Agriculture: The Next Agile Industry?

2015 was an exciting year in AgTech. As a Farm2050 collective, we looked at 531 companies and made over 100 introductions between startups and our partners. We were inspired by these entrepreneurs’ aspirations to rethink the food system and how we can feed a growing population. From seeds to food processing, we learned about the complexity of the system, the challenges ahead, and where the opportunities are. Our experiences in talking to experts, meeting with startups, attending conferences, and meeting with farmers over the last 12 months taught us some key lessons about the industry and innovation landscape. We’ve learned:

  1. There is still plenty of room for innovation in the food & ag industry: We’ve been seeing an increasing number of companies applying advanced technologies to the agriculture industry (e.g., genomic sequencing, robotics, machine learning, computer vision). The underlying theme across all those technologies is that they capture significantly more data on anything from plants to farms - data that can be used to increase the efficacy of farm operations, reduce waste, etc. But we still have a long way to go. The food and ag markets are entrenched and archaic without the systems in place to leverage these new technologies. We see sources of data with little collection or aggregation, farmers using Excel spreadsheets or pen and paper, and labor-intensive processes that could one day be automated. Startups such as Granular, Farmers’ Business Network, and OnFarm help aggregate and make this available data useful. As they lay the foundation, we see an opportunity for more innovation and an opportunity to take advantage of what technology really has to offer the agriculture landscape. 
  2. There are faster paths to market and there will be better distribution channels: The current structure of the agriculture markets lends itself to slower growth. Given the fragmented distribution platforms via ag re-sellers, the industry is not set up for efficient and effective sales to a fragmented population set - the vast majority (>80%) of farms are smaller than 2 acres in size. However, we believe that there are ways around going the direct-to-farmer route for sales. After spending time debating whether the agtech industry can experience the same growth and momentum as other sectors, we concluded that this is possible with creative routes to market and the right support from investors and industry players alike. Moreover, we believe that these first order technology startups are building out future potential paths for distribution for others.
  3. Demonstrating value is the key to success: We learned a lot about value creation in the agriculture industry over the past year. Demonstrating value is important in an industry where payback has to be quick and apparent. Yet, given the multifactorial nature of farming, it can be difficult to attribute value to any one given technology. It is important to understand how to measure value, what metrics to use, what data to gather, and how to link it to specific technologies or changes. Some will leverage advanced crop modeling; others will rely on closed loop solutions that intake data, act on this data, and measure the back-end results (a la Blue River Technology).

Perhaps even more exciting is witnessing the transformation of agriculture into an agile industry. Historically, conventional farming was characterized by high-risk decisions and “one shot” to get things right for the growing season. However, we are seeing an evolution. With the influx of real-time data and improved equipment that can act quickly, farmers can continue to make adjustments and iterate on their growing process throughout the season. One large iteration cycle (a growing season) can now be broken down into multiple mini-iteration cycles. Machine learning and analytics will shorten the time gap to translate data inputs into actions that get smarter over time. Additionally, this concept of quick iteration cycles applies well to the growing field (no pun intended) of indoor agriculture. As indoor agriculture systems offer >10X the number of growing cycles that conventional agriculture offers, there’s no better place to “test and learn” - these systems offer the speed, flexibility, and adaptability that traditional agriculture has yet to see.

While farming is changing rapidly, the ecosystem is going through an evolution of its own. Primarily, we anticipate further consolidation in the industry - both amongst the big ag players and amongst farms themselves. On the industry side, we are already seeing consolidation (e.g., Dow & DuPont, Syngenta & ChemChina) that will lead to possible reduction of central R&D efforts and an increased appetite to acquire new technologies. On the farm side, consolidation will increase the need for systematic technology to help manage increasingly large enterprises. Secondly, we are excited to see v2 of innovation from a technology perspective - innovation that builds off of the foundational layer built in 2015. The move from paper to online, the installation of basic ERP systems, and the creation of new streams of data lead to an opportunity to build next generation analytics engines, better tools for automation, and more sophisticated devices to reduce inputs & labor. We are optimistic that we will find more tech-driven food & ag investments that fit venture return profiles in 2016.

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