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Private Equity and Venture Capital Investment in Ag Tech Grow Despite Headwinds

Summer 2017

Despite economic headwinds, private equity and venture capital investors are showing a continued interest in agricultural technology opportunities, particularly in biotechnology.

The number of ag tech deals looks promising this year after increasing once again in 2016. CrunchBase statistics show that more than three times as much money went into ag tech investments in early 2017 as in the same period in 2016.[1] AgFunder and CrunchBase logged 422 ag tech deals in 2016, compared with 373 in 2015 and 230 in 2014.


Although the absolute dollar value of deals dropped from 2015 to 2016, this was linked to a decrease in the “other” category dominated by irrigation – not in ag biotechnology, innovative food, farm management software, robotics and mechanization, novel farming systems, or supply chain technologies.

Two significant headwinds

Investment is increasing despite two significant economic headwinds.

The first headwind arises from trends in agricultural commodity prices over the last five years. Corn prices, in the $8 per bushel range in 2012, have been sliced in half.[2] Farmers look back wistfully at “beans in the teens” as soybean prices have failed to hold at $10 per bushel.[3]

The effect on net farm income has been significant; 2017 is expected to tally a fourth consecutive year of decline from the record high reached in 2013. Farm income last year neared levels last seen in 2009, during the depth of the Great Recession. If reality matches forecasts, 2017 net farm income as adjusted for inflation will drop even further, to levels not seen in 15 years.[4] The resulting reduction in agricultural purchasing power is generally expected to cause farmers to take fewer risks – including pursuit of new technologies. That, of course, directly affects companies developing those technologies.

The second headwind stems from pending mergers and acquisitions among the world’s six biggest agribusiness companies, which are the logical purchasers of innovative agricultural technology. As work continues on several major ag input industry deals, it is reasonable to expect the market for venture and early stage exits to remain slower paced in the near term. “Most of the large agribusinesses were conspicuously absent from the list of acquirers,” AgFunder noted in its survey of 2016 ag tech investments.[5] Yet Monsanto’s recent purchase of HydroBio and MGV’s role as co-lead of NewLeaf Symbiotics $24M series C along side Otter Capital serve to illustrate the natural buyers of ag tech companies are not completely on the sidelines.

In this environment, continuing investor interest in the promise of ag tech solutions might at first seem counterintuitive. However, if the ag industry is able to develop and coalesce around common operating systems, then the promise of ag tech can unlock significant efficiency gains.

“Ag tech solutions that are focused on data analytics that enhance farmers’ strong intuition and decision-making skills are well-positioned,” says Context Network principal Paul Watson. Ag tech solutions leveraging multiple unique data layers can provide farmers better information about farm conditions more quickly than traditional methods such as scouting. These new solutions are also positioned to generate more accurate forecasts than traditional crop models.

According to Watson: “Farmers’ intuition and experience are often underestimated. Ag tech solutions that simply validate what a farmer already knows are of little value to farmers. Farmers are savvy business people who will pay for solutions that put actionable information in their hands more ‘real time’ than they can get it today.”

Two significant tailwinds

The ag tech investment field is expected to mature in the next few years, driven by two market realities:

  • Conditions seem ripe for the consolidation of several promising but struggling technologies into a platform with the scale to drive standardization and profitability. Key influencers in the agriculture industry are moving beyond what some call “the trough of disillusionment” within ag tech – when the wide-ranging potential was found to be difficult to achieve and not universally profitable. As technology providers and their investors seek to convert whiz-bang ag tech solutions into actual value capture, it is likely the industry will seek to combine ag tech solutions and information from multiple unique data layers to deliver greater efficiency in agriculture, which is the elusive promise of ag tech.
  • Many ag tech tools represent tangible methods to improve the use of resources – at a time when the definition of “sustainability” in agriculture seems to be maturing. In the past, the term was associated with doing well by doing good, often at the expense of return on investment. Today many in the industry view sustainable solutions as inherently more cost-effective, as the demand for food continues to grow while available resources do not. Alex Hittle, senior associate at Context Network and a business school lecturer at University of Hawaii, points out, “Sustainability is being folded into long-term profitability and no longer means accepting lower returns in exchange for positive externalities for the planet.”

The biotechnology renaissance

After a period during which drones, satellites, and in-field sensing equipment were in vogue, interest in ag biotechnology seems to be experiencing a renaissance.


Ag biotech-related companies drew $720 million in investments in 2016, more than double the dollars invested in 2015. Compared with 2014, it represented a compound annual growth rate of greater than 20 percent.

In addition, several biotechnology companies are among those reaping investment dollars already this year, according to CrunchBase. Among the biotech companies that have garnered investments in 2017 are Benson Hill Biosystems, Inocucor Technologies, and TL Biolabs.

“As consumer focus on nutrition and sustainability continues to grow, investors are rewarding companies that can leverage the combined power of advanced data analytics and a deep understanding of plant biology to capture new market opportunities, from tools that improve the genetics of nutrient-dense crops to soil microbes that replace the use of chemicals,” notes Natalie DiNicola, Ph.D., senior associate at Context Network focused on sustainability in agriculture and the food value chain.

The Context Network has years of experience in helping innovators of agricultural technology develop go-to-market strategies that create value for farmers and other stakeholders across the ag-food value chain, while enabling technology providers to capture value from their investments. Context also helps investors interested in ag tech identify well-positioned technologies and companies.

For more information, contact Paul Watson at