The agtech window of opportunity is now

AgTech Accelerator chief executive John Dombrosky (pictured) argues a funding gap, new models bringing together university research with venture capital, and real demand for agtech, mean now is a great moment to enter the space as an investor.

There is a major shortfall in funding and expertise necessary to develop the agtech fundamental to supporting our growing population.

Food politics, health awareness and other macro demographics all point to this need.

In the US, for example, the Congressional Research Service has conceded the country has not prioritised agtech funding, concentrating on immediate necessities like income support.

Smart venture capital, though, is beginning to close that shortfall, creating a new entrepreneurial culture in agtech already enjoyed by other industries. Perhaps that is because of venture capital’s creativity and ability to connect various market trends, industries and researchers. However, the venture capital and startup space in agtech is still far from overcrowded.

According to Agfunder’s AgTech Investing Report Year in Review, 2015 saw 499 agriculture technology companies attract a mere $4.6 billion of venture investment. It’s a jump from the $2.4 billion invested in 2014, but comparing agriculture with the health industry exposes the size of the gap.

Both sectors address basic needs, and in some cases attract the same investors and start-ups looking at new technologies like CRISPR. The global agriculture and healthcare markets represent 10 and 12 percent of global GDP respectively, but while healthcare received nearly 12 percent of the $129 billion total venture funding invested in 2015, agtech got less than 4 percent.

Translating today’s basic research into novel applications requires a model that is only just emerging in agtech and it is coming from early stage venture capital.

One solid indicator is the renewed emphasis on university-fostered agriculture research, and the private capital facilitating its commercialisation. Vital to building successful start-ups is the knack for spotting unmet needs throughout the agriculture value chain, translating research into products, and connecting seemingly disparate technologies .

Technology is motivating a shift in the very structure of agribusinesses, transferring risk and reward to the most efficient capital structures. As input, equipment and animal health providers seek productivity gains, the ensuing consolidation is creating a need for start-ups and innovation that will be driven by consumer demand. Even the best R&D-based organisations cannot meet all that demand, and a flourishing start-up ecosystem is vital to bringing in new innovations alongside what large agribusiness platforms can do.

But what is a relatively small venture-capital world has to grow. Scale and agility will both be required, given changing global consumption patterns expected in a largely urban food market of 9 billion people by 2050 . As consumers are increasingly distanced from the land and labour less available, as yet undiscovered platforms for farming for crops and livestock will be needed, and getting there will take venture capital.

Translating success from research to field means magnifying the importance of early stage management and scientific teams. To be successful, firms need to create deep relationships with the right universities at the forefront of agri research, have access to and knowledge of supply chain infrastructure and agri-specific commercial supply models. As this model improves, more blue-chip investors are coming on board to take agtech companies to the next level – and finding the right exit for new ventures in agtech is also a developing opportunity for venture capital.

The global agribusiness landscape is rapidly changing. The time to foster a new entrepreneurialism, bringing together capital and innovation on an international scale and along the whole agri chain, is now. And nothing unites better than the power of smart capital and the energy of well-managed start-ups.

John Dombrosky is chief executive officer at Agtech Accelerator, a syndicated investment vehicle comprised of financial and strategic venture capital built to identify, develop, and manage tearly-stage agricultural technology companies. The firm’s academic institutional partners include Duke University, the University of California and Penn State College of Agricultural Sciences.