AgTech is one of the many large industries that will both grow significantly and undergo significant changes due to the inevitable digitalization of our economies and the emergence of new technologies.
When people think about agriculture, they often think of either large agriculture businesses with huge farms with many 10,000s of cultivated crop acres or small, family run rural farms. But there are other forms of agricultural production such as aquaculture or indoor farming that contribute to meet the global needs for healthy food with minimal environmental footprint.
AgTech however is not only about agricultural production, but also comprises food processing, food safety, the minimization of food waste or innovative business models to deliver fresh and healthy food to a diversified group of end consumers.
Tech is coming to the agriculture industry
The fascination in AgTech comes with the evolution of technologies that were originally developed and applied in other industries. These technologies will become the catalyst for new forms of production, processing and distribution of agricultural products. Here are just a few examples:
Biotechnology is widely used in the pharmaceutical, chemical, and agricultural industry. In pharma, almost any of the new discoveries to fight human diseases or illnesses over the last 20 years heavily rely on biotechnology.
“The fascination in AgTech comes with the evolution of technologies that were originally developed and applied in other industries”
With the recent discovery and development of CRISPR, scientists today have a toolbox in hand that enable an unprecedented accuracy and speed in the development of new genetic modifications in living organisms. In Ag, we will see improved crops and plants that are resistant to biotic and abiotic stress, use fertilizers more effectively or food with a better shelflife and higher nutritional value.
2. AI and machine learning
There’s no point in generating massive amounts of data that sensors provide or that is accessible in multiple, dispersed data sources if we are unable to extract valuable knowledge from it. It is also clear that traditional methods will be not be capable of processing and managing all these data without the use of the latest developments and advancements in computer science. While still at a very early phase, we already see today the power of AI in many industries. In Ag, AI and machine learning will allow prediction of crop yields and harvesting time, better disease resistance and optimization of the supply chain. It enables new business opportunities for emerging leaders to better serve farmers, processors, distributors and retailers.
Leveraging on the already established practice in the manufacturing industry, robots are one of the most obvious areas for agtech companies to focus on. Robots (and automation, generally) are and will become viable options in many areas in the agricultural supply chain, starting from planting seeds, weed control or harvesting to food processing, packaging, warehousing, and distribution.
Success in innovation is a collaborative effort
Agriculture and food industries are ripe for adoption of innovative industrial technology. The sector faces enormous productivity challenges, many of which can be served by technical solutions and from which we expect to see substantial rewards.
It is our view that entrepreneurs will play a key role in the transition of this industry as front-line innovators, they will spot the opportunity first and use all their creativity to develop new solutions. Innovation and risk are an integral part of an entrepreneur led startup company. It is however also evident that partnering with the established players in the entire supply chain is an essential success factor for a young, emerging company.
A key element of Emerald’s investment thesis is that we spend a considerable amount of our time with our portfolio companies to explore partnership and collaboration opportunities with global corporate and strategic partners.
When evaluating an investment opportunity, we look both for a technology delta as we believe that a solid and defendable technology is one of the key sources of a sustained competitive advantage and a management team that has a track record in converting innovations into profitable businesses. In parallel, we are also mindful in assessing the balance between capital needs, time to profitability, and the return.