Farming, a field still largely unaffected by the tech revolution, is ripe for change and offering opportunities for investors.
“We’ve seen a wave of technology impact our information industries,” says Haim Mendelson, a professor at the Stanford University Graduate School of Business. “Now we see another big wave of technology reshaping our traditional industries, and certainly agriculture is one of the most basic ones.”
Driverless tractors tilling acres of crops, produce growing in massive climate-controlled warehouses, and seeds genetically altered to require less water are among the innovations changing, or about to change, agriculture. These technologies are making farms smarter, more productive and increasingly efficient.
A new paper co-authored by Mendelson highlights areas that are increasingly attracting startups and investors.
The world’s food system is desperate for an overhaul. By 2050, studies show, the world will have 3 billion more mouths to feed than it does today, and demand for food will rise by 50 percent.
Venture capitalists and angels are increasingly looking to farming as an investment opportunity, pouring $735 million into 147 deals in 2017, according to CB Insights. That’s a significant jump from $57 million for 71 deals in 2013.
In addition, more of these startups are getting snapped up by big farming conglomerates, which are building out their own agtech divisions.
Among the opportunities Mendelson and his collaborators identified were:
- Product innovations ($4.36 billion in investment): New technologies, such as gene editing or cellular agriculture, are designing entirely new kinds of foods.
- Digital marketplaces ($682 million in investment): Allow farmers to lease equipment, pool together for better insurance, or connect to local customers.
- Operations software ($129 million in investment): Helps farmers make better operations decisions, track resources or productivity, and save money.
- Skills-building tools (minor investment): Includes videos, hotline voice services, and mobile apps that help farmers share experiences.
- Resources ($755 million in investment): New irrigation systems deploy highly targeted water and fertilizer, using less of each, while vertical and urban farms use less land and reduce pesticides.
Still, for an industry that lags behind others in adopting technology, the challenges go beyond investment dollars flowing into agtech. Smarter farms also require smarter workers who can operate the new technology. Also, business and government regulations, trade and tax policies, and even basic technology infrastructure must support these innovative farming techniques.
There is also something less tangible that no policy can change.
“Probably the biggest challenge is the fact that people like doing things the way they used to do them in the past,” says Mendelson. “This industry was not a leading user of information technology and, as a result of that, you need to change the mindset.”
Shana Lynch is a senior editor at the Stanford Graduate School of Business. The complete version of her article appears on the Stanford website at this link: https://stanford.io/2k01tXo.