Rethinking AgTech
Could taking a local first, global second approach deliver greater benefits?
I’m heartened to see discussions about the suitability of the current AgTech investment model finally coming out into the open, although I’d like to see the conversation broadened to other aspects of the AgTech development and investment model. Here are a few thoughts to throw into the mix.
Sydney is not Silicon Valley.
The vision is scalability, and the aim is to produce AgTech unicorns that generate billions for the Australian economy. However, the reality is that despite significantly more investment over a much longer period, the Australian tech sector has only produced nine unicorns with a cumulative valuation of around $35 billion, suggesting limited scope for Australia in the AgTech/AgriFood space.
AgTech is not consumer tech.
Farmers aren’t consumers, they run multimillion dollar farm enterprises with the same needs and concerns as other similar sized enterprises. Businesses are less tolerant of risk, inconvenience, failure, poor service and data misuse than consumers, and farmers are no different. A B2B or B2E model may be more appropriate than the B2C one we appear to be following.
Revolutionary change in agriculture is rare.
The pace of change in agriculture is slower than any other industry, not because farmers aren’t innovative (they are), but because of biology – growing things takes time (1 crop a year for orchardists and most grains farmers). Think of tech as a bacterium that can double its population every 20 minutes (E. coli) and agriculture as a human population that takes 30 years to do the same, In the time it takes us to produce a single generation, E. Coli has produced 788,400 – the faster the doubling time, the faster things evolve. A fail-fast, iterative development mentality simply can’t work when the definition of ‘fast’ in agriculture is counted in years, not hours, days or weeks.
Focus on local before global
The push to scale AgTech solutions for international markets appears to be diverting focus away from local needs, meaning companies that could serve the needs of local farmers either struggle to get investment (not scalable), or are pushed to pivot or customise their products for international markets to get investment. What’s the cumulative opportunity cost to Australian farmers because potential one or two per-cent gains in productivity and profitability have been ignored, or failed to gain funding because they weren’t considered scalable? Now factor in the loss of potential employment, particularly in regional areas, or the fact those small companies may have continued to innovate and develop new products and services that may have been scalable and the true potential impact becomes obvious.
Unintended consequences
The push to scale AgTech solutions for international markets could ultimately hurt Australian farmers. Australia is not the US or Europe. Our climate is drier, our soils less fertile, our markets are deregulated and lack subsidies or protections, and as a result our farming systems are markedly different. Targeting products to meet the needs of US or European farmers over our own has the potential to erode our farmers’ ability to compete in international markets and the value of our agriculture sector. This would be like the RDCs deciding there was more money to be made in developing research for international markets rather than our own.
Given the above, I’d like to see more discussion around an alternative model that focuses on supporting smaller, regional AgTech companies that deliver practical, locally grounded innovations without the distraction of chasing international scalability. The aim should be to support these companies to become revenue positive and self-sustaining as quickly as possible, so they can continue to innovate, evolve and then work with those that have the potential to scale, albeit considering the impacts on our own agriculture sector.