Le 17/07/2020

Investing in agricultural robotics: now is the time!

The global market for agricultural robotics is expected to reach $20 billion in 2025. As it helps expand production and improve efficiency, the demand for precision agriculture is increasing. In recent years, many companies have invested in research and development.

Nevertheless, in 2019, the agricultural robotics sector received the least funding from innovation capital investors. While the food e-commerce sector mobilized $3.9 billion[1] from investors, agricultural robotics mobilized only $179M.

In a time of growing need to find alternative solutions to the use of pesticides and to labor shortages, how can we explain such a reluctance of innovation capital funds?

A farm operates like a traditional industry, with production and profitability targets and with repetitive skilled tasks. But the significant difference is that it is dependent on crop production cycles, the variables of which change with the seasons.

The number of companies providing a decision support service through the development of software and sensors has exploded in recent years. The operational transcription of these recommendations from the data analysis is always carried out by the farmer.

The need is now to have an agricultural machine that is autonomous, fully reliable in the field and capable of repeating operations. This need is being made possible by the democratization of digital and industrial technologies, in line with the evolution and improvement of telecommunications networks, essential to the development of precision farming.

However, reliability is still one of the major obstacles to the adoption of autonomous robots. Each technical itinerary differs from one region to another and requires a specific adjustment to be made in the field.

Developing a fully autonomous robot takes several years and is correlated to the time of the agricultural seasons. The learning curve of the autonomous solution provider and of the farmer is long for these pioneers.

Although the first robots are appearing in the fields, investors remain skeptical about the efficiency and sustainability of these technologies, with questions revolving around development time, capital intensity, business model (sale of machines, sale of services, recurrence), exit prospects (acquisition by industrialist in what timing) ...

Innovation venture capital industries (VC) prefer the software business model because the hardware business model with which agricultural robotics is generally associated is not very secure. This explains the reluctance of traditional venture capitalists.

It must be noted that the existence of venture capitalists specializing in Agtech, and particularly in Europe, is as recent as the emergence of agricultural robotics. The investment teams are still new to the field, which is one of the reasons why small amounts have been invested so far.

But the lines are moving, at the same time as specialized funds are multiplying and their assets under management are increasing. Thus, € 1.6 billion have been raised in the Agetch and Foodtech sector in Europe over the past 15 months[2] : the agricultural robotics market is reaching a mature stage that is particularly attractive for investors.

Gartner Hype Cycle (Trademark) for Agtech [3]

The Gartner Hype Cycle curve, adapted here to the Agtech sector, makes it possible to categorize innovations according to their degree of maturity, their visibility and the expectations they create.

Not all innovations travel the curve at the same speed. Nevertheless, the schematic and simplified vision highlights the emulation of agricultural robotics. The sector raises the interest of farmers, the press and manufacturers, and although commercial viability has yet to be demonstrated, demand is growing.

The Covid-19 crisis has exacerbated the needs already identified for automation in agriculture. Labor shortage and the need to continue production during crises lead to the adoption of new technologies.

Agriculture is inherently a sector that must be resilient, and to achieve that, it must adopt the technologies.

Farmers' awareness of new technologies, the greater accessibility of these technologies, the changes in regulations, consumer pressure on manufacturers and producers... all these elements tend to accelerate the adoption of agricultural robotics, driven by investors who are becoming increasingly alert and experienced in the field.

[1]Source: Agfunder

[2]Source: Capagro

[3]Source: Capagro

Categories : #Markets
  • Juliette Raoul-Fortésa
    Venture Capital Analyst | Capagro
    GOFAR : Treasurer