Agricultural technology, or AgTech, is crucial to the future of Australian agriculture and continued economic prosperity in Australia. AgTech start-ups will create high-skilled jobs across our cities and regions, as new cutting-edge technologies developed in Australia will be used both in Australian agriculture and exported globally. Australia has a strong public R&D system in agriculture. It also has many natural advantages making it an excellent testbed for agricultural technologies, including a diversity of agricultural environments and harsh conditions, innovative farmers, a counter-cyclical seasonal pattern to the Northern Hemisphere and a similar supply chain to the United States.

Australia should be an AgTech powerhouse but lagging levels of investment relative to our global peers constrain that growth. In 2016, per capita investment from the private sector in world-leading AgTech nations, the United States and Israel, were both around 50 times larger than that of Australia.

The United States Studies Centre has tracked investments in Australian AgTech to develop an understanding of the Australian AgTech investment market, with a view to benchmark this research against similar studies conducted in the United States and on a global level. The original research found alarming trends in the amounts of financing received in the Australian AgTech sector and the way in which financing occurs.

Investment activity in Australian AgTech experienced significant growth in the past few years – total investment in 2017 increased by nearly 150 per cent from the year prior. Yet, our research found that investment in Australia’s AgTech sector has been largely driven by government and accelerator-led financing, typically valued less than A$1 million. In 2017, nearly 90 per cent of Australian AgTech investments were below A$1 million in value. This is the sort of financing that helps get companies off the ground in the initial stages of development, however higher value investments are required to allow companies to bring technologies to market.

To put these figures in a global context: investments of US$10 million or more accounted for a quarter of global AgTech venture capital (VC) investments in 2017, an increase from around 12 per cent in 2013. VC has been key to the investment success of AgTech overseas, yet this asset class has been relatively absent from the Australian AgTech investment market.

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In our research, we have put forward a number of recommendations which we believe can increase the amount of venture capital attracted by Australian AgTech companies. The first is to create incentives for multinational agricultural corporations to establish major R&D operations in Australia. Corporate R&D centres are critical to the expansion of innovation ecosystems and their presence can create entrepreneurs with significant product management and commercialisation expertise.

It is particularly in the realm of biological chemistry and biological science where agrichemical and agrifood multinationals could stimulate product development and commercialisation of profitable technologies. These are technology areas which receive particularly low levels of financing in Australia, compared to the digital technology segments, which account for 86 per cent of investment dollars in Australian AgTech.

Secondly, Australia can incentivise AgTech-specific VC firms in the US to bring the necessary expertise and capital to sustainably grow Australia's AgTech ecosystem. VC is an asset class that has been critical to the establishment of world-class innovation ecosystems in the United States and other highly innovative economies. The AgTech ecosystem on the West Coast of the United States is the most expansive in the world, accounting for nearly 37 per cent of VC invested in AgTech globally between 2010 and Q2 2017. An asset to the ongoing success of the West Coast ecosystem is a class of VC firms dedicated entirely to investment in AgTech. Without follow-on funding in the form of higher value investments, VCs and Australian AgTech companies will not succeed in generating revenues and expanding globally.

Finally, we have recommended Australia establish technology-specific accelerator and investment hubs. AgTech venture capital investment in the United States has often been led by specialist AgTech investors. This generates confidence amongst more generalist investors who are willing to back lead investors with large capital pools.

If Australia’s AgTech start-up community was better organised into sub-communities focused on highly-specific technology areas, centred around accelerators specialising in the respective technology areas, we could more effectively attract lead investors with relevant sectorial expertise. The promises of a strong local AgTech sector for the future prosperity of Australia are certainly enticing. However, this 21st century industry will be no more than science fiction if we don’t lift our game on the investment front.

Read the USSC's full report, Australian AgTech: Opportunities and challenges as seen from a US venture capital perspective, here.