrictions, and veterinary issues. If a farmer can't make a profit, investing in business development becomes unappealing. Consequently, demand decreases for purebred livestock, machinery, services, and various innovations. The primary concern shifts to minimizing costs, if not simply survival.
“If the government wants to develop the agrotechnology sector, innovate in agriculture, it must actively promote the industry’s development. Making it attractive, ideally ensuring profitability for farmers. Facilitating exports, addressing veterinary issues, ensuring access to financing, stabilizing agricultural policy, and subsidizing.”
We hope and believe that Kazakhstan's enormous potential in animal husbandry will eventually be realized.