Investors’ new frontier: agriculture

SAN ANTONIO, Texas — Investors are suddenly taking a keen interest in agricultural technology, according to an expert who tracks where the dollars are going.

Investment in agricultural technology start-up companies around the globe peaked at a record US$4.6 billion in 2015, up from $2.4 billion in 2014 and $500 million in 2013, according to AgFunder.

Investment fell to $3.2 billion in 2016, but that was partly because of a weakening venture capital market and the absence of a few very large deals like those that occurred in 2015, said Louisa Burwood-Taylor, AgFunder’s head of media.

She said there were 580 deals in 2016, which is up from the 526 negotiated the previous year, indicating sustained strong interest in agricultural technology firms.

“I’ve seen it completely blow up as a sector of interest for investors,” Burwood-Taylor told delegates attending Bayer’s AgVocacy Forum.

In an interview following her presentation, she expanded on why that is the case.

“I think it’s because people have realized that agriculture has in some ways been left behind technologically.”

Agriculture is the least digitized industry in the world, according to McKinsey & Co., a global management consulting firm.

“It’s almost like a last frontier,” said Burwood-Taylor.

Ben Chostner, vice-president of Blue River Technology, a San Francisco company that develops “see and spray” machines that apply chemicals only where needed, said even Silicon Valley is getting into the act.

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Five years ago nobody in Silicon Valley was interested in agricultural technology, but that is slowly changing.

Millennials want to work for companies like Blue River Technology.

“We find a lot of traction with people who are tired of helping people click on ads,” he said.

“They want to tell their grandchildren about how they spent their career trying to make the world a better place.”

Some big shifts in where venture capital money was flowing oc-curred last year. Investment in agricultural biotechnology firms reached $719 million, a 150 percent increase over the previous year.

“Some of that is based on the hype around new technologies like gene editing,” she said.

By contrast, the robotics and mechanization category did not fare nearly as well, raising $109 million, which was down 89 percent from the previous year.

“There has been a lot less investment there, and I think that’s because it’s very capital intensive,” said Burwood-Taylor.

The decline was primarily due to the 68 percent drop in drone technology investment, which was a hot technology in 2015.

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Drone technology was cool and “super-exciting,” but once farmers had taken photos of their fields there wasn’t much left they could do with the machines.

“There was a big hype, and I think some farmers are very disappointed how it performed for them,” she said.

Companies are working on the next generation of drones that will be smarter and provide growers with more information based on the photos they take.

“I definitely think drone technology is going to be huge for agriculture, and I’m sure most people agree,” said Burwood-Taylor.

“But what they actually offer farmers has got to change and get better.”

Just because more money is flowing into agricultural technology does not mean it is easy to get.

“It’s still a hard slog,” she said.

There are about 20 dedicated agricultural technology venture capital funds, which isn’t a lot. The rest of the money comes from technology venture capital funds, which may not be familiar with the sector.

“Agriculture is incredibly diverse and complicated, so you’re having to bring (investors) up the learning curve, and it just makes the whole investment process longer,” said Burwood-Taylor.

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Another problem is that some agricultural technologies require patient investors because there is extensive testing and regulations in the industry, and investors typically are not patient folks.