Decline in Ag and Food Tech Investment



AgFunderNews just released their annual report
on ag and food technology funding for 2016. Not surprisingly many in the industry are finding that capital investments have declined significantly from the previous year. The numbers tell us that there are 30% fewer dollars being directed to this market sector overall. On a high note the number of startups was up 10% last year. More companies entered the fray in the hopes of grabbing that big brass ring.

 

Hit the Reset Button

When asked as to the “why” for this sharp decline in investments AgFunder CEO Rob Leclerc stated, "Investors are becoming more aware of the challenges in distribution and adoption rates. New investors in this space didn't realize how hard distribution might be.  It's raising risk, it's seeing companies not growing as fast as they'd like them to grow, and that's a real challenge," he said. https://agfunder.com/

 

The Influencers Hold the Cards

So two things here require some further discussion. Adoption rates and distribution. At first glance one might be inclined to say that without one you cannot have the other. He is right in separating these two challenges in that distribution is driven by the gate keepers of technology for growers, or as we commonly refer to them, “trusted advisors”.

 

 The adoption rate in agriculture is heavily influenced by those ag retailers and crop consultants who understand the value to their customers in utilizing technology. So they have to invest and take a risk in the hope that their growers will pay for those additional services. Farm supply companies know that in order to compete for a growers “share of wallet” they will need to add more value to their relationships with those farmers.

 

No Such Thing as a Free Lunch

While these companies understand the need to offer technology services, or any services for that matter, they are also well aware of the risk involved in not being able to charge the customer a fair price for them. It may be that in order to prove the value in using these new tools they may just have to offer them at a discounted rate or even worse - give them away for free.

 

Back to the Drawing Board

Investor are finding that growers have not been convinced of the value, the retailers - not wanting to lose money on their service offerings - are hesitant to buy and the tech companies can’t give it away because they told their investors that they would provide a significant return on their capital contributions in a relatively short period of time. Thank heavens for the early adopter retailers who are trying to establish an advantage over their competitors!

 

There are ways to crack this nut. It might just require some new strategies in order to do so.