Over the course of the last several years we have seen an
uptick in the capital investment into new technologies in the agri-food sector.
According to AgFunder News last year venture capital firms placed $4.6 B in
bets on startups and existing companies seeking additional funding for growth.
In the first half of 2016 ($1.75 B) that surge has gone the other way with a
20% decrease over that of the previous year.
Broken Systems and Hockey Stick Sales Projections
To be fair VC investments declined some 14% across all
market sectors. It may have been that agri-food-tech was a popular play last
year due to the fact that the potential for optimization through the
integration of technologies is incredibly large and more money was directed to
that market segment than others. Or the drop in the number of dollars directed
to this business category the fact that some of these
tech startups have not gotten the traction that was originally portrayed in
their overly aggressive business plans. Either way it appears that funding has been
“tempered” but has not completely dried up.
It’s not hot and not cold but certainly is a little tepid. Let’s face it the drone hoopla has died down considerably and how many mobile farm recordkeeping systems can the market actually support?
It’s not hot and not cold but certainly is a little tepid. Let’s face it the drone hoopla has died down considerably and how many mobile farm recordkeeping systems can the market actually support?
What Goes Up Will Come Down
We have seen bubbles popped over the years. Prior to the tech
stock crash of 2000 companies like Deere were convinced that they needed to invest
heavily in technology. They also saw the need to move technology management out
from under different business disciplines (the CFO directed IT) and create
a C-level position in the organization to direct their corporate strategies for
technology. The Chief Technology Officer was born and then several years later
the box in that org chart was eliminated.
Too Much of a Good Thing
So what does this mean for agri-food technology growth in
the future? The opportunity for transforming the industry is still the same. Nothing
has changed. The inefficiencies still exist or, better put, the potential for
efficiency gains are substantial when, and it WILL happen, a thoroughly optimized value chain is ultimately
realized all the way from seed to fork.
More investment may not make the
revolution gain momentum anyway. The time will come when capital will be required
for growth in the industry but until the adoption rate increases and demand
exceeds supply we should be content with slow and steady. Otherwise we will be
faced with a crowded market all vying for a limited number of dollars for technology tools from ag and food companies.
