Australia is lagging well behind the rest of the world, when it comes to venture capital investment in agricultural technology, the AgriFutures evokeAG conference has been told.
Finistere Ventures co-founder Spencer Maughan said Australia’s AgTech investment market was small, at an early stage and not keeping pace with global trends.
“A lack of experience may exist within the Australian investment community in regard to assessing risk and pricing investment opportunities accordingly,” Mr Maughan said in an earlier report.
"On a per capita basis, investment in AgTech in the United States is nearly 50 times greater than in Australia."
He told the conference, in 2016, there was only US$3 million, or less than 12 cents per head of population, invested in AgTech in Australia.
That compared with America, where the figure was US$1.87b, or $5.80 per capita, while Israel had figures of US$52m and a per capita investment of $6.05.
Between 2014-17, 77pc of all investment in Australia went into farm management software, sensing and the Internet of Things, with the rest going into other agricultural production and supply chain technologies.
This compared with the global investment trend, which saw 87pc investment in agricultural production, with only 13 pc in software, sensing and the IoT.
“In Australia, the market is very different,” Mr Maughan told the conference.
“One of the really clear things is there appears to be a growing amount of capital going into the super early stage, the seed stage deals, and we haven’t seen it in later growth stage capital.”
Venture capital
Finistere Ventures is a venture capital firm specialising in startup, early and late-stage investment, growth capital, and series A investments.
Series A financing is the first round of funding given to a new business once seed capital has already been provided.
At that point, external investors are given company ownership for the first time.
In a report last year, Finistere said Australian agriculture was expected to make further inroads into export markets around the world and become an A$100 billion industry by 2030 — matching the country’s mining and construction sectors
Those ambitions could not be met, without further AgTech investment.
Mr Maughan said the Australian venture capital market was “a little bit less sophisticated,” than the rest of the world and very different to global trends.
Most of the money was going predominantly to the digital space, such as the Internet of Things and sensors.
“Pretty much everything is significantly less, to a little bit less, in terms of allocation, except in terms of IoT, where it is disproportionately dominant.
“Is it over invested, at least from a seed point of view?
“Are there that many good entrepreneurs and ideas?
“Or maybe there are some other, better opportunities, in breeding technology, genetics, things Australia has typically done very, very well.”
Overseas, plant and crop science investments dominated global funding
Last year, they stood at about 50 per cent of all investment, with precision agriculture, sensors and farm equipment running at 11pc.
Positive outlook
But Mr Maughan said the underfunding was positive, from a venture capital point of view.
“We think it presents an opportunity that affects pricing,” he said.
“It also means many more entrepreneurs and companies are chasing a really limited amount of money.
He said AgTech investing was no different from any other venture sector.
"I think you have to look at the same sorts of things when you are starting a company, or investing in a company.
“One of the things you need, from a venture point of view, is a dynamic market.”
In the last decade, consumer preferences had changed, primarily driven by millennials.
“Post World War Two, consumers were looking for quality food, safe and consistent, processed food.
“This happened for a long time and got things like Spam happening.
“High-quality food, at least in the US now, is becoming more and more connected with local, traceability, highly nutritious fresh food, and that has altered the connection of consumers with the supply chain.
“In the last five years, the top five consumer packaged goods companies have lost almost $20 billion in market share.
“It’s happening quite quickly when you think about the aggregate number.”
There was now “real momentum” for venture capital in AgTech.
“The hype is backed up by real, quantitative analysis. Since 2012, over $7billion has been deployed, every year.”