The Agriculture and FoodTech ecosystem is on a roll. Activity connecting technology to all aspects of agribusiness and food production has increased to historic levels each year since 2015 based on measurement of overall investment value and count of financings.1 Start-ups, maturing technology firms, and outside investors are energetically seeking so-called alpha, the reference to value creation, confirmed by the next big valuation or exit event.
For strategic investors and end-users, momentum in the Agriculture and FoodTech space represents an opportunity to get in front of upcoming challenges or address immediate threats to profits. The challenging business environment includes weather and commodity cycles, regulations and policy, and consumer preference. After twenty-plus years in the making, the momentum of AgTech is signaling that the survive-to-thrive strategy has evolved. While consolidation (economies of scale) and diversification are the traditional strategies to mitigate risk, the ability to evaluate and adopt technology is increasingly important. AgTech is taking center stage.
Connecting the dots
I believe that increasing connectivity is improving both the relevance and pace of adaption. From my experience as an AgTech entrepreneur and a farmer, there was a time, not so long ago, when it felt like AgTech players did not understand agriculture, but this is no longer true. While there will always be more to learn from every perspective, it is now commonplace to see farmers, large corporate players, inventors, investors, and consumers on the same stage.
Today’s best agribusiness players are developing, partnering, and investing in technology-based solutions to manage their most pressing challenges. I am not alone in believing that farmers have historically been the world’s best innovators. And, this era of feverish Agriculture and FoodTech development and adoption is going to be another reference point for historians.
Economic and environmental sustainability remain serious threats, and continue to be at the heart of problems that need solutions. The convergence of escalating costs and the need to improve environmental stewardship makes the efforts even more pressing for end-users. However, market adoption is complicated. There are a lot of good reasons for resistance. Regional and local differences may impact in-field results, and the costs of adoption are not always straightforward. Adoption is not simply “out-with-the-old”, and “in-with-the new”. The costs of adoption, including investment in structures and training, can significantly burden stakeholders. A worst case scenario is when technology presents an unforeseen challenge of its own. Efficiency, differentiation from competitors, and environmental benefits are the end-game, but market adoption often takes much longer than a simple ROI analysis may indicate.
Changing the rules
At a recent presentation, Wells Fargo Chief Agricultural Economist, Dr. Michael Swanson, asked attendees who could remember the game of basketball before the three-point line? This example resonated with me, because this simple rule change completely disrupted basketball game strategy and the differentiated value of individual player skill sets. From the players’ perspective, a completely different set of opportunities was created when a simple line was painted on the court.
Just as the three-point line changed the game for basketball players, the acceleration of innovation, access to technology and ideas, and relationships are changing the boundaries for Agribusiness players. Technology is shifting farming, processing, distributing, and retailing, and is challenging the long-established assumptions. As examples, for highly labor intensive crops, automation forces us to adjust planting structure and sometimes accept trade-offs in yield. Within the retail food environment, e-commerce and last-mile distribution have completely disrupted the paradigm of customer interface.
It’s encouraging to be involved and to witness history in the making. The intersection of technology and global food demand is awe-inspiring. I salute the forward thinking players and their determination to solve for farmers’ most pressing challenges. Further, it’s encouraging to witness various agribusinesses wrestle with the adoption of promising technologies. Sifting through opportunities and taking calculated risks in combination with incorporating time-tested business acumen, won’t just make the best bigger, but will make the best better.