Ag tech firms becoming vogue (Editorial)
Investment has been increasing in ag technology firms with a large share going to indoor or Controlled Environment Agriculture.
Last year saw $4 billion invested by venture capitalists into the agriculture technology sector, up from $2.8 billion in 2019, according to research firm Crunchbase.
A large chunk of that — $565 million plus several funding rounds that were not publicly disclosed — went to indoor agriculture firms including vertical farms, aquaculture, insect production and greenhouse complexes.
Touted for huge efficiency gains in production and use of inputs, indoor agriculture is projected to continue its rise for years to come.
“Controlled growing is a critical solution to address both the current supply challenges brought to light by COVID and the pressures on outdoor growing exacerbated by climate change,” said Sanjeev Krishnan, S2G Ventures Managing Director and Chief investments Officer. In December, S2G issued a report on growth in the Controlled Environment Agriculture arena. “We believe CEA can grow its U.S. market share by five times over the next 10 years in response to these pressures and continued consumer demand for fresh produce.”
Along with venture capital firms, celebrities from Meghan Markle to Katie Perry have put money into ag tech, banking on companies that espouse sustainability in their business model that the celebrities can then use to enhance their own “brand.”
“Celebrities have access to tech thought leaders and see what they are excited about and want to be in on the new trend,” Jaleh Daie an entrepreneur and seed investor with a focus on agtech, told Forbes.
Nicola Kerslake, CEO of analytical firm Contain, notes venture capital firms are typically thematic investors, buying into new concepts early like the sharing economy, but the coronavirus pandemic played a role in funders pivoting to food technology.
“Some parts of the ultra-hot sharing economy theme that spawned companies like Uber suddenly look less alluring when consumers are loath to share space,” Kerslake said. “Meanwhile, themes around health and wellness became far more attractive, benefiting adjacent industries such as indoor agriculture.”
Once the virus subsides and venture capitalists move on to their next theme, will indoor agriculture have the support it needs to be fully sustainable?
For those concerned vertical farms and others in the CEA universe will soon takeover the industry, we offer a little perspective. Agriculture worldwide is a $5 trillion industry, making this new wave of indoor ag a tiny part of the overall food supply.
While the above numbers may seem astounding on their face, it’s couch cushion change compared to funding investments outside of ag. For example, the stock trading app Robinhood, raised more funding last year than all of the indoor ag sector combined.
We don’t doubt this niche industry will see continued growth, similar to the rise of USDA Organic food and food products and there will be disruptions but, what is likely, as we’ve seen when any “game changer” comes on the scene, is a blending of practices and applications to make individual operations more productive. As innovations mature, technology will stretch across the industry.
Like the consumers who farmers of all types work to serve, growers will take what works for them and leave the rest on the shelf, so to speak, adopting the systems and technology that gives them the best chance to continue their farming tradition.