As commodity prices continue to remain low and net farm incomes have fallen off by 65 percent over the past three years compared to their record highs of 2013, investors are increasingly turning to agtech as a path to both higher returns and solutions that can lift returns for the agricultural industry.

Combined investments by agribusiness companies and early-stage venture capital firms in agtech technologies reached between $20 million and $25 million last year – a new record according to the report, Lessons from the Frontlines of the Agtech Revolution released October 25 by The Boston Consulting Group (BCG) and Agfunder.

The potential that newly developed agtech technologies will be key to the birth of a new “green revolution” has sparked a wave of startup activity which in turn has given agricultural investors a viable new investment class as they seek to mitigate their exposure to risk associated with challenging commodity markets.

“There is clearly some optimism despite the shrinking farmer wallet size,” Decker Walker, managing director at BCG and co-author of the report told the Chicago Tribune.

Since 2012, venture capitalists have increased agtech investment allocations at a rate of about 80 percent per year, bringing the value of agtech investments from $900 million in 2013 to $3 billion by 2015. Betting that agtech holds the key to both profit and the reformation of agricultural production, investors have identified big data and analytics as a top investment focus, with three quarters of surveyed executives citing it as their key priority.

“Our study shows that the major sources of revenues are changing, and new profit pools are being created,” says Torsten Kurth, a partner and a report coauthor. “To emerge as the winners in this shifting landscape, companies must identify the most valuable technologies to pursue, given their capabilities, and think differently about their investment strategy.”

However, despite the investment run on ag technologies, the survey found that only ten percent of investment are being used to fund the development of new technologies, with the bulk of the capital being used to back existing technologies through building scale or expanding marketing initiatives. This ‘defensive stance’ is being centered around the goals of investors – 58 percent of which state that their end-target is for a startup to be sold to a larger player rather than to fully commercialize a game-changing technology.

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Lynda Kiernan