Is Agtech the Answer to Smarter Farming & Food Production?

Think agri-food investment and for most thoughts of old-fashioned fixed assets such as land, grain elevators, heavy processing plants or fleets of vehicles are conjured up. Agri-food and technology investment are seldom synonymous in investors’ minds. This perception defies the reality as the agri-food industry has long been at the forefront of developing and adopting new technologies. Now investors appear to be increasingly alive to the opportunities agtech offers.

Take for example ChemChina’s recent $43 billion bid for Syngenta, the world’s largest agrichemical company. The deal is reportedly motivated by the promise Syngenta’s seed and agrochemical technologies offer towards addressing Chinese food security fears.

Mega deals are not the sole focus of agtech investment. According to a recent AgFunder report the food and agriculture technology sector attracted US$4.6 billion in investment in 2015, almost doubling the previous year’s total (US$2.4 billion), and a staggering 920% increase on the 2012 figure. Average ticket size tracked by AgFunder amounted to just US$6.8 million.

While investor’s appetite for the food & beverage sector shows no sign of abating, should we be concerned an investment bubble is forming?

According to KPMG, a record breaking US$128.5 was invested in venture capital backed companies in 2015. Despite growing by a factor of 9 in just three years, agtech still attracted just 3.6% of this investment – a disproportionately small share of investment, in our view, given the myriad of potential applications for technological innovation in the agri-food sector.