Who are the gatekeepers of agriculture? How outside investment is advancing agtechApril 9, 2018
The past month was an exciting one for European agtech investment firm, Anterra Capital. On March 16, Anterra realized a second closing on its initial fund of $125M. They decided to keep things going with a week-long extension which saw the fund grow another $75M on March 20 for a total of $200M. Why is this relevant? The success of Anterra’s first fund now places them at the top of the list of agtech-exclusive investment firms currently challenging the status quo.
Agtech broadly refers to any software, hardware (of both the silicon and iron varieties), and biological innovations that improve production or efficiency anywhere in the agricultural supply chain. That vague definition captures a range of products and services from genetically-engineered crop traits, to data-driven decision support software, all the way through to food traceability. Traditionally, investment flows from large companies like seed and equipment producers to start-ups operating in those markets. These companies tend to have close ties to each other to begin with, which for a long time created something of a feedback loop that focused investment on existing agricultural markets (seed, tractors, fertilizer, etc.). Farmers appreciate the history and reputation of these established players, making them the effective ‘gatekeepers’ of agtech advancement. However, as non-traditional innovations like machine learning, artificial intelligence, or remote sensing and sensor technology continue to grow, so does the need for investment. Beginning in 2013, outside investment began pouring in to support startups that may not mesh with the typical approach to agricultural markets. For the gatekeepers of agriculture, much of this sudden attention is mis-guided—they have been active in the industry for decades, after all— but it sparked a new opportunity for specialized firms like Anterra.
While the diverse investment firms putting money into hundreds of startups every year might appear out of touch to actual farmers, specialized firms have the chance to define themselves as credible investors in agriculture. Exclusivity in agtech sends the message that firms know enough about farming to put their reputation on the line, and that the market has matured beyond pie-in-the-sky ideas from people who don’t know the difference between a soybean and corn plant. Still, $200M is a small fraction of the estimated $2.7B sunk into agtech in 2016, and the ‘gatekeepers’ are not resting. Monsanto purchased Climate Corp. in 2013 and has since rolled out Fieldview under that umbrella, while DuPont purchased the Granular farm management software last year and launched its own in-house platform, Encirca. Though agtech giants and large VC firms will continue to dominate the investment landscape, the whole story shows that agriculture is hungry for funds and developed enough to justify a narrow focus like Anterra.