Time to Focus on Precision Agriculture and Aquaculture Investments

THE OPPORTUNITY

Food production will need to increase by more than 70% over the next few decades to feed the expected growth in world population, increased urbanization and as emerging economies join the consumption class.  

  • World Population growth is expected to bring the earth’s residents to more than nine billion in 2050 from seven billion in 2012
  • Urbanization:  The World Health Organization estimated that a third of the world lived in cities in 1960; 54% in 2015 and is expected to reach 66% percent by 2050.
  • Growth in the Consumption Class:  The number of households with potential discretionary spending beyond the most basic necessities could increase to 4.2 billion people by 2025 from 2.4 billion in 2010 and about one billion in 1990.    

The McKinsey Global Institute estimates that the world will need to spend at least $57 trillion on infrastructure by 2030 to keep pace with that growth.   To exploit that growth, I believe it’s time to focus on Precision Agriculture and Aquaculture Investments

CONCEPT

Precision Agriculture (aka AgTech) will play a major role in that growth so it is time to start evaluating investments in this sector, which still is in its infancy.  In our opinion, there will be emerging technology companies that will enable growers to collect and analyze real-time data to significantly improve crop yield while reducing the demands on our natural resources such as land and water.   

Farmers long have determined crop health by visually examining a plant’s physical characteristics such as color and size, which could signal potential problems.  It’s a subjective and time consuming process especially for large farms where the data could be weeks old.  To improve critical business decisions, farmers, for example, could mount thermal imaging cameras on an unmanned aircraft or drone to collect real-time information for analysis.  

Drones and thermal imaging cameras aren’t the only items that farmers will need to produce food more with less resources.  Crop production is a complex business which require skills in biology, agronomy, mechanics and marketing.  Data collection, the Internet-of-Things (IoT), Data Analytics, Cloud Storage, SaaS and a host of other technology often discussed in everyday life such as home monitoring, fitness lifestyle and automotives can play a major role throughout the entire crop production process including, soil preparation, planting, nutrient management, irrigation, drainage and harvest.  

It’s not just the technology itself that will be subject to change.  The very way we farm will change as well.  Land resources suitable for farming is diminishing combined with consumer’s desires to eat healthier from locally sourced food will make way for new agriculture techniques.  For example, vertical farming and vertical aquaculture will enable us to produce more organic and non-GMO food per acre faster and closer to where it ultimately will be consumed.   

PrecisionAg is in its infancy so there is plenty of time for entrepreneurs to create and/or identify disruptive technologies, which should interest investors.  It’s not just in the crowdfunding arena but the venture capital community and corporations have shown an interest as well.  In fact, Monsanto in October 2013 placed a huge bet in the space when it acquired a data sciences company founded by a team of software engineers and data scientists from Silicon Valley technology companies, including Google.  The company called The Climate Corporation was purchased by Monsanto for $930 million.   

INVESTMENT OPPORTUNITIES ON THE HORIZON

In many ways, PrecisionAg reminds me of the mid 1980s when the networking space was just unfolding.  It was the wild west.  A very large number of companies were started, funded and went on to become publicly traded companies.  Wall Street even had dedicated “networking” analysts to cover companies such as Novell, Synoptics, Wellfleet, 3Com, Cabletron Systems, Lannet Data, Newbridge Networks, Ungermann-Bass.  

A lot of money was made and lost in networking until it the industry consolidated and became dominated by Cisco.  I’m not sure we will see a company as successful in Precision Ag as Cisco was in networking, but there will be plenty of opportunities to bet on the potential winners in the early and late-stage of their financing cycle as well as in the public markets.  So stay tuned.  I believe it’s time to focus on identifying Precision Agriculture and Aquaculture Investments

 

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