Making the Case for Supporting Agtech Investment

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The market for AgTech investment is growing. According to AgFunder, in 2016 there was $3.23 billion dollars invested in 580 AgTech deals. Investments in US firms represented 40% of of those deals, followed by investments in India, Canada, UK, Israel and France.
However, investments in Africa and most of Asia remain low, a missed opportunity given that this is where the majority of the approximately 500 million small-holder farmers in the world who produce 70% of the world’s food are located.
While there are challenges to encouraging AgTech investment in emerging markets, donors and impact funds and other actors in the entrepreneurial ecosystem can play a role in attracting capital to this growing field.
A Nascent ICTforAG Investment Ecosystem
While there are a number of promising investment areas including ICT extension services to farmers, digitization of farmer profiles and information in order to offer other services, applications to help farmers make better decisions and utilization of data and analytics, there is not yet a dominant technology or business model in the ICT4Ag space. The lack of a clear consensus on what investments are working and generating returns keeps away risk-averse investors.
Additionally, while investments are global, venture capital firms are geographically concentrated in the United States and Europe. The United States accounts for nearly 70% of global venture capital. Investors are inundated with requests for funding, and depend heavily on their networks to source and evaluate potential investments.
A recent report by Village Capital found that 90% of investments in digital financial services companies in Africa went to start-ups with one or more European or North American founders. Finally, many traditional investors are unfamiliar with the emerging market context and lack the risk appetite to invest in new innovations.
The Role of Donor Financing in ICTforAg
At the “Where are the AgTech Investment Opportunities” session at ICTforAg 2017, a panel included representatives from USAID, OPIC, Village Capital, Omidyar Network and the Bill and Melinda Gates Foundation discussed the role for donor organization and social venture firms to play in “de-risking” early stage investments and help test and scale new technologies so they are ready for traditional venture capital.
USAID, through a variety of programs such Development Innovation Ventures and the Grand Challenges for Development has supported a number of promising AgTech companies including Hello Tractor, low cost smart tractor company based in Nigeria, and Ignitia AB a Stockholm based company that provides localized weather forecast in sub-Saharan Africa.
Similarly, the Bill and Melinda Gates Foundation and Omidyar Network are supporting Radiant, which provides geospatial technology and analytical tools for development professionals.
Donors and impact funds also have a role to play in supporting public goods (i.e soil maps) and organizations which influence policy. These investments may not generate any immediate returns but could unlock a number of subsequent innovations.
Donors should continue to support these organizations and also share information about the technologies and business models that are working with the wider AgTech community. Similarly, companies that are seeking investment need to make themselves competitive by developing and continuously refining their business model, attracting top talent and demonstrating their ability to adapt as circumstances change.
As the market for AgTech investment in emerging markets continues to grow, it is important that donors, investors, incubators and others in the entrepreneurial ecosystem continue to support new technologies and share best practices. Demonstrating what is and is not working within AgTech innovations can unlock additional capital to support entrepreneurs and innovations with the potential to improve the lives of millions of farmers.
By Sabeen V. Dhanani, Deputy Coordinator, Digital Development for Feed the Future, U.S. Global Development Lab, USAID