The future of AgTech: Venture Capital and RDCs
Australia is a global leader in agricultural production and agriculture is a cornerstone of the Australian economy. The agricultural sector’s contribution to the Australian economy and society are not limited to the food we eat, the clothes we wear, or the $60+ billion in farm-gate output per year, but extends to the stewardship of over 446 million hectares of agricultural land – one of the largest agricultural areas in the world.
But we can’t rest on our laurels lest we be left behind. Advancing Australia’s agricultural industry depends on targeted and practical innovation to improve productivity and build resilience in the industry.
Role of AgTech
For such an important contributor to the economy, the agricultural sector is generally considered one of the least digitised industries. Innovation in agricultural technology (AgTech) has the potential to make a considerable contribution to the future of the Australian agricultural sector and the goal of making it a $100 billion industry by 2030 (Modernising RDC System Discussion Paper 2019).
AgTech is a relatively nascent industry within Australia and innovation in this space has been primarily driven by universities, Rural Research and Development Corporations (RDCs) and private enterprise. Despite the research support from existing organisations, issues have evolved which have limited commercialisation and technology adoption.
Issues in commercialisation
AgriFutures discussed the growth in AgTech startups and issues arising from a failure to understand the complexity of farming resulting in solutions that do not target problems experienced by producers.
Similar issues have been highlighted in recent submissions in response to the Department of Agriculture’s discussion paper ‘Modernising the RDC system’. While the submissions emphasised the overwhelming importance of the RDCs and their need to be supported in future, there is a perceived disconnect between the application of research and solutions to real world problems faced by farmers. This is mirrored in the Global Innovation Index of 2018 placing Australia at 76th in the world for its innovation efficiency ratio, being the translation of research into real-world outcomes.
Conversely, the submissions also suggest that those solutions developed which do have real world application and can provide a tangible benefit to those in the sector are often under commercialised or not adequately funded to achieve sufficient scale and build trust with primary producers. This issue of funding the extension and commercialisation phase, particularly in the AgTech sector, is on stark display in the United States Studies Centre’s recent report into Australian AgTech. This report showed that whilst Australia’s venture capital market doubled in size between 2016 and 2017, AgTech investment in Australia remains comparatively low by world standards with our per capita AgTech investment being less than 2% of that of the United States.
Funding and collaboration
There is no easy fix for these issues, but progress can be made through the results of the review into the RDC system. The critical areas of focus need to be:
- building on the strengths of RDCs, such as ensuring long-term research priorities remain a focus rather than resorting to short-term thinking or seeking immediate ROI;
- the continued support of Co-operative Research Centres to provide a link between industry and researchers;
- the need for greater engagement and collaboration between RDCs and the AgTech startup sector, such as RDCs embracing AgTech entrepreneurs as key stakeholders when evaluating investments and initiatives;
- increased cooperation between RDCs, building upon recent initiatives such as the ‘Accelerating Precision to Decision Agriculture’; and
- introducing consistency across the RDCs in respect of research, development, extension and adoption to provide a clear and consistent framework to facilitate greater collaboration with, and investment from, venture capital.
Attracting venture capital investment is a key component to solving the commercialisation issues facing the industry. While RDCs have a demonstrated history of identifying key issues in their relevant sectors (such as traceability and provenance in the wine sector and biosecurity risks in egg production), there has been a bottleneck in the transition from research to commercialisation which has been largely caused by inadequate funding and a lack of cohesion with the entrepreneurial sector.
Growing Australia’s agricultural sector to a $100 billion industry by 2030 will require not only unprecedented collaboration between government, research organisations and industry, but a new focus on attracting external investment to better facilitate the commercialisation of research in the AgTech space. All stakeholders must come together to give Australia the AgTech industry that our natural competitive advantage deserves.
Thank you to Jeremy Harrison for his assistance in putting this article together.
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