Ag-tech investments bounding higher

Generating interest from venture capital investors in agriculture technology has been a dream for many in the Salinas Valley, but now there are numbers to show it is a very real and growing trend.

“The ag-tech sector had a record breaking year in 2014, with $2.3 billion invested across 264 deals,” said Rob Leclerc, chief executive of AgFunder, an online equity crowdfunding platform for agriculture technology. “The big takeaway is that agriculture is being transformed by a confluence of new technologies drawn from many industries.”

This trend is important to the Salinas Valley, as the region is ripe to attract investments from the venture capital community and from existing agribusinesses, as well as a knowledge base with startup-friendly CSU Monterey Bay and the tech-savvy Hartnell College.

Aaron Magenheim, chief executive of Signature Ranch Technologies in Salinas and three other startups, said Friday that the Salinas Valley has the potential to be the sweet spot for ag-tech innovation with its proximity to the deep pockets of venture capitalists in nearby Silicon Valley and the growers in Monterey County that are adopters of new technologies. The key word here is “potential.”

“Ag is the next big thing in technology,” Magenheim said. “But there is still a huge gap between Silicon Valley and Salinas Valley.”

In one sense, the gap isn’t logical. Projected growth puts the world’s population at up to 10 billion people by 2050. They need to eat, and since available agricultural land is fixed or declining, the only way to feed a population like that is through innovation that increases yields.

On the other hand, the legacy investment model often funds technologies in search of a market. That’s backwards. What Magenheim stresses is that startup companies need to develop a network of growers and listen to their needs, then hit the lab and develop technologies that provides what the farmers want. The other way around will leave cool gizmos without a market to sell into.

One of his companies, AgTech Insight, consults with startups to share experiences Magenheim has learned from. A year ago he had a booth at the Salinas Valley Ag Technology Summit next to Roger Royse of the San Francisco-based law firm by the same name. Royse was sponsoring another tech summit in Palo Alto and invited Magenheim to present a booth there.

“So I did and that’s where I got in touch with about 80 people on the technology side,” he said. “I realized that I should be talking to these really smart people.”

What he learned was that agriculture needs to drive technology, not the other way around. Venture capitalists get it, too. AgTech Insight consults with the investment community on the companies they should be funding.

“They’ll tell me they are looking at funding 10 companies, can you help us get that down to three,” Magenheim said, adding that now is the time for startups to get moving.

During the three months ended Dec. 31, 2014, there were 64 VC investment deals totaling $969 million. That compares to the end of the first quarter last year where half that – $467 million – chased 55 deals.

“Fourth quarter investment in ag tech was about as much as the previous two quarters combined,” Magenheim said.

That is clearly a trend worth paying attention to.

Dennis L. Taylor covers business and technology for TheCalifornian.com. Follow him on Twitter @taylor_salnews.