Agriculture 4.0: The Canadian Agtech Ecosystem
The global food ecosystem is facing a dilemma. Population growth is fueling demand for food production, available arable land is shrinking, and global warming brings greater unpredictability to farming with unforeseen consequences. These challenges are only escalating as time goes on.
The COVID-19 pandemic revealed significant fragility in our food and agriculture supply chain, accelerating this food transformation.
Now more than ever, there is an impetus to look for sustainable ways to feed the world’s growing population, as well as improve the food production value chain, from primary production through to end markets. Innovation and improved technology can facilitate a move to a more resilient and sustainable global food system.
The Opportunity: Connecting Farm to Table
According to the Food and Agriculture Organization (FAO), the estimated population of the world is set to reach 9 billion by 2050. We are already experiencing challenges feeding the current population, with nearly one in 10 people in the world, approximately 750 million people, being exposed to severe levels of food insecurity.
This problem is compounded by the $2.6 trillion in food wasted every year. According to of the United Nations (UN), nearly one-third of food globally is wasted or lost, contributing to higher greenhouse gas (GHG) emissions coming from our landfills — nearly 8% of all greenhouse gases worldwide are the result of food waste. Despite the staggering food statistics of waste and insecurity, there are incredible opportunities for companies to produce food in a sustainable manner and reduce waste.
The agriculture industry is ripe for disruption. The food, beverage and meat-processing sector is anticipated to have an estimated global market size of $US4.1 trillion by 2024, representing a compound annual growth rate (CAGR) of 4.3 per cent from 2019 to 2024.
🌱Agtech, also known as agritech, is the umbrella term for innovative solutions in the food-production process, making it more efficient, cost-effective and sustainable. Farmers utilize information collected by these technologies to improve herd and nutrient management, boost food safety and traceability, increase yields and productivity levels, and make better decisions around how much money and effort to put into a crop, based on the value of return.
For example, Montreal-based Motorleaf uses artificial intelligence (AI) to automate greenhouse operations. The custom-made AI automation technology assesses growing conditions in order to highlight key factors that cause skin cracking and blemishes in vegetables. This helps to prevent harvest loss and optimize growing conditions faster.
🔧Key Drivers
The need for innovation in the agriculture sector is only going to increase, and here’s why:
- Labour shortages: agriculture is a labour dependent industry, with many areas not yet tech driven. Shortages and volatility have underlined a desperate need for automation of manual farming techniques and better systems improving operational efficiency.
- Digitization across the supply chain: lagging digitization relative to other industries coupled with growing interest by farmers to adopt new technologies. Farm productivity platforms, like those developed by Decisive Farming, can integrate agtech from across the agriculture value chain — genetics and breeding, crop protection and nutrients, robotics, water management, remote sensing, and more.
- Supply chain inefficiencies, transparency and food safety issues: the pandemic highlighted broken supply chains, particularly their inefficiencies and the amount of food waste they produce. Food safety issues have become an increasingly important, with consumers demanding data transparency in the food system.
- Accelerated consumer behaviour shift: the pandemic has forced consumers to stay at home and change many of their consumption habits, becoming more aware of sustainability issues and increasing demand for healthy alternatives.
Countries such as the US, the Netherlands, Ireland, Australia and India are leading the way. The Netherlands, for example, though geographically small, is a powerhouse in the world of agtech. Despite a population density of 511 people per square kilometre, it is the second-largest food exporter on the planet. In addition, intellectual property and farming systems are key export earners for the country. The Netherlands is home to Wageningen University, one of the world’s top agricultural universities focused specifically on the theme ‘healthy food and living environment’.
“The global agri-food market in 2025 will be highly competitive and filled with new challenges. As one of the few net exporter of agri-food products, Canada has both an opportunity and duty to set aspirational goals and achieve new levels of innovation.”- Report on Canada’s Economic Strategy Tables: Agri-food
Canada ranks seventh in the world in terms of our amount of arable land, and is one of the world’s largest agricultural producers and exporters. According to the Canadian Agri-Food Trade Alliance, Canada’s agriculture sector generates $113.8 billion and employs one in eight Canadians (2.3 million jobs), with exports totaling $56 billion a year. However, when it comes to innovation in the agricultural sector, we lag in many regards. Canada has an opportunity to use agtech to become more sustainable, respond to labour shortages, and create a safer, more-transparent food supply. Canadian agri-food exports are determined to reach $75 billion annually by 2025.
Innovating and investing in new technologies will be crucial for farmers to meet this goal. Initiatives such as the Olds College Smart Farm are already demonstrating the power of agtech. The Smart Farm is a large-scale lab operating across 2,800 acres of farmland. Students, instructors and industry leaders work together to test new applications and push the boundaries of innovation. Growers can use AI to operate drones, use sensors to measure proteins in harvested crops, monitor all farm equipment and weather conditions, all through connected technologies.
Canadian Agtech Landscape
The primary focus of this analysis is on upstream agtech. The table below highlights select agtech companies of interest:
Geographically, entrepreneurial activity is clustered around centres of excellence. Western Canada is leading the way with hubs in Southern Alberta (Calgary), Edmonton and the Fraser Valley in British Columbia. Saskatoon is home to Nutrien — the world’s largest provider of crop inputs. Nutrien acts as an anchor company and through the Nutrien Radicle Challenge Canada, hopes to ensure the success of rising stars in the ag and food tech landscape through investing the amount that entrepreneurs need to be successful at various stages of development, preparing them for their next round of funding, and providing them access to Radicle and Nutrien’s platforms. Other hubs of importance include Southern Ontario (Guelph) and Atlantic Canada (Natural Products Canada based out of Prince Edward Island).
As the ecosystem gets more populated by startups, accelerators and incubators are also taking their place. Bioenterprise, a commercialization accelerator in the Canadian agtech space leads the pack. It recently partnered with Farm Credit Canada (FCC), which was looking to invest agricultural venture capital to spur entrepreneurial innovation in agtech. In addition, among many others, there is the Agtech CTA Program exists to connect Canada’s best and brightest agtech start-ups with potential investors, customers and strategic partners in the US market, while the Zone Agtech, a Montreal-based incubator allows both SMEs and large companies involved in agricultural technologies to successfully position themselves, and also gives them a unique competitive advantage.
💵 Financing Trends
Investors tend to look for large inefficient industries where there is an expectation that new technologies could address significant pain points. Despite proximity to the US market and its large tracts of arable land, the agtech ecosystem within Canada is somewhat disconnected from the global market.
According to a report by Finistere Ventures, agtech start-ups attracted a record $22.3 billion in venture funding in 2020, twice as much as in 2019. In contrast, compared to the global financing trends, the Canadian Venture Capital Association reported a decline in deal flow and dollars invested in Canadian agtech companies in 2020 compared to previous years.
Public investment still represents the largest source of funding for Canada’s agriculture research and development. Few Canadian venture capital firms specialize in agtech: Avrio Capital, Ag Capital Canada, Bioenterprise Capital, AVAC Group, Telus Ventures, RH Accelerator and BDC Capital (out of their Industrial Innovation Venture Fund). US based Finistere Ventures is active in the Canadian market, with an office in Toronto. At least one Canadian-based investment firm is also making agtech plays. Investeco, currently managing over $41 million for more than 100 Canadian investors, oversees the Investeco Sustainable Fund, which is geared toward supporting expansion-stage companies focusing on sustainable food and agriculture.
For the agtech investment climate to improve, a “venture capital ecosystem” must develop quickly or Canada will lose out. Most traditional Canadian investors are highly conservative and don’t understand agri-food technology, the industry or the value chain. The vast majority of investment is coming from the U.S., Europe and Asia.
“There is a shortage of funding and company building expertise to carry ag and food tech entrepreneurs forward to sufficiently develop their technology before trying to raise their next round of funding.”- Kirk Haney, Managing Partner, Radicle Growth
That said, the Canadian agtech market is poised to improve over time.
- 💰 Funding Ecosystem: Canada boasts a strong grant funding ecosystem that should serve as a foundation for stronger early-stage investing, including seed-stage investments.
- 💡 Promising Innovations: experts point to strengths in the Canadian ecosystem, particularly in the animal health category.
- 👩🏽🔬 Talent: highly technically educated workforce involved in ground breaking research and innovation. Canada also has the potential to become a hub of fintech-related activity, given the existing talent in software, communications and IT.
- 🛠️Rise in ancillary sectors: Given its considerable natural resources, the Canadian ecosystem should see a rise in ancillary sectors like inputs and bioenergy.
Notable Exits
There has been increased M&A activity since 2019, with TELUS, Canadian telecommunications giant, completing several key acquisitions, to connect every participant in the agriculture value chain, from seed manufacturers and farmers through to grocery stores and restaurants. In 2020, it launched TELUS Agriculture, a new business unit dedicated to providing innovative connected technology solutions to the agriculture industry.
The timeline below highlights selected M&A activity within the Canadian ecosystem:
In March 2021, FarmersEdge completed its initial product offering (IPO), raising $100M.
Startups to watch
🍅 Semios is a leader in on-site sensing, big data, and predictive analytics solutions for perennial agricultural crops. The Semios network of sensors tracks and reports the real time, in-canopy conditions of your orchard or vineyard. In 2018, Semios secured $9.9M in funding from Sustainable Development Technology Canada.
🌱 Terramera is a Vancouver-based agtech leader fusing science, nature, and artificial intelligence to transform how food is grown and the economics of agriculture in the next decade.
🐮 SomaDetect, a New Brunswick based dairy technology start-up that will help farmers utilize AI to more closely monitor the health of their herd and improve milk quality. It has raised $6M in Series A funding from Merck Animal Health Ventures, Ag Capital Canada, Builders VC and Cavallo Ventures.
🥩 Future Fields is an Edmonton-based startup developing a first-of-its-kind cellular growth medium — the most important component of cellular agriculture — that enables customers to create lab-grown meat at a lower cost. It has raised $2M in Seed funding from Bee Partners, Pioneer Fund, Narrative Fund, and Y Combinator.
🥬 Outcast Foods is a startup focusing on food waste and reducing the carbon footprint of food supply chains. It diverts food waste from landfill and turns discarded fruit and vegetables into ‘nutrient-dense’ food products. Outcast Foods has raised $8M in Series A funding from District Ventures Capital and BDC Capital.
🛰️The Appetite for 5G
One of the hardest things about agtech is connectivity — across platforms, across systems and across farms. Reliable network connectivity in rural communities often prevents farmers from realizing the full potential of large-scale research and innovation projects, reducing the effectiveness of agtech.
5G is critical to unlock the full economic potential of agtech and position Canada as a leader in sustainable agriculture. With high speed and low latency, 5G can support digital innovation in agriculture by enabling precision agriculture, a technology-driven management approach to farming that utilizes data to measure, analyze, and respond to crops in real time to preserve resources and boost yields.
A specific example of this involves leveraging the Internet of Things (IoT) to optimize irrigation systems via data collected from remote sensors, allowing farmers to monitor water resources, all from their laptop or mobile device. Bell Canada has collaborated with Farmers Edge, a Manitoba-based precision agriculture company, to offer an IoT solution suite to farmers which includes crop monitoring, digital agronomy, satellite imaging and integrated farm data management. These capabilities allow providers to test and verify the effectiveness of their solutions ahead of wide-scale deployment.
Another example of ag-focused efforts by a telecommunications provider includes TELUS investing C$16 billion into developing Alberta’s fiber-optic broadband network, with support for agtech applications on farms as one of its stated objectives.
Experts note a trend of large tech firms catching on to the potential of agtech and developing products in the space. For example, IBM is developing applications for weather analytics and cloud infrastructure for agtech, while Microsoft launched its FarmBeats IOT solution. TELUS joined forces with tech giants Microsoft and IBM in 2018 to back a C$250 million project to enhance cross-industry use of agricultural data.
Although some of the technologies, such as drones for field monitoring, are already commonplace in many large-scale farming operations across Canada, 5G will enable farmers across Canada to utilize this data to optimize decision-making in real-time and at scale, capturing significant additional benefits. With Canada expected to continue being a leading exporter of key agriculture commodities, Canadian farmers can play a large part in leveraging the power of 5G to boost global food production.
Challenges to Agtech Adoption
Agtech is still a young, evolving industry. With so many new technologies on the market, there are still some barriers to the quick, easy adoption of agtech. Farmers, overwhelmed with too many technology solutions, need to know how to choose, implement and use the right tools at the right time. That means having a solid understanding of use cases and foreseeable requirements.
Innovation initiatives, such as Canada’s Centre of Excellence in Next Generation Networks (CENGN), enables agtech startups to test and validate promising technologies, removing barriers to product commercialization and accelerating market growth. The CENGN ecosystem, which includes members such as Cisco, University of Ottawa, and Wind River, drives technology innovation and industry growth through their test bed, technical expertise, talent development, and partner ecosystem. CENGN also partners with the federal government through the Networks of Centres of Excellence (NCE) and the Ontario government through the Ontario Centres of Innovation (OCI).
Ukko Agro, a Toronto-based agtech company, partnered with CENGN to validate the company’s analytics engine in the early stages. Ukko Agro leveraged the CENGN testbed to validate the functionality and performance of their pest prediction model. Partnerships, like this one, are invaluable to early stage agtech startups to expand their networks and get connected to customers and resources needed to propel them to the next level.
What’s next?
- Shift from “farming to maximize yield” to “farming to maximize profit” by looking at farming operations, not just precision agriculture
- Sustainability driving growth in agtech
- Traditional agtech VCs investing pharma
- SpaceTech for agriculture
Many thanks to Ingrid Fung, Investment Director at Finistere Ventures and Tim Warland, Manager of Venture Programs at Invest Ottawa for your invaluable insights.
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