The agricultural revolution is here. Will Canada keep up and invest in agtech?
Tim Smith/The Globe and Mail
From mushroom-picking robots in British Columbia to drones buzzing over Saskatchewan wheat fields that hunt for weeds, companies in Canada’s emerging agtech sector are racing to remove the least efficient element of modern-day farming from the equation: humans.
That push to bring the worlds of technology and agriculture together has taken on new urgency in recent months amid threats to food supplies from high fertilizer and commodity prices, the war in Ukraine, labour shortages and drought across many parts of the world. In just the first half of this year, venture capital investors injected a record US$5.6-billion into agtech companies worldwide, up nearly 20 per cent from the same period a year ago, according to U.S. market data firm Pitchbook.
Yet a disconnect exists between Canada’s vast agricultural resources and what many people in the industry see as its underwhelming agtech footprint. While Canada has produced many cutting-edge agtech companies, the country lags the United States in financing and developing technologies that can improve farm yields, create new products and slash emissions.
How successful Canada is at closing that gap could go a long way in determining whether the country lives up to the oft-repeated rhetoric of being an agricultural superpower or settles as an also-ran.
DAVID MCNEW/AFP/Getty Images
“Agtech has suddenly become an asset class that’s critical in the short term to preserve our ability to feed our own population here in Canada, but, more importantly, we’ve got a growing worldwide population, so we need to increase yields while also reducing our carbon footprint in this space,” says Sean O’Connor, managing director of the venture capital arm of Saskatchewan’s Conexus Credit Union and its Emmertech agtech fund.
The term agtech is a catch-all for a lot of different innovations in the agriculture sector and includes everything from vertical farming – in which layers of crops are grown indoors to maximize space and robotics – to remote crop monitoring, alternative proteins and biosciences.
And yes, self-driving tractors. Earlier this year tractor giant John Deere rolled out its first fully autonomous tractor at the Consumer Electronics Show in Las Vegas. Equipped with six stereo cameras and advanced artificial intelligence, the tractor can make its own way to a field to plow soil and sow seeds, navigate around obstacles and be fed new tasks from a farmer’s smartphone.
What all these technologies aim for is to do more with less. Available farmland per capita is in decline around the world, meaning even without the current disruptions to food supplies from war, supply chain bottlenecks, labour shortages and high prices, yields must rise to avoid a spiralling food crisis.
Global investment firms have latched onto the sudden interest in agtech. Last year Seoul-based Mirae Asset Global Investments launched the Globe X AgTech Food and Innovation ETF, which trades on Nasdaq. Then, this past April, BlackRock launched the iShares Emergent Food and AgTechETF.
Regina-based Emmertech, which launched last year, raised $60-million from farmers, agribusiness owners and financial institutions focused on the agricultural space, including $15-million from the Saskatchewan government.
DARRYL DYCK/The Globe and Mail
That made Emmertech the largest pure agtech fund in Canada, which Mr. O’Connor considers a badge of success, but also a “pretty big red flag.”
“If we’re the biggest in Canada it shows there’s a lot more room for growth,” he says. “We need someone to come take the mantle from us in the future.”
Data compiled for The Globe and Mail by Pitchbook show how Canada’s agtech sector has fallen short. Last year, US$6.9-billion in venture capital financing flowed to U.S. agtech companies, while Canadian agtech companies attracted just US$270-million. One Vancouver-based agtech company, Semios, which provides crop analytics and pest management tools to fruit and nut tree growers, accounted for US$79-million of that haul alone.
Based on the rule of thumb related to the 10-to-one population ratio between Canada and the U.S., agtech investments here should have been closer to US$700-million. If a roughly five-to-one ratio of available farmland were used, much more than US$1-billion could have been expected to make its way to Canadian companies last year.
“One of the biggest things holding back the industry in Canada is the lack of available capital,” says Mr. O’Connor. “It’s not just, can we get capital into this space, it’s can we get capital that follows the right playbook for agtech.”
Technology is in no way new to the world of farming, at least among progressive farm operators.
On Kristjan Hebert’s 22,000-acre grain and oilseed operation outside Moosomin, Sask., near the border with Manitoba, large screens in his office display detailed maps of the varied nutrient and water levels across his fields, all fed by soil probes deployed every four acres, as well as the location of all his equipment, where it’s been and how much fuel has been used. When he’s not in the office, all that information is fed in real time to his smartphone.
“The top businesses in the world are going to be those that can pivot and adapt to changing circumstances the quickest,” says Mr. Hebert, a chartered professional accountant who left that sector 13 years ago to return to the family farm.
Mr. Hebert now sits on Emmertech’s advisory board, and he regularly beta tests new technologies from agtech companies around the world, including farm management software, high-efficiency fertilizers, grain bin monitors and algorithm-driven apps that monitor soil moisture to forecast yields.
“You want data that can be used to make decisions, not to just sit in a binder on a corner of the desk,” he says. Tech entrepreneurs can easily get wrapped up in the excitement of new innovations, but not every idea is a good idea or one that’s financially feasible for farm owners.
To that end, Cultivator, an agtech accelerator program associated with Emmertech, has launched the Million Acres project, with the goal of recruiting farmers worldwide who represent that total area of land to advise agtech startups on actual problems those farmers want solved.
“A lot of times there’s a disconnect because producers are left out of the rooms where innovations are happening so we want to get them involved from the earliest stage possible,” says Ami Caragata, a program co-ordinator at Cultivator.
Tim Smith/The Globe and Mail
The demands on agtech companies can also be very different from the software and other information technology sectors in which Canada has had more success building big, international players, and where most venture capital is currently directed. According to data from the Canadian Venture Capital Association, agribusinesses raised just $1 of capital for every $52 that flowed to companies in the information and communications technology space last year.
For one thing, the startup mantra of “fail fast, fail often” that dominates so many parts of the tech world is particularly ill-suited to the business of agriculture. Unlike a software or e-commerce company that can quickly bring a product to market, then learn from user feedback and make iterative improvements over time, agtech innovations tend to require more upfront capital to create a finished product, often with a hardware component, that’s reliable for customers from Day 1.
“These farmers are trusting you with potentially one-30th of their lifetime income every year, so the penalty for failure is very high,” says Daniel McCann, the chief executive officer of Regina-based Precision AI, which is developing aerial drones powered by artificial intelligence that are capable of precision spraying weeds in fields.
Launched in 2018, Precision raised $20-million last year, in seed equity and grants, to develop its 20-foot-wingspan drones. With a database of more than 14 million images of various types of plants, the AI on board the company’s prototype drones can differentiate weeds from crops while flying at up to 70 kilometres an hour. “Yeah, these things rip,” he quips.
Currently that weed map can be fed to industrial-sized sprayers that activate spray nozzles solely over weed patches, as opposed to broadcast spraying weed killer on entire fields. In time, Precision plans for its drones to self-deploy from a trailer, spray weeds directly, then return to home base to recharge and reload.
Ultimately, Mr. McCann envisions a spray-as-a-service model involving swarms of Precision drones, replacing the need for farmers to each buy spraying equipment that can easily cost more than $500,000 and requires people to operate it.
“Artificial intelligence is probably the greatest game changer in food production in human history,” Mr. McCann says. “The robots are going to be growing our food and that’s not just aspirational geek talk.”
As that digital revolution in farming unfolds, it will increasingly take place away from Canada’s traditional centres of finance and innovation, and closer to end users such as farmers, agronomists, crop insurers and others in the industry. The result will be a more geographically diverse agtech ecosystem than sectors such as fintech and AI, which have tended to form around hubs such as Toronto and Montreal.
“This is the first wave of innovation we’ve really ever seen in Canada that belongs in these areas,” says Mr. O’Connor, pointing to places such as Saskatoon, Regina, Brandon, Man., Guelph, Ont., B.C.’s Okanagan region and parts of New Brunswick. “We’ve always fought over the crumbs Bay Street, Montreal and Vancouver spit out to us.”
For Mike Boudreau, the founder and CEO of TechBrew in Salmon Arm, B.C., in the province’s Interior, the potential for robotics to revolutionize how crops are picked drew him to the sector. TechBrew has designed and built robots that can squeeze into mushroom growing racks to gently pick, trim, clean and pack mushrooms.
It’s an industry facing an acute shortage of labour at a time when the market is growing 10 per cent a year, says Mr. Boudreau, who noted the work environment is “stinky, cold and humid,” and producers require overwhelming numbers of temporary foreign workers. Also, because mushrooms double in size every 24 hours, a robot that can pick around the clock can result in up to 20 per cent higher yields, he says.
“This is the biggest market opportunity I’ve seen in 40 years,” says Mr. Boudreau, who previously built vision-guided robotics for the forestry and food manufacturing sectors.
The company has been testing its pilot robots at mushroom farms in B.C.’s Fraser Valley and is in talks for its first commercial orders. Having raised $4.5-million to date, including a seed investment from Emmertech, plus a similar amount in government grants, TechBrew hopes to raise a second round of capital this fall to ramp up production of its robots.
Even without the recent upheavals in financial markets, however, many agtech companies have struggled to find investors in Canada who understand the sector.
“When you talk about agtech with a lot of people here they go cross-eyed and have no idea what you’re talking about, because they think technology for agriculture means sharper hoes,” says Robert Saik, a Red Deer, Alta.-based agricultural consultant and entrepreneur who has launched 15 farming, agri-retail and fertilizer companies over his 40-year career.
His latest venture, AGvisorPro, is a platform that connects farm operators with experts in real time to answer questions about subjects such as equipment repair, pest control and ailing livestock. “Like eHarmony for agriculture,” says Mr. Saik, who launched the company with $1.7-million of his own money.
On a recent trip to San Francisco to meet with potential investors, he found himself growing frustrated by the situation.
“Why am I in California chasing money from Silicon Valley and Boston and Israel when there’s billions of dollars sitting on the sidelines in Calgary, let alone Canada,” Mr. Saik says, arguing the federal government should create an investment tax credit to draw capital to the sector.
The good news is more private-sector investors are eyeing Canada’s agtech sector. In 2020, Ontario-based Ag Capital Canada launched a $24-million fund targeting early-stage companies in the agriculture sector. Vancouver-based Telus Corp. established a Telus Agriculture division that same year to focus on digitizing globe food-supply systems, and has ramped up agtech investments through its Telus Ventures arm.
Earlier this year, Calgary-based Koan Capital launched an early seed agtech fund. Techbrew was among its first four investments.
Meanwhile Calgary-based The51, which bills itself as a “financial feminist” platform and aims to grow the number of female investors and entrepreneurs in Canada, is currently raising $50-million for its first food and agtechfund. The fund will target agtech startups run by diverse founders, says Alison Sunstrum, the fund’s general manager, meaning anyone “that would not normally be well represented accessing capital.”
She says the fund is expected to announce its first funding close in the coming weeks and has a wide array of companies in its investment pipeline, including startups focused on alternative proteins, automated fruit and vegetable picking, and advanced packaging that preserves food without the need of low-temperature supply chains.
There are signs Canada is catching up with the U.S. in agtech financing. Over the past five years, the amount of venture capital injected into Canadian agtech companies grew at a compound annual rate of 27 per cent, slightly edging out the U.S. rate of 24 per cent.
Even at that pace, however, it will take considerable time to close the gap with the U.S. And while some people have argued for greater federal government spending to boost innovation, Ms. Sunstrum predicts that approach will ultimately fall short.
“We have to quit looking to the government to spur on innovation,” she says. “We need to increase our expenditures on research and development and increase the amount of investing capital and banking capital that’s available. Canada has done this in oil and gas.”
“We’re a world player in energy,” she adds. “We need to be a world player in sustainable agriculture.”
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