The Future of AgriTech is Built, Not Pitched: The reality of M&A in Agriculture
M&A is the new R&D
The past decade has seen a lot of innovation come to agriculture through the acquisition of startup technology by the incumbent agriculture corporations such as John Deere and Kubota.
Key acquisitions of AgTech startups like Granular, Blue River Technology, Bear Flag Robotics, and most recently Kubota's acquisition of Bloomfield Robotics have enabled agricultural incumbents to buy rather than build tech, in an effort to bring new capabilities such as digital platforms and autonomy into their global product lines.
To date, most of this M&A has been a defensive tactic to keep the best technology away from competitors, while also acquiring talented people and capability into their organization to accelerate the development of in-house technologies and products.
These acquisitions have also been a catalyst for growth of the AgriTech innovation sector, creating a much-needed pathway to liquidity, providing the valuation benchmarks and return profiles that enabled the establishment of numerous AgriTech-focused venture capital funds.
Over the past 5 years, the playbook for many AgriTech startups has been to achieve a market-leading position in an agri-tech vertical, building relationships with the corporates along the way in hopes of a partnership or outright acquisition.
Partnerships such as the one between John Deere and Guss Automation have been synergistic, leading to accelerated adoption of technologies, thanks in large part to the corporates' distribution capability, equipment financing, and support networks.
Initial minority investments by CASE IH in companies such as Augmenta and Hemisphere eventually led to acquisitions of $110 million and $175 million respectively. While this may not be the unicorn territory that many venture capitalists demand, the Augmenta acquisition still represented a 10x return for investors.
Who is Micheal, Our architect of ideas ?
Michael is an entrepreneur, operator, and advisor focused on recoding the food system.
Through his company Recode Ventures, Michael supports AgriFood technology commercialisation, investment, and international market entry.
His 15-year entrepreneurial journey began at the age of 21, launching the first of five ventures across a range of industries.
A deep curiosity for technology solutions in agriculture led to prior roles as Director for AgriFood Tech at BDO and Managing Director for APAC at SVG Ventures Thrive. Today, he advocates for the AgriFood tech ecosystem as a Committee Member of the Australian AgriTech Association and co-organiser of the South Australian AgriTech Meetup Group.
Michael's forward-thinking perspective on redesigning the food system was showcased in his TEDx talk, and recognized as a recipient of an InDaily 40 Under 40 award in 2020..
The M&A path is getting crowded
Recent signals indicate that agricultural corporates' M&A strategies will be changing, with several factors driving this shift.
Maturing tech platforms within agricultural corporates
The core technology building blocks (operating software, autonomy, connectivity, and smart implements) have evolved and become somewhat commoditized. Agricultural corporates have a product framework and partnerships for most of the macro technology drivers, with the focus now on increasingly integrating, iterating, and driving adoption in the market.
Strengthened Internal Innovation
Through these acquisitions, many former startup founders and engineers are now leading internal R&D projects within the corporates, building product teams and innovation capability. For example, despite the acquisition by John Deere, Blue River Group continues to be "an independently-run subsidiary with entrepreneurial spirit."
Rapid increase in number of AgriTech Startups
The accelerator program + venture capital model has fueled a rapid increase in the number of AgriTech companies globally. With multiple startups going to market across each of the technology verticals, the corporates have ample choice and leverage to feed their M&A strategies.
The innovation theatre
Access to agricultural corporates is increasingly difficult, filtered through open innovation challenges, accelerator programs, and pitch events. With M&A deal sourcing processed through these formats, more time is spent by startups developing a pitch narrative, rather than building world-leading technology.
M&A buys profits not pitches
Agriculture has a strong history of M&A, which is likely to strengthen and grow as the demand for technologies that enable sustainable agriculture exceeds the internal pace of corporate innovation.
The challenge for the AgriTech sector is that margins for agricultural equipment and inputs are tight, with gross margins ranging from 20% - 30% and net margins as low as 6% at Case IH. These margin dynamics extend to their customers, the farmers who operate in an industry demanding efficiency and margin compression as a constant economic force. These tight margin dynamics mean that unicorn valuation multiples often break the analysts' financial model.
In agriculture, efficient capital allocation is the key driver of success.
These financial dynamics are in stark contrast to the current AgriTech ecosystem, which has been built on a venture model that traditionally relies on startups achieving gross margins of 70%+ once they reach scale. With margins that high, startups and investors can afford (and are often encouraged) to be inefficient allocators of capital through the scale-up phase, as the high margins and growth rate multiples will eventually hide the waste—if they execute well.
Over the past two years, we've witnessed the force of financial gravity. When capital is no longer limitless, it simply can't close the gap between lofty aspirations and the free market's stark realities around profit margins.
We can debate the role of venture capital in AgriTech indefinitely, but one truth remains: the product is reality, the pitch is vanity, and profit is sanity. Ultimately, genuine value creation—not an inflated narrative—is what sustains a business.
I believe venture capital still has a critical role to play in enabling a more blended capital stack—one that aligns return expectations with market conditions and timelines. This means prioritizing efficient capital deployment strategies and building funds that don't hinge on finding the next unicorn.
While AgriTech may not produce a herd of unicorns, there are plenty of good companies quietly delivering 5x - 10x M&A returns through disciplined capital allocation, consistent execution, and good old-fashioned hard work. These successes weren't driven by hype, but by sustainable financial practices.
Learn more about the AgTech Collective’s expert team, our offer, or simply contact us to tell us about your project!
