AgTech appeal quantified for investors

Speaking on AgTech webinar AgTech Acquired, hosted by agtech podcasters Sarah Nolet and Tim Hammereich, representatives from two major agricultural corporations spoke about how these start ups could find a path towards acquisition.

Vice president of Bayers venture capital investment arm Leaps, Derek Norman, said his team was generally looking for growth opportunities, with the early movers in a field most likely those to benefit and grow.

He said they would often look at a start-up company's potential but also where Bayer expected to be in the next five to seven years, to see if the two were a good fit.

"It's not, 'what is my parent company's business' but what is the future potential?" he said.

"We're looking for a unique story or value proposition and it's usually the first company to move in a space to be the big winner.

"Ultimately it comes down to, what are the available technologies and what technologies are breakthroughs and paradigm shifting?"

Mr Norman said access to new markets, such as indoor farming, was also a positive.

He said one recent investment was a United States company looking to use gene editing tools for a cover crop in between soy and corn.

"It would give a third crop in a two-year rotation," he said. "While not something that would be created internally but could be a valuable offering for growers."

While Bayer might look at investing in a small company and help it grow, for international service technology Trimble, it was helpful to find companies with some runs on the board.

Trimble Worldwide Agriculture Division vice president and general manager Jim Chambers said when looking at a start-up company, or even a scale-up, he said they wanted something that could be operational and producing revenue quickly.

"It is rare for us to buy a product that still needs another three years," he said.

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Mr Chambers said when assessing new technology, the initial question was not 'does this work' but instead how would it impact the market.

"Is it solving an important problem or a critical problem?" he said.

He said critical problems were those that kept farmers up at night.

"We're most excited if we're solving a critical problem, there is a clear path to markets," he said.

Mr Chambers said it was also easier to market a product to farmers that would help them save money, rather than one than could eventually help them make more money.

Mr Norman said one of the biggest changes he has seen in the past 10 years was not in North America or Europe but in Asia, where drones were increasingly being used in spraying crops.

"It illustrates there is potential for something to take off in a relatively short time," he said.

Mr Chambers said these products and companies could be found in a number of ways, including through their dealer network.

"Agriculture in not that big, so it's not hard to connect in the ag world," he said.

But he said advisors could also help with making introductions.

With the outbreak of COVID-19, and its effect on the economy, Mr Chambers said many larger corporate companies would likely slow their acquisitions and be looking to consolidate.

He said this was also a chance for the startups to do the same.

"Focus on what's core to the business - now is a really good chance to pressure test the most important thing," he said.