Before the farmgate (ex. seed technology)
Inside the farmgate
After the farmgate (sometimes intersects with FoodTech)The industry can be further segmented into crop farming, animal farming, and marketplace/fintech. Tao explains that “under each high-level segment, you have various technological theses, usually crossed with biotech/chemical innovation, AI/ML application, machinery or commercial innovation.” This leaves room for a diverse group of AgTech startups. Monarch Tractor, based in SF, California, is producing zero-emission autonomous driving electric tractors for Vineyard/ apple orchards. There is also a crop health biotech innovation company called Greenlight that is using RNA to treat crop diseases instead of chemical pesticides. In the space of precision ag, also known as breeding innovation, Benson Hill and Pairwise have created gene editing platforms for improved vegetables and fruits. Other companies are focusing on ways to address the limited food availability by reducing waste. One-third of what we produce is lost. This loss occurs throughout the entire supply chain, from inside the farm, silo, truck, supermarket, all the way to our homes. There are even AgTechs trying to optimize consumer behavior. Incumbents are also getting into the game. Corporate VC’s have established funds and are actively investing in or acquiring startups. From the incumbent perspective, the highest priority right now is around data. Per Mazza, “these companies are automating data collection in the farm, so they know when farmers planted, what they used, how much and where. It is a good practice for the farmer to record everything that he or she did to control cost, but to also understand the nutrients/inputs that are coming in. That is how they plan for the next year. If the big companies unlock this data science and machine learning, they can predict farming outcomes based on the use of products they sell with a huge level of confidence.” In a controlled environment, this could be considered easy. In farming however, they must fight the elements of unpredictable weather patterns, microbes, and more. The first agriculture company that unlocks the ability to accurately predict the future will fundamentally change the market. The incumbents also recognize that they must adapt to keep up with the pace of change. Consumer preferences are evolving. Some consumers are pressuring against GMOs, for example. The incumbents are also struggling to produce new chemicals at the rate required to keep up with the pace of change. For many of these issues, data could be the answer. So, what is holding us back? Tao explains that the answer to this is region specific. From the application perspective, the US is further along its journey, “largely due to the concentrated large-scale farming practices which enable easier implementation. In places like Asia or Africa, farmers are predominantly working on areas of land smaller than two hectares. Hence, it’s much harder to adopt innovative technologies.” Mazza adds that connectivity is also a challenge, particularly in huge rural areas of emerging markets. Large cell phone companies are partnering with AgTechs to solve this, but the solution is not yet available everywhere. Risk of adoption is another issue. Farmers are already making low margins. Now, multiple AgTechs are coming to them with competing products. It can be very confusing for the farmers who tend to prioritize cost. What is the ROI? How should the AgTechs present to the farmers? How can the farmer understand the differences between the products? At the end of the day, the risk of adoption ultimately falls to the farmer. To this point, once the farmer does adopt a new technology, oftentimes there are data incompatibilities. The many AgTechs are not integrating with each other. If you want to see rainfall, soil nutrients, and grain volumes, the farmer will have a different technology for each. They receive valuable data sets, but they struggle to make it work together. Fortunately, there are many bright teams working on these challenging issues. To join the conversation, you can become a member of the HBS Food, Agriculture, and Water Club. If you are interested in learning more about AgTech, we also invite you to check out www.agfundernews.com.
Alex Smith (MBA ’23) is a dog mom from Texas. She previously worked for Chevron Technology Ventures helping startups to scale. Skiing with friends, listening to the Energy Gang podcast on long walks, and singing Billy Joel on road trips are some of her favorite pastimes.
