Australian startups will soon be leading the way in global agricultural technology, according to those working most closely with them. But that doesn’t mean they’ve got an easy road ahead.
Agtech has been an ongoing theme of 2018 so far, with several startups cropping up (pun intended) and raising millions to make life easier for the Australian farmers, producers and distributors.
In February this year, Agridigital, a startup using blockchain technology to track the grain supply chain, and to verify all deals throughout the chain, raised $5.5 million in a raise led by Square Peg Capital.
In April, another blockchain startup, BlockGrain, raised $3.5 million in an ICO pre-sale, before closing its ICO in July, having raised $4.63 million. The startup is intended to reduce inefficiency in agriculture, giving farmers and grain brokers better visibility of the supply chain, through a blockchain-based platform.
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More recently, we have seen farming software startup AgriWebb — which promises to digitise the notebook in farmers’ top pockets — raise a huge $14 million from British agricultural investment company Wheatsheaf, which also included the acquisition of British software platform FarmWizard in the deal.
And just this month, fledgling startup MEQ probe secured a $500,000 investment from farming industry heavyweights to test and develop its technology for testing the quality of meats.
Speaking to StartupSmart, Tristan Shannon, head of product at AgriDigital, says the agtech space has been “alive and well” for a while already.
“But it’s not as mainstream and hasn’t generated as much publicity and investors’ interest,” he says.
The uptick in investment and interest is coming from heightened consumer interest in where their food is coming from, and a desire to make healthy choices, and ethical choices, based on that.
For food producers, “there’s a gap in the ability to answer a lot of those questions”, he says.
“We’re seeing the digitisation of agriculture driven around the consumer desire to really understand their food,” he adds.
Andrew Lai is chief executive of SproutX, an accelerator and VC fund now supporting its second cohort of agtech startups. According to Lai, Australia already has a competitive advantage here.
“Australia is known for its fresh food and agriculture,” he tells StartupSmart.
However, “there’s a lot of conservatism within the agriculture industry”, and it can take time to get people on board. However, times are changing, Lai says, and people are starting to realise technology could be applied to bring efficiencies to all kinds of agricultural industries.
But Petra Andrén, chief executive of Cicada Innovations, which runs agtech accelerator GrowLab — also in its second year — says, actually, Australian farmers are very happy to adopt new technologies. In Australian, varied and often challenging farmland, along with high labour costs, mean farmers are forced to innovate.
“They don’t have a choice,” she says.
“Australia is home to every single type of crop that’s grown on the planet, because of our climatic diversity. When combined with the fact that our farmers are highly innovative early adopters, we make a great test bed for new agri technologies,” she adds.
And that test bed is paying off, Andrén says. Before launching GrowLab, Cicada conducted some research with agricultural producer-owned industry body Meat & Livestock Australia, to see what kind of research was being conducted in the agtech space in Australia.
They found “there were an awful lot of ideas to be unearthed”, she says.
GrowLab focuses specifically on science-based, or deep learning agri-food startups, helping research projects to grow into startups, and providing them with a “validated commercialising pathway”, Andrén says.
These types of startups are more likely to be funded through grants than VC funding, and so can often fly under the radar. But “agtech incorporates a broad range of solutions”, Andrén adds, and a lot of new and emerging technologies can be applied to what is a very traditional sector.
“What we see and are interested in includes deep technology, science-based businesses working on everything from robots and drones, driverless vehicles, ground-based sensors and aerial imaging, through to the analytics and artificial intelligence platforms needed to understand all the new data streams being created,” she says.
The SproutX VC fund has invested in 19 startups in the space of a year, Lai says, making it one of the most active startup accelerators in the world. All of this shows activity in the industry, which promises a bright future, he says.
Australians can get stuck in a mindset that the more developed agtech and startup sectors in the US, Israel or the Netherlands means those startups will be better than Australian ones.
“I don’t think that’s necessarily the case,” Lai says.
“There’s no reason some of our startups can’t do just as well.”
Andrén agrees, adding that agtech just isn’t a mature market in Australia yet, and so it’s lacking an existing pool of experienced mentors.
There’s value in “having a mentor pool — founders that have been there and done that, that we can tap into”, she says.
A the agtech sector is fairly young in Australia, so “we don’t have that,” she says.
Australia doesn’t have as developed an ecosystem as the likes of the US, Israel or the Netherlands, Andrén says.
“But we have things they don’t have, and there’s no reason we can’t catch up,” she adds.
The future may look bright for agtech startups, but that doesn’t mean it’s going to be an easy road for founders.
Shannon offers startups a word of warning, saying it can be easy to overestimate the size of the market. Sure, the agricultural sector is huge, but founders often find themselves “overstating the potential numbers of farmers who might buy their products”.
Startups should “do their potential market segmentation really accurately upfront. That will save them a lot of pain later”, he advises.
“When dealing with long-established industry have to be prepared for a slower growth rate than you would probably like,” he adds.
Despite the recent progress, many of these startups are asking their customers to change their business processes from those that have accumulated over years — even generations.
Startups have to work with their customers “and work side-by-side to go about changing business practices, as opposed to putting it out there and hoping they use it”, Shannon says.