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.

WHY IS THIS IMPORTANT:
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.

MARKET - 100 Years of Changes in Value

A chart showing the market capitalization of leading organizations in 1917, 1967 and 2017 shows the changes in value and industry leaders are profound.

Determining what will be the next 'blue chip' investment is complicated. This look at what the economy (consumer) is driving and what the investor is valuing is more than interesting:

BUSINESS - Mind the IT Gap

There is a gap between what businesses expect from their IT departments and CIOs, and what these departments and executives can provide.

And a wise business owner or investor will pay attention to that gap, or risk falling into it.

Deloitte recently released a global CIO survey highlighting major areas of disconnect between expectations and capabilities.

They found that CIOs can have significant positive influence on the long-term success of the company when they develop capabilities in their IT departments.

This positive influence was true regardless of the personality of the individual CIO, as long as that executive could adapt and respond to the specific needs of their team and organization.

This fits with what The Bayard Partnership has noted as the most common stumbling block for CIOs – the inability to influence either upper management or their own teams.

Deloitte’s research suggests that CIOs tend to be less relationship-oriented than other CxOs, and paired with Bayard’s finding, this indicates that CIOs need to focus on building their relationships with both management and their own teams.

However, a key recurrent finding in Deloitte’s research was that the core expectations of the businesses did not match investment and resource allocation within the business, and that’s an issue that no amount of relationship-building can solve.

For example, cybersecurity is a core expectation according to 61% of CIOs, but only 10% said that it was a top priority of the business.

This is a major issue, because without adequate cybersecurity systems, businesses and organizations are at significant risk.

Similar disconnects between expectation and capabilities exist for categories such as improving business practices, reducing costs, increasing efficiency, maintaining systems, and driving business innovation.

When the capabilities are not currently in place, the infrastructure is not being built, and the talent is not being pursued or properly cultivated, can businesses reasonably expect IT departments and CIOs to deliver? Clearly not.

Talent, like cybersecurity, is a significant issue.

For agile tech talent, demand is four times the supply, and big-data talent is similarly in high demand.

Many businesses are failing to entice or maintain their tech talent.

In some cases, such as Uber’s issues keeping industry-leading women engineers on their teams, talent is actually being driven away.

These gaps are not new.

After all, investment in long-game improvements to core business capabilities always hurt the bottom line before they help it, and a fast-moving marketplace doesn’t feel hospitable to those “short-term pain for long-term gain” choices.

And yet, as Computer Weekly states in their series on CIO development and digital innovation, “If companies are unwilling to use technology to disrupt their business, someone else will do it for them. Businesses must be truly up to date with the changes being driven by technology, and be wary of the opportunities and threats.”

Disruption is already here, and CIOs (and their organizations!) are going to have to take the plunge and make the investments that allow capabilities to catch up to expectations.

Without closing the gap in critical IT areas businesses will not be able to deploy an effective digital strategy, and without that strategy, they risk falling in.

About Tiffany Sostar

Tiffany is a published academic, an editor with the Editors Association of Canada, an independent scholar and researcher, and a self-care and narrative coach. She is particularly interested in the intersection of technology and identity - how our tools shape our selves and change our stories, and in how the nature of work is changing as we incorporate more technology into our daily lives.

BUSINESS - Pet Tech Investors are Barking up the Right Tree

Pet technology, and the pet industry in general, has been called “recession proof,” citing the fact that during the 2008 financial crisis, the pet industry continued to grow.

Consumer spending overall shrank by 3% during the recession, but pet spending grew at 5% per year.

Those are some convincing, and encouraging, numbers for investors and business owners.

However, investors should still be cautious.

The resilience of the pet industry refers to the sector as a whole, and doesn’t mean that every pet stock will do well.

Investors need to look at each business as a unique and context-dependent case.

Individual companies can still sink if they don’t adapt to consumer demands and rapidly changing economic contexts.

Fresh pet food companies, for example, are subject to thin margins and increasing competition, and two companies – Freshpet Inc and Blue Buffalo Pet Products – have seen their stocks drop significantly.

On the other hand, pet healthcare companies aren’t subject to the same regulatory and policy debates that impact human healthcare, and these companies are doing well.

Pet technology is an area that’s heating up, and worth a close look.

2016 saw a record number of funding deals in this area, despite the overall drop in Venture Capital funding.

There are multiple factors at play that influence the popularity of pet tech stocks right now.

One important element is the millennials.

This is a generation heavily invested in their pets. They’re less likely than their parents to own a home or a car, but they’re much more likely to own a pet.

According to the Washington Post, “Three-fourths of Americans in their 30s have dogs, while 51 percent have cats, according to a survey released by research firm Mintel. That compares to 50 percent of the overall population with dogs, and 35 percent with cats.”

These individuals are marrying later, having kids later (when they have kids at all), and according to research by Wakefield Research, 76% of them are more willing to splurge on their pets than on themselves.

The economy drives some of these trends.

Pets are less expensive than children or houses, and Millennials have grown up with job scarcity and an abundance of student loan debt.

They aren’t big spenders, and they tend not to take big financial risks.

Their pets fill roles that previous generations have filled with both family and career goals and spending.

The other driving force behind the surge in pet technology stock is this generation’s love of wearable tech, integrated tech, Internet of Things, and other digital age devices and services.

Rover, which was the best funded company in the sector in 2016, matches pet owners with pet service providers such as dog walkers and pet sitters.

And BarkBox, which was similarly well-funded, has experimented with all kinds of digitally-integrated services, including BarkBuddy and BarkCam, marketed as Tinder and Instagram for dogs.

The industry, and the economy as a whole, will continue to change in response to global financial pressures and the quirks of the Millennial generation, but chances are good that pets will continue to be a solid choice for investment.

About Tiffany Sostar

Tiffany is a published academic, an editor with the Editors Association of Canada, an independent scholar and researcher, and a self-care and narrative coach. She is particularly interested in the intersection of technology and identity - how our tools shape our selves and change our stories, and in how the nature of work is changing as we incorporate more technology into our daily lives.

BUSINESS - HomeSafe Seeks New Brand Partner

Canada’s Automated Lost and Found Service Moves On

HomeSafe™, North America’s only automated, privacy compliant, customer owned and managed recovery service, announced today it is searching for a new brand partner.

HomeSafe™ is a trademarked service owned by Urban Animal Corporation (formerly PetLynx) that provides “Fast, Cheap, Direct Protection and Recovery of All Things Valuable.”

A new Partner:   HomeSafeTM desires a North American brand partner that owns a significant market presence.

An interest in asset protection/recovery may be useful but is not a requirement.

HomeSafeTM will be an element of the social innovation strategy and core value alignment of the brand partner. Brand clients feel good about helping another person recover something of value, especially in the case of a pet.

The Investment:  As HomeSafeTM launches V2.0 in the US market, the investment supporting this relationship is expected in the range of CAD$150,000 to CAD$300,000 per annum.

The brand partner is supported by Urban Animal’s digital media channel with a global audience greater than 340,000.

The History:   In 2008, in a nationwide collaboration with the P and G brand IAMS, Petsecure Insurance and the Canadian Kennel Club (CKC), HomeSafeTM launched what has become the most effective lost and found system for pets in Canada.

With a million public users per month, more than a million active subscribers, coverage in 340 Canadian communities, an experience factor of 75 months and more than 337,397 recovered pets, HomeSafeTM continues to be the fastest and cheapest way to get a pet home safely.

What’s more, recovery is not dependent upon a microchip or tag or, more significantly, pre-registration.

When a lost episode occurs, HomeSafeTM allows pet owners to use the system free for seven days to affect recovery. Even though many recoveries occur in 48 -72 hours, there are other low-cost options to continue the recovery process after the initial no-cost service.

Why the Move:   In 2012, the brand relationship moved to assist Randy Valpy with the launch of a new approach to pet health insurance called Pets Plus Us.

When Royal Sun Alliance (RSA) decided to abandon this initiative earlier this year Pets Plus Us was sold to Pethealth a Fairfax company. Since Pethealth also owns 24PetWatch, a concierge/microchip based recovery service in Canada, the eight year brand relationship with Valpy is ending.

“We are grateful for the experience, collaboration and support of our relationship with Randy Valpy and his colleagues during the past eight years,” said Larry R. Evans, Managing Director of Urban Animal Corporation.

“However the timing for a change in brand relationships couldn’t be better for HomeSafe™. Expanding service from pets to ‘all things valuable’ will provide the new brand partner with a high level of trust and reliability from the only automated, privacy compliant asset protection and recovery service in North America.”

The new brand relationship is expected to come into effect during the first quarter of 2017.

PetLynx Rebrands to Urban Animal; Offers a 22% Stake

Last week InfoStream caught up with PetLynx founder Larry R. Evans at his home near Crossfield, Alberta, Canada.

InfoStream (IS): We understand there are changes coming to PetLynx Corporation, our global audience now numbers over 320,000 and they would like to know more.

Larry R. Evans (LRE): Thank you for this opportunity to communicate with your audience.

IS: What is driving these changes at PetLynx?

LRE: Since 2013 we have observed huge changes in the pet industry and we believe there is much more to come. Because we have been ‘people centric’ in our approach, we could also see that our asset protection and recovery service under the HomeSafe™ brand has a much wider consumer base than we could reach from the pet industry. By late 2015 we identified the elements most important to people and the valuable things they wish to protect and recover.

IS: Does this mean the company is moving away from pets and pet owners?

LRE: Absolutely not! In fact, our pet owning subscribers will be the first to experience a broad range of new services that will give them ‘Fast, Cheap, Direct Protection of all things Valuable’.

IS: The press kit says you are rebranding the company. Why the name change?

LRE: In 2005, we developed the Urban Animal brand and used it extensively in our development of subject matter expertise through the Urban Animal Summit program.

The new name for PetLynx, Urban Animal Corporation, recently received the approval of our shareholders and we will move quickly to bring this brand to life in the market. I think everyone will agree that it is a strong brand that shows our ‘people centricity’ and will facilitate our move to ‘all things valuable’. People are the most important Urban Animal since they have votes, they have wallets and they have valuable things they wish to protect and recover.

IS: Why are you offering 22% of the company to outside interests?

LRE: In fact, we expect to part with even more of the company in a future round. We attract new investment to ensure that we have the capital to achieve our goals. In 2016 investors will provide commitments totalling over C$2 million dollars to acquire roughly a fifth of a company that we believe is now worth in the order of C$20 million.

IS: How can Urban Animal Corporation be worth C$20 million?

LRE: Let us first say that beauty and also value is in the eye (assessment) of the ‘beholder’. However, as we observe recent transactions (some involving pre-revenue or negative income companies) we can imagine how Urban Animal Corporation will be valued by investors.

I believe your readers can see a subtle change in the valuation of companies that represent large trusted ecosystems. As the global economy moves into the ‘post-digital’ environment, brands that haven’t been able to achieve their goals need to accelerate their e-commerce and digital programs to remain competitive.

Since 2013, we have observed transactions that have valued the acquisition of subscribers, members and policyholders (POPulation) at values ranging from C$23 to hundreds and even thousands of dollars per POP.

Brands have recognized they don’t have the ability or resources to achieve a timely competitive position except by acquisition or strategic partnership. At C$20 per active subscriber Urban Animal Corporation would be valued at just over C$20 million dollars today.

IS: Doesn’t it seem like development took a long time?

LRE: The Company has been fortunate to have core investors that have patiently invested more than C$7.4 million and eight years to be prepared for the day when the Company emergence would align with commercial activities.

Urban Animal now has a very strong position with 8 million public users and more than a million subscribers from which it has generated more than C$5.2 million in revenues. I might add that successful plays like Google, Facebook and Amazon have all taken more than a decade. However we can see the current pace of emergence has really accelerated.

IS: What makes Urban Animal believe it can be successful under current market conditions?

LRE: I think there are three elements that will lead us to achieve success:

• HomeSafe™ is the only Automated, Privacy Compliant, Online Recovery Service that provides Fast, Cheap, Direct Protection of all things valuable.
• Proven HomeSafe™ web services can be easily ported to the Android and IOS platforms and then bundled with Network services or OEM digital devices.
• We have assembled a stellar team of professionals that can take on the heavy lifting of finance, operations, marketing and administration.

IS: Can you identify the team you have assembled?

LRE: Our Merger and Acquisition team includes advisors from Bennett Jones (Legal/Tax/Structure), Deloitte (Capital Advisory), Armanino (Sell-side Support) and CAS Corporate Governance (Corporate Reporting/Administration). Deloitte Corporate Finance is contracted to prepare us for an additional round of investment in 2018.

Among the other professionals are Endeavor (Assurance), McRally (Real-time Financial Reporting), Andrea J. Parkins (Investor Relations), Cheryl Wallach Communications (Digital Media) and Cori Imberi Professional Services (Client Experience and Service Desk).

IS: We notice a strong marketing organization is missing.

LRE: There is currently much upheaval in this area as agencies and marketing organizations consolidate and move to more intimate success based roles with their clients. Even so, there are several candidates in view. We like the performance of Trone Brand Energy and Meredith Corporation in the US market.

The first major marketing activity will be the launch of the new brand and marcom development. We have a proposal from a local company, Venture Communications, that we like very much. By the second quarter of 2017, when we require a strong success based marketing partner we expect one of the organizations on our watch list will meet these requirements.

IS: Where does all this lead?

LRE: The Company is aimed at a moment in 2020 when it can attract a strategic partner or acquirer. At that moment, we expect the plan will deliver 42 million public users, 9 million active subscribers and a share value at or near C$0.90.

IS: Are you prepared to reveal the new services you alluded to?

LRE: We aren’t going to reveal new services until later. At that time there will be opportunities to share market data and reveal each new application (service).

IS:  Thank you for taking the time to update and clarify the plan for our audience.

LRE:  Thank you for this opportunity