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article imageQ&A: How advances in AgTech are reshaping farming Special

By Tim Sandle     Mar 20, 2019 in Technology
Activity in the agtech sector has skyrocketed over the last five years—marking its arrival as an important piece of the venture capital ecosystem, according to with Arama Kukutai of the venture capital firm Finistere.
Agtech is far-reaching and classed as a “horizontal” sector, covering all groups of technology and business models from inside the farm gate and its world of inputs, to the supply chain, and, more recently, marketplaces and even fintech.
For this reason, AgTech is receiving considerable investment. In addition to being part of a maturing market also needs to be innovative, matching evolving consumer preferences.
To discover more about trends in the AgTech sector, Digital Journal spoke with Arama Kukutai, managing partner of ag and food tech VC firm Finistere.
Digital Journal: How has agtech grown in last five years?
Arama Kukutai: According to our report, we have seen ~ [$6.7B] invested in the sector, including two ‘record’ years in 2017-2018.
DJ: What are the main drivers for this increased investment?
Kukutai: Drivers include increasing VC dollars targeting the sector, both corporate and financial VCs like Finistere. We are also seeing interest from the ecosystem of Ag players toward ‘external innovation’ sourcing (much as was seen in Life Sciences and biopharma), and increasing pressure from changing consumer trends favoring clean labels, traceability, alt protein and nutrition, reducing food waste and supply chain transparency. There are also technology tailwinds driving down cost of key enabling tech such as automation, IoT, cloud computing, genomics and of course AI/big data apps – all of which are benefiting start ups working with farmers through to food companies and the consumer.
DJ: What levels of investment are we seeing?
Kukutai: From 2013/14 we are seeing a trend of maturity occurring as companies that started with ‘point solutions’ move toward platforms with greater integration – for e.g. in the digital space there are many companies with hardware/software hybrids ranging from imagery data to on-farm solutions for irrigation, fertilizer, crop protection and pest controls. Farmers and distributors alike are seeking better integration, value and useability – which is going to drive consolidation, and also larger funding rounds as companies that prove out move from startup to scale up. The net point is that funding needs go up as a result and we are seeing that in later larger rounds.
DJ: To what extent is this growth global?
Kukutai: The investment trends are global – Finistere has invested in companies from EU and in particular Ireland, Israel and New Zealand/Australia. There are also ecosystems for Ag investing showing maturation in Latin America, Asia and India.
North America remains the bulk of deals and dollars, but just as Ag and Food are multi-trillion dollar global industries, so too are the centers of excellence producing great companies and technologies.
We also see this reflecting the regional differences in scale, and types of farming requiring solutions tailored to the farmer and supply chain needs. For example, Australian and Latin American farms are often very large, remote with infrastructure challenges on for e.g. connectivity but are also increasingly automated. Some of our companies like Taranis, CropX are working with such operations and the ability to support these farms in country, often in collaborative arrangements with co-ops or distributors is very important, as are local staff with knowledge of business customs and practices.
Back in the US, farm sizes are smaller but also more diverse, and break out between row crops with huge total acreage in corn and soy etc, vs permanent crops and high value horticulture/produce such as we see in the West. Agritech needs to be diverse because so is Agriculture. At the same time, one of the attractions of platform technologies is their applicability across these different systems. In NZ and Ireland pasture farming is predominant and also increasingly focusing on environmental sustainability. Europe has smaller farms but also very strong regulatory drivers and major farm subsidies from the EU agricultural commission in the range of ~ 70B euros p.a. We are seeing a lot of innovation there on automation and labor saving tech, as well as non GMO food demand. Perhaps some of the most interesting future opportunities exist in delivering tech to Africa and smallholder farming in India. Massive opportunities and need to help leapfrog farm productivity and scale up where the worlds population is growing most!
DJ: What are the main types of technologies and key benefits?
Kukutai: A lot of the capital in the last 5 years has flowed into digital agronomy solutions, and Crop protection/soil health and genetics companies that are really Life Sciences plays. The technologies, and timeline/capital needs of these are really very different, even if the end points are similar – better productivity on farm, and therefore improved farm profits; increasing sustainability and also meeting consumer and regulatory demands for healthier, nutritious food from safer, more transparent supply chains.
Reducing waste and inefficiency have also received significant capital. At the leading edge, novel farm systems like vertical/indoor tech is being transformed both in the farming sense, but also in supply chain disruption potential and new consumer experiences.
DJ: Who are leading agtech companies?
Kukutai: Ultimately we believe in data-driven value creation for farmers and supply chain partners. There are a host of “awards” promoting companies as leaders or winners in the space which are largely subjective or worse hype driven – but ultimately we think the best companies can actually show data and proof in the field or value chain that is compelling, and also key to adopting these technologies.
Finistere is looking at field data for examples like: How effective are these results vs the control? We appointed Mike Pereira as Chief Agronomist – the first VC fund to do so – because companies we invest in that are in the field need to show actual results that stand up scientifically and practically. Companies like High Fidelity, Biolumic, Zeakal, CropX and Growers Edge are all engaged in rigorous trialing and prove out of their tech with farmers and partners and are scaling on acres globally.
Another area we are particularly bullish about is the application of Fintech solutions to Ag markets. Growers Edge is the pioneer in this sector, with 50,000 farmers on its platform offering insurance, lending and agronomy advice as well as integrating technology solutions wrapped with a warranty to provide farmers with protection/assurance on the use of new technologies on farm. We expect to see a lot of capital flow to this new niche.
More about agtech, arigculture, Farming, Finistere
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