28 December 2017

INVEST - AgFunderNews Top 10 FarmTech Deals of 2017

Top 10 Ag Deals in 2017 Generate US$1.13B of Investment

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According to AgFunderNews.com, the top 10 ag deals of 2017, included value chain aggregation plays, vertical farming, sensor monitoring, payment and settlement services, bug farming and geospatial analytics.

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It is clear that investment in farmtech continues to fall from the high of US$4.6B reported in 2015. The number of companies active in this sector that have failed, merged or refocused activities into other areas has also increased. 

For example, while the mother lode of data expected from farmtech is undervalued by the primary producer, it appears to have value to financial service providers who wish to have more transparency and understanding in the area of input costs and marketings.

"The uptake from primary producers has failed to meet the anticipated demand for such technology and services."

While a new generation of primary producers can see the opportunity of new technology, they also see a need for payback in the short term. Amortizing the cost of a new technology over more than 2 crop years is a hard sell in the current environment. Moreover, some producers have a healthy skepticism, feeling that farmtech has more benefit for input vendors who use technology to upsell products and services or expand their portion of farm receipts without improving the financial returns of the producer.

Finally, the vast majority of farms around the globe are small enough that farmtech is unsupportable. In August 2016, Minahil Amin wrote an article entitled 'The AgTech Pedestal Problem: How to Bring Innovation Down to Earth' for the William Davidson Institute, University of Michigan, that illuminated this condition and suggested an impact on farmtech that we can clearly see today.

A look at those supplying capital to farm tech has also changed. Hightech investors seem to have left the sector while investors in greentech, lifetech (biotech), pharmtech and medtech seem to be taking a different approach to emerging technology. Support for proof of concept (POC) activities continues to be available but with a much shorter string. Philanthropic organizations continue to supply capital if the technology can be shown to improve the conditions of third world populations or improve the ethical environment of production.

The capital to develop innovative technology prior to the proof of concept (POC) stage may be limited. Other areas of the ecosystem (value chain) seems to have the interest of capital providers at this time. Expect continued pressure on sources of capital for innovative farmtech concepts. Watch for disruption and innovation in farmtech to emerge from sectors other than traditional agriculture and agrifood participants.

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