How Ag-Tech Ripened Into a Growing Market

How Ag-Tech Ripened Into a Growing Market
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This story appears in the December 2015 issue of Entrepreneur. Subscribe »

This article is part of our Trends 2016 coverage.

With the rise of data-crunching agricultural software, farmers these days are digging as much in data as in dirt.

“It is as frothy as I have ever seen it,” Adrian Fortino says of the ag-tech software market. In 2012, as an investor with First Step Fund, Fortino invested in a seed round for FarmLogs, an Ann Arbor, Mich.-based developer of software to help farmers map and predict crop yields, rainfall and other essential data. “But in the course of the last three years, we’ve seen a dramatic explosion,” says Fortino, who now leads the Ann Arbor office of venture capital firm Mercury Fund.

That is due in part to an attitude shift among the farmers themselves. “You always have this adoption curve for technology, and ag is not any different,” Fortino says. “There will always be some people who operate on the basis of feel, but more and more people are moving away from farming by feel [alone].”

Investment in ag-tech in 2014 reached $2.36 billion, according to online marketplace AgFunder, and had already reached $2.06 billion by mid-year 2015. September’s Ag Innovation Showcase in St. Louis was the biggest and most diverse in the 6-year-old event’s history; organizers tallied that presenting companies raised $430 million.

Fortino says this suggests that industry development is adapting to macroeconomic trends. “If you look at the numbers, by 2050 we will need to double ag production to feed the world,” he points out.

Ag software runs the gamut from basic business operations -- reducing paperwork, improving productivity and enabling e-commerce -- to specialties such as drone and robotic technology for overseeing fields, moisture levels, pesticide and fertilizer usage and equipment, as well as for predicting crop yields and commodity prices.

Jeff Beck, controller of Lagomarsino Group, a Visalia, Calif., grower and commercial real-estate company, says such software has created a massive and rapid shift in his business. “When I started here in 2008, everything was handwritten. It was a huge commitment and a huge waste of time.”

Many who’ve relied on traditional methods are coming around to using software that adds human input for a more complete picture. For example, a computerized model for predicting dairy prices can’t always incorporate breaking news, such as a milk-powder scare in China, into its formula. “There are some things that a human does better than a machine,” says Mike Neal, co-founder and CEO of DecisionNext, a San Francisco firm that creates software for prescriptive analytics.

Neal says international firms have been more willing to accept that hybrid analytics will make a difference for them, but as U.S. farmers become assured of the safety of the data, they are coming around as well. Those in commodity-based agriculture, such as cattle ranchers, have been earlier adopters than smaller, organic and specialty farmers.

There’s mobile ag-tech, too. Downers Grove, Ill.-based developer Lextech Global Services worked on an iPhone app that would allow one person to load a truck from a grain elevator, rather than two. Lextech advisor John Hennessy says businesses that used the mobile assistant had a more predictable and safer loading process and increased their efficiency by up to 20 percent. Using technology to help schedule truck loading and unloading can reduce the time drivers sit in line.

What’s more, farmers can act quickly on data conveyed by mobile apps. “They do not need to wait an hour or a week to get a report. If you suddenly saw trucks come from the fields with strawberries in a higher level of rejection than usual, you can stop harvesting immediately, and not wait until the end of the day,” Hennessy says, noting that such decisions immediately cut losses. “The farm world is a more complex and more data-driven world than people expect.”

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