Cascadia Capital was motivated to a launch a unit devoted to robotics and automation after observation of the Pacific Northwest’s tree fruit sector, said its chairman and chief executive.
Michael Butler told Agri Investor that orchards and packhouses in the US north-west – where Seattle-headquartered investment bank Cascadia already has a practice devoted to food and agriculture – have long been used to test and deploy new agricultural robotics.
Covid-19 and recent immigration restrictions have exacerbated longstanding concerns about labor availability and cost in the regional ag sector, he said, leading to an accelerated adoption of robotics among its pear, cherry and apple producers.
“A lot of the growers have invested in the companies that are trying to create these products and they are working very closely with them,” Butler said. “They know that this is coming to a head and robotics is the only solution.”
Cascadia describes its practice as among the nation’s first to focus on investment banking and advisory opportunities in robotics, automation and artificial intelligence. Butler said ag-focused clients of the unit are likely to include growers it already works with and early-stage companies focused on developing automated field machinery, harvesters or robotics with machine vision to analyze plants.
The practice will have a US-wide scope, said Butler, and he expects Boston and Pittsburgh to be the most important markets for startups focused on mechanical robotics, machine learning and machine vision.
Investors most active in agricultural robotics to date have largely been those already comfortable with robotics and automation technology, he added, who view agriculture as a promising end-market for their products.
“What we are seeing is that at the very early stage, the tech-focused VCs are the early-stage investor. They are the ones that understand the product development risk,” Butler said. “Once the product gets built and is ready to scale and they need capital to create a sales and marketing effort, then it becomes something the agricultural investors are much, much more interested in.”
Butler said investors prefer robotics platforms with the capability to work across multiple crops, echoing a point recently made by Root AI founder Josh Lessing, after the specialty crop robotics-focused startup’s $7.2 million seed round in August.
Large agricultural producers generally prefer direct ownership of robotics equipment, explained Butler, but most ag robotics companies are pursuing service models that allow customers to pay on a per-acre basis and avoid spending on equipment maintenance and repairs.
“That is the model that we think wins at the end of the day,” said Butler. “The robot as an ongoing cost matches up with a labor costs that is on-going and is not an upfront cost.”
Butler said robotic harvester startups Abundant Robotics, FF Robotics and Terraclear, which offers a robot that clears rocks out of fields, are among the companies that have helped drive increased investor attention in the market.
Last month, Google announced its development of a “plant buggy” designed to inspect and analyze crops using AI as part of Mineral, an ag-focused project from its X Development unit, which targets “10x impact on the world’s most intractable problems, not just 10 percent improvement.”
For investors, said Butler, Google’s entry adds yet another layer of validation that could help change the makeup of firms active in the market.
“Going forward, we are going to see a lot of traditional agriculture investors looking at robotics. I really believe they see the same thing we do, that labor is really hard to come by, is really expensive and producers have to start using robotics to replace labor. Investors are on to that and are going to invest ahead of that thesis.”