Rethinking the Financing of Agtech Innovation: Is Venture Capital the Best Path Forward?
Editor’s note: In a recent issue of Upstream Ag Professional, agribusiness analyst Shane Thomas provides insight into why there is a growing call for alternative funding models that blend venture capital with other forms of investment, such as concessionary loans or different approaches. Here’s a summary of that article:
The venture capital (VC) model has struggled to consistently deliver significant returns in agtech, with only a few major acquisitions. As a result, alternative funding models are being proposed to better support innovation in this sector. These models, such as blending venture capital with concessionary loans or adopting foundry-like approaches, aim to offer more patient capital and operational support. This is crucial because agriculture presents unique challenges, including regional specificity and a limited number of potential acquirers.
The question of whether VC is the best funding model for agriculture is debated. While many industry insiders might question why this matters, it’s essential to recognize that attracting investment and driving innovation are key to advancing the agricultural sector. Whether the goal is increasing production, decarbonizing processes, improving crop quality, or enhancing the lives of farmers and workers, effective funding is needed to bring new tools to market and deliver viable returns that continue to attract capital.
Some believe that VC is the best funding route, while others disagree. There may be no definitive answer but there are arguments for and against VC in agtech that often fail to fully address the complexities involved. One common critique is that the time horizon for VC is too short for agriculture. However, data shows that other sectors funded by VC also have long time horizons, with median exits taking around 13 years. This implies that the challenges in agtech may be more complex than just the issue of time horizons.
MORE BY SHANE THOMAS
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