What is AgTech?

With global food security, water scarcity, and climate change as major geopolitical issues, Agtech offers hope

Labor automation, bio engineering and climate extremes are now part of a day’s work in modern agriculture, putting the $177 billion U.S. food industry on the front lines of much bigger conversations about the future of work, the ethical boundaries of technology and adaptation to climate change.

Before Monsanto acquired Climate Corporation in late 2013 for nearly $1 billion, few investors gave much thought to technological innovation in our agriculture system

  • In what can be described as the Netscape moment for agriculture technology, the sector had a breakout year in 2014, receiving over $2.36 billion of investment across 264 deals spanning the agriculture value chain, according to data we pulled from CrunchBase as well as press releases and SEC filings for last year
  • Surprisingly, this $2.36 billion figure has now surpassed well-known sectors like fintech ($2.1 billion) and the former queen of green, cleantech ($2 billion)

‘Second Green Revolution’

Technology is transforming every industry, and now it’s coming to agriculture

  • The agri-food industry is only at the frontier of applying advancements in satellite, irrigation, drone, robotic, bioenergy, nano and other decision support technologies across the supply chain
  • Application of these technologies can transform previously struggling businesses
  • However, not all companies are willing or open to adopting these technologies due to cultural opposition, regulatory issues or consumer push-back
  • Smart farming and food production techniques have benefited greatly from agtech by supporting what could be described as a ‘second green revolution’
  • Increased application and adoption rates in primary agriculture and food processing has the potential to significantly increase output, product quality, seasonality and shelf life

Over the past six years, a growing number of AgTech startups have developed technologies to help the agriculture industry feed our growing population without destroying the planet.

Gaining momentum…

White paper produced by The Kauffman Foundation and Donald Danforth Plant Science Center finds that we need more investment and entrepreneurship to fuel the “Evergreen Revolution,” or sustainably produce 70 percent more food by 2050

The paper, AgTech: Challenges and Opportunities for Sustainable Growth,

Begins to quantify the AgTech sector – which includes

  • Integrated genetics

  • Physical inputs

  • Information technology and

  • Smart machinery

Oportunities for innovation and investment

One of the report’s key findings is that given the size of the agriculture industry – global net farm income is $120 billion and farm assets are around $2 trillion – there is a huge opportunity for investments in AgTech

  • Estimates that biofuel production will increase by 800 percent by 2050 and that food prices will increase by 50 percent by 2030 are just two examples of the industry growth that’s expected in the coming years
  • And then there are also more and more promising, venture worthy startups who are looking for capital
    • The paper examined a dataset of over 900 AgTech startups compiled by Cultivian, a venture fund focused on food and agricultural technologies, between 2006 and 2012
    • Of those companies, 80 percent are focused on improving the value chain through technology inputs, crop production, animal production, agricultural processing and manufacturing and distribution

And over the last six years, 132 AgTech startups have sought funding annually

  • With 38 percent of the companies located in the U.S. Heartland, the twelve states in the north-central United States: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin
  • Because of the high concentration of companies in the Heartland, as well as the concentration of some the world’s largest agribusiness, chemical and farming companies, the report advocates for making the region the “epicenter for development of a comprehensive innovation ecosystem and entrepreneurial economy around the emerging AgTech sector”
  • According to data from the CleanTech Group, investment in AgTech was relatively flat before 2013

Most tech innovation in agriculture was narrowly concentrated in biotechnology and seed genetics, and both investment and innovation was limited to players with close ties to the ag sector. Outside of seed genetics and crop inputs, most other AgTech was typically bundled with Cleantech

Like cleantech before it, many AgTech companies are have set their sights on Big Goals

  • This is also a lure for investors who are attracted to companies looking to solve big problems with big market potential
  • Agriculture accounts for 70% of freshwater withdrawals, and under Byzantine water rights laws that date back to the 1820s there has been little incentive for farmers to manage this resource more sustainably

In response to the massive multi-year drought, AgTech companies are developing new solutions to use water more sustainably

  • SWIIM, a company that was recently named a partner for the White House’s Climate Initiative, is developing the Airbnb for H20
    • It’s hardware/software solution enables farmers to analyze every drop of water on their property, optimize its uses, and then rent out their surplus water needs to thirsty municipalities and industrials
  • On the other end of the spectrum, Hampton Creek, a vegan mayonnaise company, is attempting to formulate an egg-less egg product
    • If Hampton Creek can create a palatable all-vegan egg, the product could have a disruptive effect on the $120 billion egg industry
    • Investors seem to think so, too—the company took in $90M from the likes Silicon Valley heavyweights Khosla Ventures, Founders Fund, Li-Kai Shing’s Horizons Ventures, Jerry Yang (Yahoo), Marc Benioff (Salesforce), and Eduardo Saverin (Facebook)
  • And even further out there, New York-based Modern Meadow is printing meat and leather products with 3D technology
    • Although 3D-printed meat may take a while to hit the market and win trust from consumers, Modern Meadow has an opportunity to take on the $54 billion leather market by cultivating cow-less leather from real cells
    • And unlike leather made from an animal, the process doesn’t require any harsh chemical treatments

Why now?

In 2013 there was a shift

  • AgTech grew 75 percent to reach $860 million across 119 deals
  • Taken together with our data (while recognizing our unique methodological approaches), AgTech subsequently grew 170 percent in 2014 and it’s continued to show strong investment in early 2015

The momentum shift leading up to the phase-transition 2013 can be traced to a confluence of three underlying trends

  • A groundswell of macro economic trends that tipped the balance between supply and demand in agriculture
  • Shifting consumer tastes, and
  • A confluence of new hardware technologies that freed computation from the desktop and automated multivariate collection of big data

Advances from the mechanization in the 1920s and the Green Revolution from 1940-1960 have largely been exhausted. Rates of yield increases for major crops have been trending negatively on a 10-year curve at the very time that global forces of population growth, prosperity, and globalization are putting basic supply-and-demand pressure on our agriculture system.

The population is growing at approximately 77.6 million per year, and it is expected to reach nearly 10 billion by 2050

  • At the same time, the middle class is expected to double by 2030
  • And as incomes rise people spend more on food (Engel’s law) and eat more animal protein (8 pounds of grains are needed for 1 pound of beef)
  • To meet the demand for food, fuel and fiber from a growing and increasingly affluent population, experts predict that we will need to double global crop production over the next 35 years
  • With demand outstripping supply since the emergence of China starting in the mid 1990s, the agriculture sector has quietly outperformed all other sectors except for tech since 1999
  • It’s taken a while, but investors and entrepreneurs have started to take notice
  • In addition to secular trends driving the agriculture sector, the public at large is now better informed about the state of our food system and more concerned about the impact that agriculture has on the environment

Agriculture now accounts for about 30 percent of greenhouse gas emissions, a 75 percent increase since 1990, which makes agriculture a huge target for Disruption.

  • In addition, informed consumers are demanding locally grown, sustainable food with fewer chemicals, and the agriculture supply chain must evolve to deliver such products
  • This has created opportunities for a new generation of startups to gain a toehold into new markets that are too small for larger agriculture players

Finally, a confluence of hardware and software technology advances are creating opportunities to address this market

  • Inexpensive and infinitely configurable mobile devices (enabled by advances in wireless and energy storage) have liberated technology from the office desktop
  • At the same time, inexpensive but sophisticated hardware sensors have emerged to automate the collection of massive data sets
With these technology shifts, exciting technologies like drones, AI, satellite mapping, robotics, and the Internet of Things, have quickly realized that the agriculture value chain provides fertile first market opportunities for many technologies that are not advanced enough or have not yet found solutions in the consumer space. Many investors looking at these technologies are going to need to get smart on agriculture if they’re going to make informed investment decisions.

Growth potential

According to AgFunder News data

Agriculture has a long value chain and the sector is often described as being more horizontal than vertical

  • Tracked 16 subcategories—as diverse as biotech, food e-commerce, and smart equipment—and 10 of these subsectors had more than 5 percent share of the AgTech market)
  • Currently there is room for growth across the value chain
  • Already this year, we’ve seen a $50M investment into drone maker 3D Robotics and a $95M investment into micro-satellite company Planet Labs, both of which count agriculture as key early market opportunities
  • Foodtech company Soylent raised $20 million at a $100 million valuation
  • Plant trait company Arcadia BioSciences recently filed a $86 million IPO
  • FlowHive has emerged as the highest grossing campaign on Indiegogo, raising over $6.8 million for its honey-on-tap technology, already making it one of the top 10 crowdfunding campaigns of all time 


Capital keeps lining up

  • In the first quarter of 2015, Finistere Ventures and Maumee Ventures both announced the launch of their new AgTech funds
  • Ag-focused Paine & Partners announced a new $893M Private Equity Fund that will be allocating a portion of its investment to AgTech
  • While companies like John Deere and Syngenta have been mostly silent,
  • Monsanto has decided not to wait for the competition
    • In 2011 Monsanto acquired Beelogics and Divergence
    • In 2012 they acquired Precision Planting for $210M
    • 2013, Monsanto established Monsanto Ventures in San Francisco, and went on to acquire
      • Agradis
      • GrassRoots
      • Rosetta Green ($35M)
      • Climate Corp. ($930M)
        • Climate Corp. has since been given access to Monsanto’s checkbook and has been on an acquisition spree itself
Investors are even jonesing for cannabis startups; Snoop Dogg announced a $25 million fund, and Founders Fund invested in Privateer Holdings‘ $75 million fund, which backed Leafy, the Yelp for marijuana.

The Future of Agtech Innovation: Cannabis?

CannaTech Summit, Israel, March 20-22, 2017

  • CannaTech 2016 brings world’s cannabis experts together
  • Investors, researchers and high-tech experts gather for Israel’s first International Summit for Accelerating Cannabis Innovation
  • Canna Tech was founded last year to provide a platform to enable the identification and incubation of world-class innovative solutions for the cannabis industry
  • Professor Raphael Mechoulam, known worldwide as an influential figure in the field of medical cannabis, is chairing the conference

Video Highlights from CannaTech 2016

Future Plans:

  • Now that I have a better understanding of agtech, the industry, and growth opportunities, my next step is to examine existing ETFs for investment ideas.
  • Join me next time as I examine $MOO! The agri-business etf…