The challenge of agtech start-ups
A huge challenge awaits agtech. We read this in the recent McKinsey Agriculture report, which analyzes the dilemma of the agricultural technology sector, which, despite excellent premises, is still struggling to be used in a widespread manner.
The current macroeconomic situation, the growing attention of consumers towards environmental sustainability and the change in business models could be the ideal conditions for agtech products to be massively adopted: first, however, it is necessary to address the reluctance of farmers. In fact, agtech start-ups struggle to build the customer base necessary to obtain funding, which often stops only at the very first steps of the various projects. Some obstacles emerge from the McKinsey survey, which differ according to the latitudes involved: among these are costs, lack of trust in digital purchasing processes and online data processing, and unclear ROI (the profit deriving from the investment).
The current inflation situation is increasing the challenges for farmers, who cannot overlook several elements such as weather forecasts, regulatory changes, consumer demand, rising costs and supply chains. On the other hand, however, in the last decade, there has been a high, but slow, opening towards innovation in the agricultural field. A lot of external capital has poured into agriculture-related industry and food technology and consequently the number of technological solutions for agriculture has grown and with them the agtech start-ups aimed at farmers. There are six dedicated submarkets: farm management software; technologies related to sustainability; precision agriculture hardware; remote sensing technologies; agri-food markets.
Although the adoption of agricultural technology is slow, farmers are still open to innovation. In addition, there are some trends that should not be underestimated: first of all, the need to move to more sustainable food systems, with less waste of resources; business models in constant evolution towards integrated solutions; the emergence of more precise regulation, which will play an increasingly important role in agtech.
In this regard, McKinsey makes four proposals to overcome the current obstacle and exploit the great potential of the sector:
– Customize products and business models: by focusing on the uniqueness of each farmer, innovators can propose more targeted and personalized solutions.
– Streamline the customer journey: Agtech companies should look for ways to improve the customer experience. From product testing to support operations, the user experience should be simpler and more intuitive.
– Renew trust in data storage and sharing: precisely because this is considered a weakness, agtech start-ups should build trust by refining their data strategy, simplifying data collection and using only essential information to deliver products and better solutions to farmers.
– Integrate solutions: agtech innovators can collect information from different sources (field sensors, satellites, agricultural equipment) and present their technology not as a replacement, but as a supplement to the wide range of solutions already used by farmers.
Agricultural technology has the opportunity to play a central role, but only by understanding the current difficulties and proposing useful solutions to overcome those obstacles. When done right, expanding the use of agtech can lead to more inclusive and sustainable growth for farmers and benefit knowledgeable consumers and investors off the farm.