We have heard many times that agriculture will have to double production, using less land and less water, over the next 30 years to meet growing global demand for food, fuel and fibre. It’s clearly a huge challenge. But it’s also a massive opportunity, and one global investors are only just waking up to, as a unique agriculture investment forum in Toowoomba this week found.

 

The venture capital boom moved into the agricultural technology space in a big way last year, but Australian innovators were disappointingly slow in securing a slice of the global investment action.

Globally, US companies dominated ag-tech investment deals in 2015, with 303 deals conducted worth a total of $2.2 billion. India followed with 64 deals worth almost $505 million, while China saw $480 million worth of ag tech investment in just 8 deals.

Sharing in the action, according to analysis by US-based ag investment platform AgFunder, was Canada with 25 ag-tech deals worth $176m, and the United Kingdom, with 19 deals worth $121m.

How about Australia, which we locals like to think of as a world-leader in the ag-innovation field? Umm… just 6 deals worth a meagre $4.6m.

However, there are encouraging signs the Australian ag sector is warming to the ag-tech investment challenge, judging by the energy and excitement evident at the inaugural 400M Ag Innovate Investment Forum conducted in Toowoomba this week.

The forum was the latest proactive collaboration of the Toowoomba Surat Basin Enterprise group, Food Leaders Australia and the University of Southern Queensland. (Why ‘400M’ you may well ask? 400 million arable hectares in Australia, a 400m strong middle class in China, and a target of $400m in ag investment to capitalise on the opportunities in Asia Pacific region.)

The unique forum connected global venture capitalists with Australian innovators seeking funding for ag-tech, and along the way provided some fascinating insights into how the growing market for ag tech investment is taking shape.

 

After years of lacklustre growth, global venture capital investments in ag tech exploded last year, with a record $4.6 billion invested in 526 deals involving 672 individual investors.

That was almost twice the level of investment of 2014 and four times the level of 2013.

AgFunder co-founder and COO Michael Dean attributed the increased level of investment interest in ag-tech to the recent growth in digital hardware innovation and the recognition that agriculture is an extremely large market that hasn’t yet been significantly disrupted by digital technology.

Venture capital investments involve financing by private equity groups of small, early-stage and emerging firms deemed to have high growth potential, in return for an ownership stake in the companies in which they invest.

The 400m Ag Innovation forum was a microcosm of the bigger picture and growing excitement that is building around ag tech. A kind of trade alchemy was occurring as funders and innovators came together to discuss the challenges and opportunities they all see in the same space.

Whether any direct deals will be done between investors and tech-developers at the forum we are yet to see, but it would be very surprising if some serious discussions weren’t now underway as a direct result of the event.

Investors at the forum included internationals such as Ag Funder and Bio Pacific Partners and locally based companies including Blue Sky Venture Capital and the National Farmers Federation-initiated “agritech-ecosystem” SproutX. Each presented at the event and also saw direct pitches from several Australian companies seeking funding and commercialisation support for their ag tech Innovations.

These included AgDNA Pty ltd, a mobile platform for viewing precision farming data on the run; AgBiTech, which develops biological insect control solutions; Satamap, a Moree-based company which provides satellite mapping solutions for agriculture on mobile devices; and AgAlytics, which is developing “lab-on-a-chip” technology to allow farmers to use their Smartphones to test soil and crop nutrient levels in the paddock.

A good idea is half the battle, but successfully commercialising that innovation can be an even bigger challenge, particularly in an increasingly crowded ag tech funding space.

The AgFunder platform is a good case in point. It reviews ag-tech start-ups for listing on its platform, providing successful applications with exposure to thousands of large-scale institutional investors across the world.

It was launched in February 2014, and has since reviewed more than 1700 start-ups.

So how many of those applicants have been accepted for listing with AgFunder? Less than 2pc, or fewer than 30.

Within the Ag-tech umbrella, the specific area that attracted the most interest from investors in 2015 was food e-commerce, which captured a little over one third of total funding in the space last year, three times more than the year before.

The second largest investment target was irrigation and water technologies, followed by drones and robotics – see more in the chart below.

 

Further areas where AgFunder’s Michael Dean sees growth potential?

GM Seeds – particularly as the awareness of soil health and balanced environmental systems increases, driven further by the gathering pace of climate change talks.

Sustained growth for ag tech software is also likely, he believes, given the level of unrealised potential that exists for digital disruption in agriculture.

AgFunder’s tracking of venture capital investments in agriculture so far this year suggests a slight easing in activity compared to last year’s record levels.

The firm’s data shows that around $750m was invested in Q1 this year, still a large figure but less than Q1 2015.

“This reflects the wider tech investment market, and I think this is more related to global economic conditions rather than a cooling of interest in ag tech,” Mr Dean said.

Ag compared to other sectors

While $4.6 billion for ag-tech investment may sound like a big figure, agriculture still has a long way to go to achieve parity with other sectors.

Agriculture accounts for around 10pc of global GDP, but captured less than four percent of global venture investments in 2015.

By comparison, the health sector, which contributes a similar level to global GDP, accounted for 12pc of venture investment activity last year.

Why the imbalance? Mr Dean suggested the following reasons:

•  Lack of broad access to agriculture investing;
• the historical focus of venture capital on biotech and internet sectors;
• A geographical gap with investors funding companies ‘nearby’; and
• few digital technologies in ag tech.

However, last year’s investment figures show that the investment landscape for ag is attracting greater interest.

Coming up: The challenges Aus ag-tech companies face when seeking international funding: Why global investors equate small populations with no innovation, and tips when dealing with corporate scale investors – keep an eye out for this 400M follow up article on Beef Central next week.

Not a subscriber? Click here to stay up to date with our free daily Beef Central news emails.