We aren’t even halfway through 2017 yet, but AgTech startups have raised $320 million so far this year – nearly three times the amount for the same period in 2016. The buzz in the technology world is all around AgTech, including at our firm AMGlobal, so we stopped to ask:
Is AgTech 2017’s FinTech or, is the newfound focus on agriculture – and pardon the accidental food reference – just the newest “flavor of the month?"
In an increasingly ADHD investing world, it is always hard to predict future trends. Still, there are some strong indicators that, built on the strength of the FinTech boom, AgTech can stay hot for years to come.
You may remember the FinTech boom a few years ago – a sudden explosion of interest in using technology to increase access to financial services among the unbanked, especially in the global south. Blockchain, mobile wallets, and cryptocurrencies became hot topics for conferences and funded projects. FinTech startups raised more than $12.7 billon in 2016. And the investments are paying off. From 2011-2014, 700 million adults gained access to financial services according to the World Bank, largely as a result of disruptive financial technology and new business models that have cut inefficiencies in the financial system.
But if this is the “AgTech moment," why now? Why do we think AgTech is more than just a passing fad? The story lies in 5 simple trends, from A to E:
1. Aging – around the world, farmers are aging. Estimates put the average age of a farmer in the US at over 58, but countries as diverse as Colombia, Nigeria, and Uganda have similar numbers. There will be a generational changeover in land ownership with new, younger farmers set to inherit land and the responsibility for production. These farmers – many of whom are returning from cities – are more tech-friendly and tech-enabled. They know about and are often veteran users of apps, cellphone banking, and other technologies.
2. Banking – a decade ago mobile banking was in its infancy, but today it has taken off in many countries though its impact is largely still confined to dense urban areas. Banks and financial institutions in emerging markets are growing, but they need new customers and new business models to reach untapped rural markets and more ag-focused audiences. Connecting more deeply with the largest economic activity in most rural areas – agriculture – makes sense, especially as AgTech makes these farmers more productive.
3. Connectivity – while connectivity remains an issue, trendlines are very positive. Today some 80% of people in developing countries own a mobile phone. Internet access/cellular data is exploding, with new technologies from long-distance wifi to satellites to solar powered cell towers providing increasing bandwidth. From literally zero a few years ago, today nearly 40% of consumers in countries like Colombia and Ghana have smartphones, with non-urban markets set for strong growth.
4. Demand – demand and demographics rule. There are currently over 7 billion humans, but by 2050 we will be over 9 billion on the planet. A 70% increase in yield is needed to feed them, but today 30% of all food produced annually is wasted or lost according to UNFAO. In money terms, that’s a staggering loss of $150 billion in the global south. In human terms, it is the difference between hunger and security in many countries. AgTech can make both supply chains and production better – with the greatest efficiency gains for small farmers.
5. Employment – estimates vary, but according to the UN more than 125 million Africans will be aging into the workforce in just the next 10 years. High levels of unemployment and underemployment are endemic causes of instability across the global south. The 500 million small farms across the developing world are the planet’s largest employer. By improving payments, pick-up, and policy, AgTech can help 21st century agriculture move from a “way of life” to being a viable, attractive, sustainable business for hundreds of millions of people.
Is AgTech the future? The possibilities are striking. Taken together the 1.5 billion people in small farm communities around the world would be the largest country on earth. Raising their incomes and improving their productivity is a colossal business and development opportunity, one that might just save the planet. We see the possibilities and to address them our own firm, AMGlobal, is launching Agromovil, a simple-to-use, app-based platform that combines proven technologies – ridesharing, mobile banking, and microinsurance – to help get more goods to market – better, faster, and fresher.
Around the world technology is revolutionizing agriculture in ways yesterday’s farmers couldn’t imagine. Tomorrow’s agriculture will almost certainly be more productive, more sustainable, and more lucrative for farmers large and small. Why? Because today is the AgTech moment.