Investments in Brazilian agrotech businesses are just at the beginning
The startup ecosystem is in constant transformation. Over the last few years, especially fintechs, companies that combine technology and financial services, have registered a significant market growth. Now, investors and entrepreneurs are observing the emergence of a new market: Agricultural technology. It can also be called agrotechnology, but usually abbreviated as agritech, AgriTech, or agrotech.
Companies in this field combine technology and agriculture to improve agribusiness services, reduce costs and increase production. Agrotech’s activities refer, for instance, to crop management. Others focus on the use of intelligent software analysis for pest and disease prediction, or complete agriculture 4.0 concepts.
Brazil plays an important role in this scenario. Agriculture is one of the most important economic sectors in the country due to its extensive land area, abundant sunlight and natural resources. As stated by Statista, “agricultural production makes up approximately four percent of the annual aggregate value of the country’s gross domestic product”.
Besides, around ten percent of Brazil’s workforce is employed in the agricultural sector. According to the latest analysis of the Brazilian Center for Advanced Studies in Applied Economics (Cepea), the agribusiness’ GDP grew by 4.62% from January to May of 2020 compared to the same period of the previous year. This is equivalent to an increase of BRL 76 billion, showing the continuous expansion of the sector. In comparison, from January to December 2019 the sector had registered a growth of “only” 3.81%.
Which business areas are most promising for agrotech startups in Brazil
The number of agrotech businesses is growing constantly. Almir Araujo Silva has been following the sector for several years. He is the Lead of Digital Transformation and Commercial Excellence for Latin America at BASF. The international company is always seeking innovative solutions, and therefore, founded the Agrostart program to accelerate promising agrotech startups.
In Silva’s opinion, there are many areas in Brazil that still require small or even huge improvements. The following fields are the most promising, the expert said in a former interview with Universo Agro:
- information technology solutions related to precision agriculture, traceability, crop and business management; as well as
- process automation.
According to Goldman Sachs Global Investment Research, by 2050, technologies related to precision agriculture, for example, should increase world agricultural productivity by 70%, adding BRL 240 billion to the agrotechnology market.
As stated by Araujo, Brazilian agribusiness offers a great opportunity for startups, as they profit from a natural advantage in terms of innovation compared to large companies. “In multinationals, the development and approval process is slower, precisely because of the size of the corporations, due to the entire process inherent to companies of this size.” That is why BASF offers a co-creation model to agrotech startups to develop new digital solutions together.
Brazilian Agrotech report mapped more than 1000 startups
In 2019, different market players carried out a comprehensive market study to map agrotech startups in Brazil. The Radar Agtech 2019 report listed a total of 1,125 companies, divided into three categories: before the farm (197 companies), inside the farm (398) and after the farm (530).
A surprise, not only for the researchers, was the concentration of agrotech startups in the city of São Paulo. The city is host to 262 agrotech startups, 23% of the national total. The second city to appear in the ranking is Piracicaba, a city in the interior of São Paulo, and well-known as an important innovation hub in the agribusiness.
One of the partners involved in the study is the early-stage fund SP Ventures. According to its founding partner Francisco Jardim, “the main objective is to join forces to assist in the development of the sector and to boost businesses that have innovative technologies, with high impact and growth potential”. But he also believes, that the agrotech sector needs more venture capital contributions. In 2013, he stated, venture capital investments totalized only USD 30 million. By 2018, the amount had risen to USD 80 million. This would show that the growth is consistent, but still much lower than in other sectors.
According to the “’100 startups to Watch” list of 2020, there are eight most interesting Brazilian agrotech startups. The list cites Tbit Tecnologia, Terramagna, Solubio, Safe Trace, Pink Farms, Jetbov, Grão direto and Agrotools. Besides, in the opinion of Francisco Jardim from SP Ventures, the first Brazilian agrotech to achieve the status of a unicorn – a company with investments above USD one billion – might be Aegro.
Brazilian government plans to support sustainability initiatives
Companies that invest in modern technologies and sustainability can also expect financial support by the Brazilian government. The Ministry of Agriculture, Livestock and Supply (Mapa) launched a new investment plan for sustainable agriculture in June of this year. The main idea is to contribute to boosting the market for green bonds in Brazil. Furthermore, the Mapa wants to provide a wider understanding and visibility on the scenario of green investment opportunities in Brazil’s agribusiness.
In an official announcement, the Brazilian Minister for Agriculture, Livestock and Supply, Tereza Cristina, emphasized that the plan is linked to the signing of a protocol between the Mapa and the Climate Bonds Initiative (CBI) in November 2019, in New York. “We want to be the protagonist of this new trend. That is why it is important to strengthen this green finance market in Brazil, committed to sustainability”, she said.
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