Can Digital Farming Deliver on its Promise?
Precision Ag has been the hot topic in the Agtech sector, particularly with the acquisition of the first “Ag Unicorn” Climate Corp by Monsanto and the subsequent gold rush of new digital ag startups. As farmers face lowering commodity prices and squeezed farm margins, a plethora of startups are now attempting to persuade farmers they can deliver more value per acre. In doing so, these early innovators hope to convince investors that they can get the attention of the other “Big 6” players and rapidly grow onto millions of acres with software-like margins.
Turning Investor Interest into Market Traction
Silicon Valley investors have been at the forefront of this expansion, bringing expertise in Big Data and IoT (the Internet of Things) with low-cost mobile platforms and novel business models, linked to broad access to innovation capital and talent. It is an intoxicating mix for a traditional industry like Agriculture. However, Agtech is also following a well-trodden and proven formula – riding the cost curves of other industries (Life Sciences, for example) to adapt and innovate for the farm and food industries.
Precision Ag is not an overnight phenomenon – established industry players like John Deere and IBM have been engaged in smart-farm equipment development and software integration for large-scale farms for years, and more recently web and mobile-based tools. However, it is novel that VCs and entrepreneurs have now turned their attention and talent in disruptive high tech to Agriculture in such a concentrated fashion. In fact, industry source AgFunder expects the Agtech investment trend to top $3B in 2016.
Digital and precision Ag companies easily make up the largest segment of Agtech deals by number. However, the jury is out on whether this wave of innovation will lead to strong market adoption. Farmers demand a step change in value; only startups delivering on a clear value promise will be able to scale and drive profitability. After all, it’s a sobering counterpoint when considering the adoption rate of new technology by farmers – self-steering tractors and combines, for example, are less than 20 percent adopted after a decade or more of effort.