Over the past decade, the Canadian farmer has been pragmatically slow to adopt new technology. However, this mentality will need to shift quickly with the emergence of new agtech innovation, which will reward Canadian farmers that are faster to adopt new technology.
Everett M Rogers’ teachings from over 50 years ago on the five types of adopters of new products and innovation remain the pillars by which technology companies view how they can acquire customers. The first customers, which represent a tiny subset of potential customers, are the innovators. These are people who seek out innovation by nature and are open to going through the pains of an incomplete product in return for being the first to use new technology. As adoption picks up, the product moves on to the early adopters, followed by the early majority, late majority and laggards.
Sean O’Connor, Conexus Venture Capital
Generally, most customers are early majority and late majority. To put this in context, when AirBnB launched in 2008, they initially had a platform where people would pay to sleep on an air mattress in a condo where other people were already living. These were the innovators. As the platform grew, they improved their options to include having people rent out spare rooms, then entire apartments and houses. The product grew from innovators, to early adopters (generally people travelling on a budget that were looking for authentic experiences), to early majority, and is now ubiquitous across the entire population of customers.
Agtech has not typically followed the same distribution around the five types of adopters. While there’s still a handful of innovators that are constantly looking to explore new solutions, along with a few early adopters that grab on to innovation once it has been proven, the bulk of the farming base fall into the categories of late majority and laggards. “I’ll wait until it’s available in green or red” tends to be the prevailing sentiment. When you look at the quality of early stage agtech products that have been released in Canada over the past decade, it’s hard to blame farmers for waiting until new products, whether that be in precision farming, agribusiness marketplaces, farming robotics or traceability, have been validated.
If you only have 30–40 growing seasons in your career as a farmer, and each one has a significant portion of your net worth sunk into the ground, the idea of embracing a new technology that could falter in the most important parts of your year would be devastating. Compound this with the fact that our agtech space has been woefully underfunded over the past couple decades, and you can quickly see why agtech startups struggle to get traction. The problem starts with how we approach funding our country’s brightest agtech innovators.
The general playbook for investing in technology companies in Canada has small investments coming in at the earliest stages of a company’s development, with large investments waiting until the entrepreneurs have proven signs of commercial success. While this works in a country that’s built itself up as a formidable player in the software space, this mentality doesn’t work for agtech. Agtech requires companies that can build highly reliable products that deliver an immediate return on investment to the farmer. As a result, they need investors to bet bigger and earlier than we typically see in the technology space. For example, instead of raising $500K to build a minimum viable product that can be rushed out to market, entrepreneurs need to raise $5M to build a commercially stable product that a farmer can rely on in the heart of harvest season. This investment shift is starting to happen here in Canada.
Here at Conexus Venture Capital Inc., we’re believers that Canada can become a global leader in agtech. While our current agtech ecosystem is limited, we believe in this space so strongly that we’re in the process of building one of Canada’s largest early stage agtech venture capital (VC) funds; Emmertech. Our new fund, which will go live in the coming weeks, is one of a handful of new VC funds focused on Canadian agtech.
Emmertech is fundamentally taking a different approach to venture capital. Our investor base is predominantly made up of agriculture stakeholders, including farmers, agribusiness owners, ag-focused insurance companies, and credit unions anchored in agricultural communities. More importantly, we’ve thrown out the Canadian venture capital playbook, and are rebuilding our investment approach to fit the world of agtech. When we find a company we want to invest in, we’re going to invest big. The outcome of having funds like Emmertech, which we believe will become the norm here in Canada, will mean more products are released to market that add significant value to the farmer, with a high degree of reliability.
While the pressure on farmers to keep up with technology are increasing, the demographics of the Canadian farmer is shifting to meet this demand. According to RBC’s Farmer 4.0 Report1, we’re starting to see a transition of farming owners from baby boomers (one-quarter of Canada’s farmers will be 65 or older by 2025), towards Gen X and millennials. This next generation is prepared for harnessing technology on the farm. Nearly half (47.2 per cent) of agriculture workers under 40 have a post-secondary education. Moreover, more than 80 per cent of producers under the age of 40 report already using technology in their farming operations.
Over the next decade, we’re going to see a shift in Canadian agtech where homegrown technology is released with greater reliability, and immediate value given to the farmer. This shift, combined with a quickly changing demographic to a younger, more tech-savvy farmer, is going to fundamentally change how farming operations are conducted. With a projected domestic labour shortage of 123,000 workers in agriculture by 2030, this shift can’t happen soon enough.
Sean O’Connor is the Head and Managing Director for Conexus Venture Capital Inc. & Emmertech. Prior to Conexus, Sean was on the leadership team of a Canadian fintech, Grow Technologies Inc. (acquired by ATB). He graduated with a degree in Finance and International Business from McGill University.
Reference
1RBC report “Farmer 4.0” identifies Canadian agriculture sector as having massive potential growth, Canadian Federation of Agriculture, https://www.cfa-fca.ca/2019/09/12/rbc-report-farmer-4-0-identifies-canadian-agriculture-sector-as-having-massive-potential-growth/
