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AgTech Mid-Year Investing Report – 2016 – AgFunder
Seed stage investment continues to drive agtech investment, representing 52% of deals recorded. The total size of seed stage investments grew with 159 seed stage deals raising $104 million in H1-2016 compared to 260 deals raising $130 million for all of 2015.
Student Ag Entrepreneur Business Concepts by Subsector
Visitors to the Agricultural Entrepreneurship Initiative ask me what businesses student ag entrepreneurs are most interested in. One way to answer the question is to look at business concepts students create for the entrepreneurship course I teach at Iowa State University, Entrepreneurship in Agriculture.
Two week’s ago, students in the course pitched their favorite of the 2 or 3 new business ideas they’ve developed in the course. I went through the list of business concepts and categorized them by subsector. I use subsector definitions from the AgFunder report on AgTech investment activity.
Alternative Protein – These companies look to replace traditional sources of protein such as meat and eggs. Companies fall into three categories: cellular agriculture; ingredient innovation; and the production and discovery of alternate protein sources, such as crickets or algae.
Animal Health & Nutrition – Companies that identify agricultural livestock or farming of aquatic organisms as a key market.
Bioenergy – Companies producing energy made from materials derived from biological sources.
Biomaterials & Biochemicals – This includes companies using biological material to produce/farm: peptides, bioplastics, non-ag inputs, microorganisms, pharmaceuticals, microbes and algae, functional ingredients/nutrients/phytoceuticals.
Cannabis Technology – Companies developing technologies for the emerging legal cannabis and hemp markets.
Decision Support Tech – This is our primarily software-focused category. It includes but is not limited to precision agriculture technologies. It includes satellite data companies, big data, and ERP technologies. Excludes companies categorized under drones & robotics, and smart equipment & hardware, and irrigation & watertech.
Drones & Robotics – Companies that are building drones or robotic technologies which have self-identified food or agriculture as a key market.
Farm-2-Consumer – Companies that directly deliver food to consumers from farms, differing from food e-commerce, which involves e-grocers, meal kit delivery services, and specialist meal delivery.
Food E-Commerce – E-grocers, meal kit delivery, and specialist meal services which are attempting to disrupt the agriculture value chain. Excludes restaurant delivery.
Food Tech – A broad category including food processing, food enhancing technology (e.g. flavor or nutritional value), packaging, food analysis.
Food Safety & Traceability – Includes all companies attempting to track food production, food sterilization or introducing technologies that reduce the risk of food safety concerns.
Indoor Agriculture – Includes all farming operations that occur indoors or in greenhouses, and the technologies that accompany them. It does not include Cannabis-related tech, which is spun out into its own category.
Irrigation & Watertech – Includes all technologies involving the management of water for agriculture. Some precision irrigation companies could technically fall into smart equipment or decision support tech, but we felt that this categorization would be more informative.
Smart Equipment & Hardware – Predominantly includes sensor technology, Internet of Things (IoT), and other non-robotic machinery in the food and agriculture value chain.
Soil & Crop Technology – Includes: biological inputs and treatments, chemical inputs, genetics–based tech, new crops, seed technology.
Waste tech – Includes products made out of food waste, wastewater treatment for agriculture, and agriculture or food waste mitigation technologies.
Student Business Proposals By Category
Entrepreneurship in Agriculture Course
Fall 2016 Semester, 94 Students
Alternative Protein 0%
Animal Health & Nutrition 11%
Biomaterials & Biochemicals 3%
Cannabis Technology 1%
Decision Support Tech 9%
Drones & Robotics 5%
Food E-Commerce 0%
Food Tech 0%
Food Safety & Traceability 0%
Indoor Agriculture 5%
Irrigation & Watertech 0%
Smart Equipment & Hardware 5%
Soil & Crop Technology 0%
Waste Tech 0%
Non-Technology Agriculture 20%
Social Impact 8%
I work the students through various exercises to see if we can identify new business ideas that come from something unique to their experiences or observations. In particular, many of their ideas come from:
- A problem they’ve noticed or experienced that others haven’t noticed.
- An experiment, accident of circumstance, or heritage activity from their past.
- A personal passion and interest.
57 percent of student ideas were related to agricultural technology, 77 percent in total related to agriculture. Most, but not all, students are agriculture majors at ISU and/or have backgrounds in agricultural production, so probably not surprising as to their interests.
The top category in the AgFunder report linked to above for 2016 investments was Food Commerce, a category ignored by students.
What categories of student business plan or investment will be the most attractive when we look back ten or twenty years from now? I suspect certain themes will run through winning businesses. To suggest a several:
- Time/labor saving technology – It’s an old story in agriculture, but technologies that save labor win in the long-run. Robotics offers a myriad of potential applications to take labor out of various processes in agriculture.
- Unique food ingredients and products – Consumer interest in food products with a story will continue to grow. Where was it grown? How was it grown? What makes it different? What experiences are coupled with the food?
- Data at the right time and place – We have a lot of data in agriculture today. The question is what to do with it. Technologies, services, models, and algorithms that enable decision making at points in time where those decisions make a difference in outcomes will win.
- Disruptive economic models – New technologies and accompanying business model innovations enable challenges to existing supply chains and logistics models. Some may create significant changes in unit economics for production of certain agricultural products /commodities which will drive changes in place of production and logistics of product movement.
What are the most interesting categories of future business opportunities for you? Why?