- Specialised venture capital firms are focussing on the future of food, farming and agricultural technology, dubbed ‘ag tech’.
- Some $700 million was invested into the nascent “ag tech” industry in 2017, with a larger proportion of funding coming from venture capital.
- Investors within the space may be able to expect decent — one investor says even double-digit — returns.
The next market ripe for disruption: food.
Some $700 million was invested into the nascent “ag tech” industry in 2017, with a larger proportion of funding coming from venture capital. While that is tiny compared to the about $4.2 billion that Agfunder found is ploughed into agriculture sector globally, investors say there’s a major evolution afoot — farms are becoming fewer, bigger and more professionally minded, and thus have a growing demand for technology.
“Food is the next major market that needs disrupting,” says Chris Kerr, chief investment officer at New Crop Capital. “There’s a variety of levers on the market from religion and ethics to climate change, lactose intolerance, sustainability, and health benefits, which are forcing traditional markets to adapt.”
Funds such as Cultivian, New Crop Capital, Anterra Capital, Finistere Ventures, and Pontifax Agtech are becoming a vital part of the financing system for startups in agriculture as well as more established names.
Investors say the field isn’t yet crowded, but growth has put it far from its previous wasteland.
Venture capital has targeted both early and late plays in the agricultural markets from research students with a great discovery and universities that need professional backing, to more mature projects which require series C or D funding in the realms of millions of dollars.
The other major change has been the shift in demand from consumers who now seek different types of products and greater transparency about the provenance and quality of food. From vegan diets, to those who won’t eat genetically modified or non-free-range products, consumers are driving a fundamental change in the way that food and by extension the agricultural industry processes new systems.
Another key issue causing greater demand for farm robotics and artificial intelligence in agriculture has been the demographic shift which has seen the labor pool for agriculture dry up. That, alongside environmental degradation affecting water supplies, and increased demand for meat in developed markets is forcing innovation and new funding requirements on the industry.
Venture capital isn’t alone in funding new ventures. Some of the world’s largest chemical companies like Dupont, Monsanto, Syngenta, and BASF are forming their own investment arms to aid the development of improved agriculture methods.
Investors within the space may be able to expect decent — one investor says even double-digit — returns, given the current lack of major competition for venture capital. The space looks set to become more competitive.