Let’s end the race to zero. The race I’m referring to is cutting prices so low eventually they’ll be nothing — don’t laugh Google’s Photo app is free and comes with 15 GB of storage. Originally the cost for unlimited storage was $0. Do you want to compete with Google? I’m sure you can think of many more examples of companies competing in the race to zero. One of the problems with the race to zero is only companies with deep pockets can play. Today’s global food challenge means we need more innovators, additional solutions, better partnerships and higher margins to meet the rapidly rising global demand for food.
According to the AgTech funding report by Agfunder.com, 2016 experienced a 30% decline in AgTech venture capital funding to $3.23 billion, but an uptick (10%) in the number of deals closed. The report also explains large agribusinesses were conspicuously absent from the list of acquirers. It seems investors are taking a wait and see attitude about more funding for AgTech.
This rings two alarms for me. The first, AgTech comprises Ag Biotechnology, Robotics, Novel Farming Systems, and Innovative Food just to name a few. AgTech for irrigation can get lost in this crowd but the crowd can’t thrive without water. We need to stand out more. In addition, AgTech funding needs to grow dramatically to feed 9 billion people by 2050.
As products get more technical, dealers and manufactures need to partner more closely. Center pivot irrigation is an excellent example in the Ag irrigation market of manufacturers partnering with exclusive dealers. The dealers need to have exclusive distribution because the training and support for this complex product is high. They can’t be expected to invest the time in training and build an inventory of spare parts to be under bid by someone else who has not invested the time or money. The dealers and manufactures both understand undercutting the market ultimately hurts growers.
In the landscape industry manufacturers used an exclusive distribution model for their central control products. Today most smart controller companies use an exclusive distribution model to sell their smart controller products and end users benefit from this as well as the distributors. As technology increases in irrigation we will see more partnerships like these and the industry will benefit from them.
So Why Is This Good For The Industry
To feed 9 billion people by 2050 we have to grow more food with fewer inputs. Remember a grower’s first decision when it comes to water is how to irrigate. Flood, sprinkler, pivot or drip is part of their first consideration. Solid partnerships place more focus at the dealers on AgTech irrigation products as the best irrigation solution for Agriculture. Increased awareness means more growers will be visiting all dealers asking about AgTech products. This increase in demand allows dealers to supply better products, charge higher prices, earn greater margins and end the current race to zero on pricing. All while better servicing growers and contributing positively to increased yields with fewer inputs.
I learned early in my business career to welcome change with open arms because there is no stopping it. We’ve already noticed an uptick in interest in searches for drip irrigation, AgTech and field monitoring on the web. Our conversations with dealers and growers also shifted. AgTech is becoming the dominant topic of discussion. This progress is so exciting for our industry because this positive change is more important than the success or failure of one company. This is about the success of feeding the world.