Rob Leclerc indicated recently at Forbes Online that, “Agriculture technology is no longer a niche that no one’s heard about. Agriculture has confirmed its place as an industry of interest for the venture capital community after investment in agtech broke records for the past three years in a row, reaching $4.6 billion in 2015.
“For a long time, it wasn’t a target sector for venture capitalists or entrepreneurs. Only a handful of funds served the market, largely focused on biotech opportunities. And until recently, entrepreneurs were also too focused on what Steve Case calls the ‘Second Wave’ of innovation, — web services, social media, and mobile technology — to look at agriculture, the least digitized industry in the world, according to McKinsey & Co.
“Michael Macrie, chief information officer at agriculture cooperative Land O’ Lakes recently told Forbes that he counted only 20 agtech companies as recently as 2010.”
Mr. Leclerc explained that, “But now, the opportunity to bring agriculture, a $7.8 trillion industry representing 10% of global GDP, into the modern age has caught the attention of a growing number of investors globally. In our 2015 annual report, we recorded 503 individual companies raising funding. This increasing interest in the sector coincides with a more general ‘Third Wave‘ in technological innovation, where all companies are internet-powered tech companies, and startups are challenging the biggest incumbent industries like hospitality, transport, and now agriculture.
“There is huge potential, and need, to help the ag industry find efficiencies, conserve valuable resources, meet global demands for protein, and ensure consumers have access to clean, safe, healthy food. In all this, technological innovation is inevitable.”
The Forbes article added that, “With these different technological subsectors laid out, each with its own growing ecosystem of startups and investors, now all eyes are on how quickly these technologies will be adopted by the industry. Depressed commodity prices have raised concerns about the spending power of farmers and agribusinesses in the short-to-medium term but, at the same time, a survey recently showed that one in four Midwest farmers are planning to purchase new technologies in the hope of increasing efficiencies, and with them, profits.
“The rate of adoption for each subsector will differ, and each will face a different set of challenges. The same can be said for agtech being developed for the emerging markets, where innovators are often meeting different needs and creating business models to fit the even more disjointed ag industries in these countries.”
Mr. Leclerc cautioned that, “It’s certainly not plain-sailing for many agtech startups out there. Agriculture is the world’s oldest and most entrenched industry that’s survived centuries. It’s not easily disruptable. It’s tied to regulatory schemes; influenced, and in many ways controlled, by the incumbent seed and chemicals companies; and has worked through the same distribution channels for decades. There are onlookers wondering if much of this sci-fi like technology can really deliver on its promises and whether recent funding activity from the venture community and interest from entrepreneurs, is a bubble waiting to burst. It’s a good question…[I]n other words, there’s a lot of technology that’s exciting to the public, but it’s only in its first innings and iterations. We’ll need to wait for the real innovation to come, but once it does, it will be transformational.
“Until that point, the agtech startup scene will continue to attract the attention of forward-thinking investors who are compelled by the macro drivers that highlight the need for technological advancement of the world’s least digitized industry — consumer trends, environmental and resource challenges, increasing populations.”
