AgTech: Challenges and Opportunities for Sustainable Growth
37 Pages Posted: 2 May 2014
Date Written: April 2014
In this white paper, we provide an overview of a new emerging economic sector: sustainable agricultural technology or, more simply, “AgTech.” This sector has the potential to completely reshape global agriculture, dramatically increasing the productivity of the agriculture system while reducing the environmental and social costs of current ag production practices. Given that we must produce more food in the next forty years than during the entire course of human history to date, and must do so on a planet showing signs of severe environmental stress, AgTech innovations will be absolutely essential. We believe humanity can rise to the occasion and overcome these monumental global challenges, but to do so will require sustained attention, significant investment, and AgTech-specific entrepreneur support systems to help spur innovation in the field.
Our purpose in writing this paper is threefold. First, we seek to increase awareness of the productivity and sustainability challenges of the food system and inspire entrepreneurs to enter the field. Total demand is expected to rise 70 percent by 2050, and current growth rates in agriculture are not sufficient to meet this goal. However, the ag sector faces an even greater challenge because of the uncertainty posed by climate change on future production and constraints posed by the limited availability of land, water, and other key resources. These twin challenges of productivity and sustainability translate to countless opportunities for innovation across the complete value chain, from inputs and agricultural production to transport, processing, distribution, storage, and waste disposal. Visionary entrepreneurs will have the ability to solve pressing societal challenges while capturing the economic value of their new AgTech products and processes.
Our second purpose is to help increase the flow of capital to investments in AgTech. The agriculture sector as a whole is one of the world’s largest economic sectors, with net farm income of around $120 billion and farm assets at around $2 trillion with little leverage. Yet there has been relatively little investment in AgTech compared with other industries like clean energy. Venture capital firms compiling portfolios of new AgTech companies are seeing more startups seeking funding than available capital, and other investor groups thus far have not entered the field in significant numbers. Given the size of the potential market and the vital societal need for agricultural innovation, we expect that investors soon will realize the opportunity of AgTech and invest substantially in this emerging field.
Our third purpose is to highlight the need for regional AgTech entrepreneur support systems to accelerate innovation. We believe that the American heartland provides an ideal example of a region poised to make great strides forward in developing an entrepreneurial sector for AgTech. The heartland has some of the world’s best growing conditions and natural resources, and currently produces 27.2 percent of the world’s corn, 29.75 percent of its soybeans, 6.7 percent of its beef, and 6.9 percent of its pork, making this region an epicenter of global agricultural activity. The heartland houses some of largest and most progressive agricultural companies in the world, looked upon as leaders in their field. The heartland is blessed with highly developed transportation networks along its waterways and railroads, allowing for efficient logistics and transport of ag products. In addition, the heartland has world-class AgTech research capabilities with its land-grant universities and city-level clusters of expertise, such as plant sciences in St. Louis and animal sciences in Kansas City. Given the overall AgTech entrepreneurial activity in the region and the large number of significant multinational players, the American heartland can be a powerful influence in driving the objectives of the AgTech revolution. Taken together, these resources indicate a regional competitive advantage in AgTech, similar to what the Silicon Valley cluster has provided for the IT industry. For these reasons, we believe a concerted effort to develop a regional AgTech entrepreneurial support system will result in immense benefits for the region itself and set an example for other agricultural communities across the world.
We hope this paper launches a larger dialogue on the monumental challenge of sustainable food production for the next forty years and opportunities for the AgTech sector to help solve this challenge. We look forward to hearing your thoughts and ideas on these important topics.
Keywords: agtech, agriculture, technology, sustainability, entrepreneurship, innovation
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