I can vividly remember walking through the aisles of ag shows a couple years ago and seemingly stopping every few booths to grab a business card and a brief conversation with an ambitious entrepreneur looking to stake a claim in the ag tech industry.
Some of those companies have now merged, folded or rebranded — in part a reflection of overestimating the market — but also a result of a shift in investors’ visions for the next game-changing segment of the precision industry.
Ag tech startups continue to be big business, with more than $3.2 billion in investments reported by www.AgFunder.com in 2016. But this total also represented a 30% year-over-year decline, according to the online investment platform.
Talking with dealers about the influx of venture capital, particularly from non-ag companies into the precision farming industry, there is some skepticism and concern that vulnerable startups could overpromise and under-deliver, leaving behind frustrated customers.
If the bubble bursts on ag startups, it could be a “black eye for dealers,” says one independent precision retailer because there would be enough blame to spread throughout the industry, not just on a particular company.
So is the flow of venture capital into ag technology slowing to a trickle? Not necessarily, although certain segments saw dramatic declines during the last year. The AgFunder report notes an 89% drop in Robotics, Mechanization & Other Equipment investments ($109 million in 2016), fueled by a 68% dip in investment in unmanned aerial vehicle technologies, which didn’t get the short-term traction many in the industry hoped.
But there were several areas of investment growth, as reported by AgFunder. Overall, there was a 10% increase in the number of ag tech investment deals closed compared to 2015, attributed to an uptick in seed stage activity.
Breaking down the markets, Ag Biotechology saw the biggest jump, 150% year-over-year and Farm Management Software, Sensing & IoT (Internet of Things) investments grew by 3.7%.
So what does the future hold? That remains to be seen, but the report notes that one area to watch is investment activity of larger companies during the coming year.
AgFunder recorded 38 ag tech mergers and acquisitions in 2016, mostly involving smaller companies, so it will be worth seeing if bigger players become more or less financially committed to the future of precision farming.