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 afterinvestment 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.

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.

Annual Agtech Financing 2010 – 2015

Source: AgFunder's AgTech Investing Report: 2015

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.It’s a complex and diverse industry, however, with many subsectors for farmers, investors, and industry stakeholders to navigate. Entrepreneurs are innovating across agricultural disciplines, aiming to disrupt the beef, dairy, row crop, permanent crop, aquaculture, forestry, and fisheries sectors. Each discipline has a specific set of needs that will differ from the others.

The technologies for the subsectors do have similarities and can be divided into a few clear categories.

Those aiming to impact the industry “on the farm”: input technologies (encompassing all inputs such as fertilizers, pesticides, soil amendments, genetics, seeds, and feed); precision agriculture (including drones & robotics, big data, smart equipment & sensors and farm management software); new production and new business models (indoor or controlled environment agriculture, cellular agriculture, input and asset sharing).

And the technologies looking to disrupt the supply chain after the farmgate: traceability and packaging; processing technologies; waste reducing technologies such as biotechnologies producing biomaterials from food and agricultural waste; farm-to-consumer distribution; e-grocers; and food nutrition transparency.

These technologies are being applied globally across developed and emerging markets, although the vast majority of the activity is taking place in the US.

How quickly we get there

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.

Advertisements