- Conventional farming methods are unable to produce enough food to feed the world’s growing population, which is projected to swell to almost 10 billion people by 2050.
- In just five years, "agtech" startups have caught investor attention with venture capital investments totaling $2.8 billion in 2019.
- From self-driving tractors and robotic harvesters to artificial intelligence biologicals, agtech entrepreneurs have endless opportunities to develop technology.
- Raising funding for your agtech startup requires understanding grower pain points and being able to show how you'll improve farmers' and companies' bottom lines.
- Visit Business Insider's homepage for more stories.
By 2050, the world's population is expected to reach nearly 10 billion people, the UN reported in 2017, a large jump from the more than 7.6 billion people worldwide today.
Andrey J. Zarur, the cofounder, president, and CEO of GreenLight Biosciences, told Business Insider that conventional farming practices simply can't produce enough food to keep up with that growth.
"We are hitting a tipping point where the old way of industrially growing food can no longer be done with the techniques we've been using the last 60 years," said Zarur, whose technology company, which researches and uses naturally occurring biological molecules called RNA to create products to improve human, animal, and plant health, has raised $215 million to date, with the most recent $102 million secured in June. "We are degrading soil at a rate that is not sustainable, we are depleting pollinating, beneficial insects that are side casualties to pests we are trying to control at a rate that makes agriculture no longer sustainable."
Zarur's research and development of RNA-based products is just one example of entrepreneurs working to bring scientific and technological advances to farming through what's known as "agtech." Agtech broadly describes the use of technology, particularly software and hardware, to improve productivity and sustainability in agriculture.
The term was largely unknown even as few as five years ago. The industry covers diverse solutions to almost every step in the food production process, from cultivating fields to planting to weed control to harvest. In 2019, venture capital investments totaled $2.8 billion for agtech startups worldwide.
"Investor interest comes from the fact that there are so many types of new sensors," said Greg Sands, founder and managing partner of Costanoa Ventures, a company that leads seed and Series A investments.
Agriculture sensors installed on weather stations, drones, and robots provide data to assist farmers in monitoring and optimizing crops. The sensors track environmental changes and inform a farmer's decisions for fertilizing or spreading weed or insect control.
Costanoa Ventures has about $12 million of its $175 million fund invested in agtech startups, one of which is Aquabyte, a Norwegian company that develops computer vision hardware and AI software for fish farms. It monitors the growth and health of farm-raised seafood so that farmers know exactly how much to feed to eliminate waste, as well as provides data for decision making in all aspects of raising seafood.
On land, sensors and cameras measure soil pH and check soil nutrient content and moisture to precisely time when to use fertilizers, weed, and pest control products. Known as precision farming, this allows farmers to use only what's needed at the optimal time to reduce environmental impacts. Satellites and drones, meanwhile, can collect data on environmental conditions that farmers can use to maximize the volume of crops harvested while making the best use of limited water resources and reducing the use of harsh chemicals.
But agtech isn't limited to sensors. Innovations in the field range from self-driving tractors to gene editing and more. Tortuga AgTech Cofounders Eric Adamson and Tim Brackbill have identified a niche through robots that perform a variety of labor-intensive tasks on a farm, such as picking, washing, and packing produce.
The nearly limitless opportunities to improve the future of farming is what excites John Hammer, a managing partner of DCVC Bio, which has invested in agtech companies like Plenty, Pivot Bio, and Blue River Technology, which was acquired by John Deere for $305 million in 2017.
"I see some tremendous opportunities for technology to make agriculture safer, more efficient, and more precise so that less chemicals are used," Hammer said.
Raising seed money is never an easy task, and there are fewer investors in the agtech space than other fields. Zarur has observed a large number of sophisticated investors involved in the early stages of investment, but they have small funds and write small checks. But, he added, startups shouldn't be discouraged that the space isn't abundant in mid and large funds.
"We didn't go to traditional ag investors," he said. "[We] went to those who care about sustainability. We went to family offices who see their mission as promoting human health."
He encouraged other startups to work with small investors in the space rather than attempt to raise funds in other ways. Smaller investors have a deep knowledge of agriculture, and that expertise is priceless.
"The level of knowledge they have and bring to the conversation is almost like being in a club," he said. "When you get one, the next week you get all of them. If you miss that, you're missing very important information."
Adamson believes that Tortuga AgTech's success in fundraising has come from demonstrating a clear value tied to grower yield and quality. To date, the company has raised $7.4 million since launching in 2016.
"What's resonated with our investors is that when they call customers, those customers tell them how dedicated we are to understanding, comprehending, and solving the problem in front of them," he said. "Folks who have struggled to get funding is because they have something that is really interesting or impressive but doesn't directly impact the bottom line."
Telling the right stories to the right people
Hammer said entrepreneurs looking to break into agtech must understand what it costs to produce a crop, where those costs are incurred, and other on-farm pain points. He recommended browsing crop budgets developed by agriculture schools like the UC Davis College of Agricultural and Environmental Science or UC Riverside College of Natural and Agricultural Science.
"Growers have tremendous experience in what they are doing — it is not like selling to someone who is not an expert," Hammer said. "You have to know how you can reduce costs for the grower where they spend a lot of time and money."
Adamson and Brackbill have family ties to agriculture, which has helped them both understand the challenges farmers face — and experience is irreplaceable. But Adamson said entrepreneurs don't have to come from a farm family to be successful. Farms always need labor and are open to hiring people with an interest in agriculture.
"I highly recommend being as close to farming as possible," he said. "We spent many months working alongside the grower and their staff to get a sense of what the real problems are. If you have a clear idea, go to the farm and test it out."
Although farmers are the market for agtech, public opinion can't be overlooked. As the head of a business-to-business company, Zarur was initially focused on selling to retailers and farmers, not customers.
"You really have to get your PR story right early on," he said. "I didn't realize this early enough and we're working hard to catch up."
Source: Read Full Article