Australia is “losing a race we should be winning” on AgTech, with local investment in the sector “dramatically behind” the rest of the world, a new report has found.
The United States Studies Centre at the University of Sydney has released a report this week looking at the opportunities and challenges for Australian agricultural technology companies from a US venture capital perspective, and compares investment levels around the world.
It finds that although the sector is growing rapidly in Australia and investment is rising, it is still “not keeping pace with global peers”, and needed significantly more funding to reach its full potential.
“Australia clearly has the necessary conditions and imperative to be an AgTech innovation powerhouse. Unfortunately, however, investment into Australia AgTech does not reflect this. Australia is dramatically behind that of global AgTech leaders,” co-author Benjamin Saling said.
According to the report, private sector investment in 2016 on a per capita basis in AgTech companies in the United States and Israel was about 50 times larger than that of Australia. While global investment in AgTech jumped from $US309 million in 2013 to $US1.5 billion in 2017, this has not been matched in Australia.
Although there had been an “explosion of investment activity” in Australia, most was concentrated on the early-stage and worth less than $1 million.
The report found that last year, 80 per cent of all investments were less than $1 million, and the majority came from government grants or accelerator programs.
“While there has been an explosion of growth in new Australian AgTech companies, very few are accessing the larger and later stage sized capital that is essential for growing and exporting technologies to a global market,” Mr Saling said.
“Compared to international standards, the Australian AgTech investment market is small, both in investment volume and in the aggregate amounts of financing. The total amount of VC-sourced capital deployed in Australian AgTech in 2017, $6.5 million, is approximately the size of one early stage VC deal in the United States,” the report said.
“These are particularly concerning trends, driving Australia out of sync with the global market, where there is an increasing appetite for later-stage deals and a more diverse range of technology areas.”
The report included three main recommendations to foster the growth of investment in AgTech and create a thriving industry.
It recommended that incentives be put in place for multinational agricultural corporations to establish major R&D operations in Australia.
“This would stimulate diversification of AgTech segments of focus and leverage Australia’s public R&D sector in agricultural sciences through collaboration with industry, to build commercialisation capability,” it said.
“Australia’s agricultural public R&D infrastructure is seen, both locally and internationally, as indispensable for the development of a strong Australian AgTech sector.
“Furthermore, AgTech venture capital firms in the United States see immense value in the Australian agricultural environment as an AgTech testbed.”
The USSC researchers also recommended incentives for overseas sophisticated investors from overseas to open up offices in Australia, especially those focusing in AgTech.
“This would stimulate an increase in Series A and later-stage investment flow in the sector as well as transfer domain-specific expertise to the Australian investment community,” the report said.
It also said the technology-specific incubators and accelerators should be established in order to create “tight-knit, globally connected investment communities around technology-specific expertise”.
“This would allow AgTech companies in niche technology areas to access the right investors more easily and to develop confidence within the general investor community around these technology areas,” it said.
Do you know more? Contact James Riley via Email.