Sean O’Connor and Kyle Scott are Managing Directors of Conexus Venture Capital & Emmertech
Agricultural technology, or agtech for short, can (and should) be a leading enabler in Canada’s climate change platform. As we seek to seize this opportunity, Canada is poised to become a global leader in a growing multi-billion dollar economic sector through its innovation in agricultural technologies.
Private and public funding has flowed into Canada’s agricultural technology sector, which promises to improve yields, increase profitability and reduce the environmental impact of farming by shaking up the sector with cutting-edge technology. Agtech generally focuses on improving efficiency for the farmer by reducing the use of inputs such as fuel, fertilizer and pesticides while improving yields. Agtech innovation can exist in the real physical world (e.g., precision machinery, biologics) and in the traditional “technology” or software world (e.g., intelligence-powered recommendation engines artificial intelligence or machine learning), both of which are key to delivering value to our farmers. The goal of innovation is to improve farmer outcomes, and the wonderful by-product is the farm’s reduced impact on the environment.
The Canadian government clearly recognizes the potential of agtech, particularly as a method to help achieve our country’s clean technology goals. The government funds agri-tech companies through Sustainable Development Technology Canada, an independent foundation created by the Government of Canada that supports small and medium-sized businesses and entrepreneurs who develop sustainable clean technologies.
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SDTC currently has close to 40 agricultural enterprises under its umbrella. These companies are looking to make their way into a global market that Dentons says is worth US$495 billion in 2021 and is expected to grow to a staggering US$725 billion by 2023.
SDTC’s role in funding agtech with respect to clean technologies is expected to grow as Canada races to meet its emissions reduction targets. Funds from SDTC, along with other sources of public capital like IRAP, are essential for providing capital during the validation and early commercialization phases, which are the toughest hurdles startups face.
The private sector has also realized the potential of agtech; the Canadian Venture Capital Association reported that in the first nine months of 2021, agtech saw investments of $162 million across Canada and is expected to surpass the record of $185 million set in 2019.
Agtech will grow hand-in-hand with the cleantech sector as both will be essential in tackling climate change and ensuring a prosperous future for all of us. However, agtech has an advantage over many traditional cleantech companies, especially those focused on alternative energy generation, due to its business goals and global scalability.
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Traditional cleantech companies often focus exclusively on solving environmental problems, while industry-driven innovation (such as agtech) aims to solve specific end-user business problems (e.g., the farmer), with positive implications on clean technologies and an accretive side effect. Therefore, agritech companies created to solve business problems will generally only depend on taxpayers’ money during the technology development phase (common to all Canadian tech companies) and will not become a permanent part of the government’s operating budget. . In contrast, cleantech companies that are not focused on business needs will need subsidies to encourage customers to use their technology. Therefore, agtech is less likely to face commercialization issues in the private sphere once (or if) government subsidies dry up.
In terms of scalability, Canadian agtech has the world at its fingertips as its services can be exported to farmers around the world. This helps ensure that Canadian agriculture as a whole enjoys a leading brand on the world stage, something we should all embrace and build on with pride.
Canada doesn’t have to look far to remember how quickly its tech companies can go global. Founded just 15 years ago, Shopify has already become Canada’s most valuable company with a market capitalization of $218 billion and operates in over 175 countries. The meteoric growth of Shopify stands in contrast to how slowly traditional businesses grow. Royal Bank of Canada, Canada’s second most valuable company, is 156 years old but lags far behind Shopify with a market capitalization of $183 billion. The next Shopify may well be part of the wave of agtech startups currently finding their feet in the Canadian market.
Suppose Canada’s agtech startups reach their true potential and the country becomes a global market leader; this would mean not only that Canadian farming practices will become more sustainable, but that farming practices around the world will become more sustainable through the efforts of Canadian entrepreneurs. Countries around the world will be able to showcase their climate-friendly agricultural approaches, and the “Made in Canada” sticker will be proudly displayed on the technology that has brought global agriculture into the 21st century while generously adding to Canada’s GDP by taking part of what could one day become a trillion-dollar market.
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