More beyond in AgTech

(Spoiler: it's got a lot to do with FinTech and business models)

The Pillars of Hercules once stood in the waters past Spain. Inscribed were the words ne plus ultra, meaning nothing beyond. It was a warning to sailors. Beliefs at the time were that nothing was beyond and therefore too dangerous to go further. But in 1492, Christopher Columbus challenged the sentiment. To the doubt of many, he sailed beyond. 

Some in the AgTech ecosystem draw a parallel to the skepticism of there being more beyond. After all, exits have been few and disruption really hasn't happened. My colleague at Syngenta Ventures, Shubhang Shankar, writes that the promise of venture capital and technology has not been realized in agriculture. True that.

When Columbus returned and shared his discovery of the new world, Spain adopted the motto plus ultra, meaning more beyond. This remains today. The notion of more beyond has inspired entrepreneurs and innovators ever since.

I believe a re-calibration of thinking can reveal more beyond in AgTech. The world’s food supply depends on it.

Why it matters

Climate change
Climate change is creating problems for the ag ecosystem. Billion dollar disaster weather events are becoming more common. Just this summer, 5 million hectares were damaged because of a derecho with 200+ mph winds over a 20-minute period in the midwestern US. Compared to historical averages, global temperatures are rising. Ice caps are melting. East Africa is having locust invasions. But let’s not forget that 12% of greenhouse gas emissions are from agriculture, and about 30% from the food system. Ag is a corner piece of the climate change solutions puzzle and can be climate neutral within our lifetime.

Access to food
1 in 9 people globally are undernourished. 30-40% of food is wasted from harvest to retail. Consider the impact on nutrition and poverty if all that waste made its way to needy mouths. Eliminating waste and increasing access to food is as much a logistics and supply chain challenge as it is a humanitarian one. A lot of societal problems are fixed when food security is fixed.

Improve the earth
Long term mistreatment of land is bad for the earth. But removing modern seed and crop protection technology would reduce yields by as much as 50%. This clearly is not an option especially considering that by 2050, food production must nearly double to feed the global population. We need to produce an adequate food supply while taking better care of the planet. This is the only Earth we’ve got; there is no backup.

Grower profitability
Farming is hard. Modern growers face challenges in finding high quality land to farm, handling more frequent extreme weather events, dangerous working conditions, regulatory pressures, global trade pressures, and in some countries volatile financial infrastructure. All of this squeezes farmers’ margins, thus pushing them to sell out or operate at a loss until they are forced to. While only 1% of US GDP is attributed to ag, nobody gets fed unless they succeed.

Business model innovation > technological innovation

Technology will always have a place in the future of AgTech. After all, it remains one of the least digitized industries ever and relies heavily on scientific R&D for advancements in seeds and agrochemicals. But it will take more than technology to drive progress. Business model innovation will drive behavior changed throughout the supply chain.

“Do not go where the path may lead, go instead where there is no path and leave a trail.”  - Ralph Waldo Emerson

 

My predictions about the next wave of innovation in AgTech

1. Digital transformation
Today, farmers are drowning in data. There are no standards to enable the myriad of data sources to integrate such as satellite and drone imagery, soil sensors, tractor data, etc. This extends into the rest of the supply chain to enable traceability and smarter logistics. Because of data silos, nothing readily talks to anything else. To realize meaningful advances in efficiency through automation, robotics, and AI, data interoperability must mature at and beyond the farm level all throughout the value chain.

2. Regenerative Ag
The idea of regenerative farming is to adopt farming practices that minimize soil disturbance, increase soil health, reduce carbon in the atmosphere, keep the soil covered, maintain root life year round, and improve the water cycle. Examples include planting cover crops, no tillage, and having a larger crop rotation. The long term gains outweigh any short term downside. Progressive farmers and land owners are keen. But technology alone won’t drive widespread adoption, which leads me to 3 and 4...

3. Business models 
How value is created, delivered, and captured will change. Consider the business model of Netflix, which accelerated cord-cutting behavior in America. Consider RecycleBank, which incentivizes consumers to recycle. This type of business model innovation will drive change throughout the ag and food value chain, from farmers to consumers. I’m bullish on this point. Behavior change is foundational to a more sustainable food ecosystem.

4. FinTech / AgTech overlap
The overlap of FinTech and AgTech is growing. Lack of transparency, low digitization, access to capital, risk reduction for loans and insurance, and trade risks all contribute to economic friction in ag production. FinTech can help growers become more sustainable, profitable, and increase adoption of new technologies and methods. While not all FinTech solutions are made with Ag in mind, some may be portable and relevant for Ag. Interestingly, FinTech affects the entire supply chain and can usher in a host of much needed change such as regenerative ag practices. This also widens the aperture for exits, which have been elusive. (I’ll write a separate post on the FinTech/AgTech intersection later)

5. More female entrepreneurs
Female founders have had to unfairly endure extra scrutiny and skepticism. Less than five percent of US venture capital is invested in female founders. Interestingly though, companies with at least one female cofounder are likely to exit faster than the rest of the market. Female founders are just as capable, and sometimes more capable, than their male counterparts. Some of the best leaders with whom I’ve worked are women. The inequity of VC-backed female founders is changing for the better albeit slowly. I believe it should and will accelerate.

Be the plus ultra in AgTech

With the right entrepreneurs solving the right problems, the right investors investing in the right people, and a dose of patience, we all can be part of the plus ultra in AgTech. The trails to be carved will look nothing like the last 15 years. The future of the planet depends on it.

Article By: Mark S. Brooks.  Source: LinkedIn