When pitching a new idea, entrepreneurs almost always get the question, “How will this product or solution disrupt the current system?” Disruption is implied as a great differentiator, an indicator of possible future value, and the line between simple improvement and authenticity. Now, as COVID-19 delivers the Black Swan 2020 version of disruption on both global and personal scale, will it cheapen our use of this descriptor for game-changing ideas? In my opinion, no. It is certain that the events of last few months have resulted in massive changes for individuals and businesses alike, but we’ve also seen tremendous and impressive pivots. The virus-related disruption has ironically intensified opportunity, and the stakes, for innovators in food and agriculture.
In my conversations with entrepreneurs, and only after expression of empathy for the sick and/or suffering, I’m hearing optimism that technology will offer solutions for a changed world.
Here are some paraphrased insights into these conversations
- From an animal health diagnostics and data firm: “There is a massive opportunity for our company. Our tools are designed to provide early detection of disease conditions and has significant implications for events like these, human and livestock.”
- From a livestock geo-location and health/estrus tracking company: “COVID-19 has amplified the importance of leveraging labor, supply chain transparency, and biosecurity interests.”
- From a platform based SAAS provider: “Optimizing production efficiencies and planning at the processing plant, by modeling labor/human and plant health/yield & logistics, allows for forward planning, cost management, and supply chain adjustments.”
- From a drone based permanent crop monitoring company: “True catalyst for accelerated adoption.”
While much, not all, of the nation’s food supply is grown in rural and sometimes remote areas, ‘social distancing’ is not equally possible across the diversity of ag sectors. While automation and remote management technology is already a well-established enabler of ‘social distancing’ in highly mechanized row crops, we are encouraged to hear of nimble adjustments to protect human safety and to ensure business continuity in labor intensive sectors such as fresh fruits and vegetables production. On the other end of the value chain, it is exciting to see how technology continues to evolve in novel ingredients and foods, manufacturing processes, and safety protocols. Technology is driving improvements in process automation, data-driven decisioning, ingredient tracking, labeling, and delivery of food. Certainly, industry players further down the adoption curve could react more quickly to the challenges presented by nervous shopping behaviors resulting from sheltering-in and closures of foodservice / restaurants. This reliance on data and technology to assist with shifting demand and distribution will be heightened as the ‘New Normal’ reveals itself.
Trends in both agtech and foodtech investment and product development show a ramp-up for this kind of opportunity, even though most people may not have been anticipating an event of this scale. According to Finistere/Pitchbook, 2019 was a banner year for agtech and foodtech, by measuring both deal value and deal count. By Pitchbook’s measurements, $2.7billion of committed capital flowed into the agtech ecosystem in 2019. It’s important to note that later stage deals are attracting a greater percentage of the activity (70%), a shift in capital allocation by stage over the last decade. This would appear to bode well as a food & agribusiness as scalable innovations means that proof of concept and development is poised for broader realization of benefits.
For bigger picture view, I find the taxonomy offered by Finistere and Pitchbook in their annual reviews, both helpful and an important framework. Wherever innovators play in this ecosystem, mainstream agribusiness is partnered either with direct investment or indirect collaboration.
The abrupt and far-reaching shocks of COVID-19 will continue to unfold for some time. It would be feckless to speculate how the 2020 numbers will look as investors sort their own responses to disruption, given complexities in markets. However, the future of foodtech and agtech innovation should remain strong from a demand perspective, since the producers and processors will continue to seek efficiency, safety, and distribution advances. Like some of the most resilient farmers and ranchers I know, innovators relentlessly seek opportunity when others are still focusing on disruption – and because of this, my spirit is lifted by the strong relationship between technology and agribusiness, forged even stronger under pressure.