Australia’s agtech sector is not keeping pace with its global peers but does present increasing opportunities for savvy investors, a report has found.
Australian AgTech: Opportunities and challenges as seen from a US venture capital perspective, published by the University of Sydney’s United States Studies Centre, found that total venture capital deployment in Australia from Q1 2010 to Q2 2017 was $60 million.
In contrast, the US figure for the same period was $3.85 billion. The state of Connecticut alone saw $56 million of VC deployment in the period, only $4 million less than Australia’s total.
Claire McFarland, director for innovation and entrepreneurship at the United States Studies Centre, said Australia was also lagging the US and other countries in terms of levels of investment relative to GDP, as well as in absolute terms.
“When you look at Australia compared with the rest of the world in terms of the contribution that agriculture makes to GDP, and the extent to which we’re investing in it from a venture perspective, we’re doing quite poorly compared with other countries on some of those basic [metrics],” she told Agri Investor.
“There’s a stark contrast in the extent to which we’re not making investments in this emerging growth area compared with other nations, not just the US.”
The report found that Australia invested $0.12 in agtech per capita in 2016, compared with $5.80 in the US and $6.05 in Israel. This is despite agriculture contributing 2.43 percent of Australia’s GDP, higher than Israel’s 1.17 percent and 1.01 percent in the US.
In addition, the total amount of VC-sourced capital deployed in Australian agtech in 2017 was just A$6.5 million ($4.6 million; €4.0 million), which the United States Studies Centre said was approximately the size of a single early-stage VC deal in the US.
This lack of investment to date could be because the Australian agtech market is at an earlier stage of development than in other countries, Australian agtech companies are not good enough to warrant larger investments, or there is a lack of agtech expertise within the Australian investor community, the report found.
Despite this, investment in agtech as a percentage of overall venture capital deployment stood at 1.1 percent, which compared favourably with the 1.2 percent recorded in the US.
McFarland said she was “optimistic” about the prospects of Australia’s agtech sector because the report had found there had been an “explosion” in pre-seed funding through incubators and accelerators in the country.
“Having the volume in the pipeline is really important, and I think that has shifted since 2016,” she said.
“And when we asked investors about sectors, Australian investors who were interested [in agtech] said they were interested in anything that was a good opportunity, which is perhaps indicative of less sophistication in understanding the agtech environment, but is also a good sign because it shows that investors are open to opportunities from a very broad perspective. I think that’s very valuable at this point.”
The report found there was a need to find and recruit more foreign lead investors for Australian agtech venture investments, who could invest alongside domestic groups and transfer expertise.
It also recommended that government create an incentive for multinational agribusinesses to conduct more research and development in Australia, noting that none of the ‘big three’ global agrochemical companies – Monsanto-Bayer, Dow-DuPont, and Syngenta-ChemChina – undertook any significant in-house R&D for biologic chemistry in Australia.
McFarlane said it was “a question for government” regarding what those incentives could look like in practice.
The United States Studies Centre compiled the report with publicly available information and conducted a survey in collaboration with the Australian Venture Capital and Private Equity Association. The latest investment recorded was in the Q1 2018 and investments made after 30 March 2018 were not included in the data analysis.