Venture capital funds continue to flow into Latin America at an increasing rate, mainly focused innovative early-stage companies. One of the main investment opportunities they are seeking to access is agricultural technology enterprises (“agtech”).
The macro drivers are obvious, according to a US venture capital investor, “The main logic behind the boom of agritech is simple: as the global population continues to grow in the middle of an unprecedented climate crisis there is an urgency to increase food production. The challenges derived from this crucial challenge require innovative solutions that can only be delivered by technology-based solutions. Latin America is a privileged region in terms of agricultural resources.”
“The main logic behind the boom of agritech is simple: as the global population continues to grow in the middle of an unprecedented climate crisis there is an urgency to increase food production.”
Venture capital investor, US
She’s not wrong! Agriculture plays a crucial role in the economies of many Latin American and Caribbean countries. World Bank estimates state that the sector accounted for 6.9% of the region’s GDP in 2021, up from 4.8% in 2011. In addition, some countries in the region, like Brazil and Argentina, are amongst the world’s leading countries in the export of soybeans, wheat, corn, and rice.
So where do the main opportunities lie? The founder of an agricultural consultancy commented, “In terms of technology, I would say that big data, management software, new production systems, task automation, and crop and animal genetics are the main innovations to invest in. For example, accurate data on livestock management platforms improves the efficiency of feeding, vaccinations, transportation, and pasture costs which results in more efficient production and higher profits.”
“In terms of technology, I would say that big data, management software, new production systems, task automation and crop and animal genetics are the main innovations to invest in.”
Founder, agricultural consultancy, Argentina
The International Fund for Agricultural Development (“IFAD”) revealed that, in 2021, Latin America counted with 15 million smallholders, defined as farms operated by families mainly using their own labour. More specifically, smallholders reportedly control 400 million hectares in the region. At present, these small farmers area at crossroads between the constraints of structural inequalities which hinder their access to development and the opportunities offered by smart farming.
The concept of smart farming refers to the use of advanced technology like big data, digital cloud, and the Internet of Things to track, monitor, and analyse farming operations. In Latin America, agtechs quadrupled in the previous decade and reached 540 in 2019 with Brazil and Argentina registering the largest number of companies. Notably, the number of agtechs in Brazil increased by 40% in 2021, and reached a 1,541-record number of companies. São Paulo, Paraná, and Minas Gerais lead the states with more agtechs.
It is perhaps unsurprising then, that Brazil’s SP Ventures’ latest BRL 460 million fund is focusing on tech powered solutions in agriculture and food. Its fund, AG Ventures II, attracted major investors including Syngenta Venture Capital, BASF Venture Capital, FoF Capria, and the International Finance Corporation, a sister organisation of the World Bank.
These entities provide services which range from farm management systems to advanced precision agriculture solutions. The use of satellites, drones and sensor data contribute to increase productivity and a more sustainable use of resources. Start-ups allow smallholders to gain access to technological tools used in all stages of the agribusiness chain, including pre-farm; on-farm, and post-farm.