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As an investor in the ag-tech space for the last decade, I would argue that 2020 was a tipping point. The pandemic accelerated a shift that was already underway to deploy automation in the farming industry. Other venture capitalists seem to agree. In 2020, they invested $6.1 billion into ag-tech startups in the US, a 60% increase over 2019, according to research from PitchBook. The number is all the more staggering when you consider that, in 2010, VC investment in US ag-tech startups totaled just $322 milion. Why did 2020 turn the tide in ag-tech investment, and what does that mean for the future of farming? Which ag-tech startups are poised to become leaders in the multi-trillion-dollar global agriculture industry? I’ll delve into those questions below.
The pandemic changed many sectors forever and agriculture is no exception. With idled processing plants, supply chain disruptions, and COVID outbreaks among workers curtailing an already-strapped labor force, farmers faced unprecedented challenges and quickly realized some of these problems could be solved by automation. Entrepreneurs already active in the ag-tech space, and those who may have been considering launching an ag-tech company, saw an opportunity to apply innovation to agriculture’s long-standing — and now all the more pressing — challenges.
Ag-tech investment boom
Companies applying robotics, computer vision, and automation solutions to farming were the greatest beneficiaries of the record levels of VC funding in the last year, in particular vertical farming companies that grow crops indoors on scaffolding. Bowery recently raised $300 million in additional venture funding and is now valued at $2.3 billion, while AeroFarming recently announced plans to go public in a SPAC deal valuing the company at $1.2 billion. Vertical herb farmer Plenty has raised over $500 million in venture funding, while vertical tomato grower AppHarvest went public via a SPAC in February and is now valued at over $1.7 billion, despite recent share price fluctuations.
But while vertical farming companies have received a large share of venture capital dollars, there are many other ag-tech startups emerging in the race to automate agriculture. Some of the ag-tech sub-sectors where we see the most potential for growth in the next five years include tiller, weeding, and planting robots; sensor-fitted drones used to assess crops and plan fertilizer schedules; greenhouse and nursery automation technology; computer vision systems to identify crop health, weeds, nitrogen, and water levels in plants and soil; crop transport, sorting, and packing robots; and AI software for predictive yield planning.
Some of the sub-sectors that are a bit further out include picking and planting robots, as well as fertilizer and watering drones. A few startups are building tactile robotic hands that could be used to pick delicate fruit such as strawberries or tomatoes. Yet the picked fruit must be placed on autonomous vehicles that can navigate uneven terrain and paired with packing robots that place the fruit carefully to avoid bruising, so challenges remain. Meanwhile, drones exist today that can drop fertilizer or water on fields, but their use is strictly regulated and their range and battery capacity is limited by payload capabilities. In about 10 years, we could begin to see drones that use cameras, computer vision, and AI to assess plant health and then automatically apply the right amount and type of fertilizer based on the plants’ size and chemical composition.
Solving the right problems
For any ag-tech company to win over farmers, it must solve a big problem and do it in a way that saves them significant time and/or money. While a manufacturer might be happy to deploy a robot for incremental improvement, farmers operate on exceedingly tight margins and want to see exponential improvement. Weeds, for example, are a huge problem for farmers, and the preferred method of killing them in the past, pesticides, is dangerous and unpopular. A number of companies have emerged to address this problem with a combination of AI, computer vision, and robotics to identify and pull weeds in fields. Naio Technologies and FarmWise are examples (disclosure: my firm is an investor in FarmWise). Meanwhile Bear Flag Robotics is making great strides in the automated farm vehicle space, building robotic tractors that intelligently monitor and till large fields. And Burro is a leader in crop transport robots, with its autonomous vehicles used to move picked fruit and vegetables from the field to processing centers.
While fully-autonomous harvesting is still a ways off, apple-picking robots are starting to gain ground, including those from Tevel Aerobotics Technologies. Tevel’s futuristic drones can recognize ripe apples and fly autonomously about the trees picking them and placing them carefully in a large transport box. Abundant Robotics takes a different approach to harvesting apples, using a terrestrial robot with an intelligent suction arm to harvest and pack ripe fruit.
Several greenhouse and nursery robots aim to improve handling, climate control, and other tasks in plant-growing operations. Harvest Automation’s small autonomous robots can recognize, pick up, and move plants around a nursery. Other greenhouse automation companies to watch include iUNU, which offers a computer vision system for greenhouses, and Iron Ox, which has built large robot-driven greenhouses to grow vegetables.
And, finally, satellite imaging companies such as PlanetLabs and Descartes Labs will also play an important role in ag-tech, as they provide geo-spatial images of crop land that can help farmers understand global climate trends.
Facing climate change, a growing population, worker shortages, and other challenges that will only grow more intense, the agriculture sector is ripe for disruption. Agricultural giants such as Monsanto and John Deere, as well as small and mid-sized farms, are embracing automation to improve crop yields and production. But wide-scale adoption of farm automation won’t happen overnight. For any ag-tech innovation to take hold, it must solve a huge problem and do so in a repeatable way that doesn’t interfere with a farm’s current workflow. It doesn’t help to deploy picker robots if they can’t integrate into a farm’s current crop packing and transport systems, for example.
We may well see small and medium-sized farms leading the way in the adoption of automation. Even though industrial farms have large capital reserves, they also have established systems in place that are harder to replace. Smaller farms have fewer such systems to replace and are willing to try robots-as-a-service (RaaS) solutions from lesser-known startups. For millennia, farmers have thought outside the box to find solutions to everyday problems, so it stands to reason they want to work with startups that think the same way they do. Farmers wake up every day and think, here’s a big problem, what innovative trick can I use to solve it? Perhaps farmers steeped in self-reliance and ag-tech entrepreneurs steeped in engineering and computer science aren’t so different after all.
Kevin Dunlap is Co-founder and Managing Partner at Calibrate Ventures. He was previously a managing director at Shea Ventures, where he backed companies such as Ring, Solar City, and Chegg. Kevin currently sits on the boards of Broadly, Soft Robotics, and Realized.
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