In 2015, $4.6b went from venture capital firms into the agricultural technology space. Prior to 2010 this was not an industry that received much attention at all from investors.
Sound a bit strange? This post will answer a few key questions that you may have: what sparked this change, what does this mean for one of the world’s oldest and largest industries, and what is the path forward?
Why is this happening? The cause for this influx of money is twofold.
The first reason is that global macroeconomic and microeconomic business pressures are constantly pushing farmers everywhere to grow more crops. Given that the amount of land dedicated to farming in the developed world is fixed, to increase output farmers must grow more with the same amount of land. Large biotechnology companies such as Monsanto, Dupont, and Syngenta have poured billions into R&D to get farmers localized, high performing seed, while hardware companies such as John Deere have ensured that farmers are equipped with exceptionally precise farming mechanisms. The next frontier that we are seen being explored now is the use of data and software to enhance on-farm yields.
The second reason is much more tactical from an investing perspective. In October 2013 Monsanto announced that it was purchasing the Climate Corporation for over $1b, which was (and remains) the largest big data and predictive analytics software (and now hardware) platform in the agricultural space. Put simply, the Climate Corp. takes weather, seed, soil, and many other types of data, crunches it using proprietary algorithms, and provides farming recommendations to its clients (typically large US-based farms) at a very granular level. This was arguably the first large exit in the ag. tech space, and the acquisition sent a signal to investors that returns, in addition to growth, were possible.
Why should I care?
If you are an investor, it’s pretty clear why you should care – the space offers ample opportunity for significant return. If you’re an MBA or tech.-interested practitioner, the value is also clear – there are many business-related roles in a fast-growing industry.
However, there’s another reason that everybody should care. The global population is growing, and existing yield outputs and food supply systems are not sufficient enough to feed our population (not to mention increased demand for meat-based products as middle classes develop globally). Ag. technology will be a seminal piece in world’s ability to feed itself and preserve our planet sustainably.
What are some more examples of ag. tech companies?
In addition to software providing agronomic predictive analytics, here are a few other exciting examples of how technology is adding value in the agricultural space:
- Blue River Technology, which recently raised a $17m Series B, smart creates smart machines/tractors that are able to sense each individual plant, instantly determine its health, structure and needs, and precisely apply the right amount of care – all in real time, at tractor speed.
- Granular, which recently raised a $21m round, has created an ERP software tool for large, commercial farms across the US.
- AgBiome, which recently raised a $34.5m Series B, has created a fungicide product that can help contain soil borne diseases.
So what’s next?
This influx of investment capital, combined with a repeated need for improved farm yields, has encouraged even more risky, more long-term approaches to bringing technology to the agricultural space. A few examples include:
- Biotechnology focused on genetic mapping of plants, with the idea of natural, non-genetically modified solutions to crop growth.
- The use of drones and satellites to gather a range of data that can both inform better farming practices and advise observers on agricultural output.
- Food supply chain mapping all the way to the farm to increase transparency and quality.
Be on the lookout for more in this space!