No Shortcuts Allowed: Ag Venture Capital Requires Patience, Understanding

By Blake Hurst

In 2020, there was a record amount of venture capital in agriculture. Food and fiber and growing cannabis was where the action was, and the merger between Silicon Valley and the Tarkio River Valley, where I farm, was just a few startups away. I have to admit that I was caught up in the excitement. The future was plainly going to be wonderful, and we early adopters and investors were in for a fun ride.

I talked my brothers into investing with me in a startup that was attempting to collect and sell farm data. I was convinced there would be a market for our data, and we installed boxes in all of our machines to collect and upload the data. The company has since been sold, our data has disappeared into the ether, along with our investment, and my assumption is that no one was willing to pay for the data that is often available for free. The entrepreneur who started the company has landed on his feet and is heading up another startup. We haven’t invested.

Our experience in ag venture capital isn’t unique. According to AgFunder, investment in the startup market in agriculture declined nearly 50% from 2022 to 2023, far outpacing the 35% decline in the venture capital market as a whole. The combination of higher interest rates and a number of well publicized failures has cratered investment in agriculture startups. Even though venture capital by its nature is cyclical and prone to extended booms and busts, these are sad times indeed for entrepreneurs on the cutting edge of the oldest industry of all. 

An auction appeared in my inbox the other day. Forty vertical farming units are available—shipping containers full of lights and irrigation and everything you need to grow plants inside a steel box. Now, many of you are probably looking out your window right now, and, if it’s during the day, and the weather conditions are right, you may notice that it is bright out there, with sunshine providing light for a very reasonable price. Not only that, but you are also probably aware that people have been growing plants inside structures called greenhouses for a very long time, using that free sunshine. I don’t know how the costs of heating a greenhouse compare with the costs of lighting the inside of a steel box, but when they auction off your assets, it may be a sign that you didn’t get the numbers right. 

The financial difficulties experienced by the former owners of those shipping containers might have been avoided by having a conversation with somebody who was actually in the business of growing food. One constant that I noticed in the agricultural venture capital craze is this: very few of the entrepreneurs pitching the latest and greatest ag tech come from a farming background. Those who do often go to market faster, smarter and with a more realistic understanding of what farmers are willing to adopt and why. I’ve attended a few pitch sessions where dozens of startups are making their case. Engineers and marketing experts and geneticists and biologists and former investment bankers were much in evidence at these meetings, but there weren’t many farmers pitching the latest and greatest.

Even though farmers backing ag innovation would likely already know who to approach and why, all the other pitching startups should work harder to ensure they have a traditional farmer investor on board before trying to talk to other farmers. If not, the whole message tends to be lost in translation.

The farming industry needs new ideas, new technologies. We need the right kind of new companies that understand the lay of the land. There are plenty that do not. Case in point; I confess I was among a good number of traditional farmers who celebrated Beyond Meat’s $9 billion loss in market capital. The concept didn’t hit the mark for us, and set us up as rivals. There are few things I enjoy more that seeing the Kansas Jayhawks lose early in the NCAA basketball tournament, but that was one of them.

From drones to local networks monitoring everything going on anywhere on our farms, to new uses for agriculture products, farmers and society as a whole benefit when agriculture is included in the conversation and becomes more efficient. Venture firms are investing in bioenergy, biomaterials, robotics, biotechnology, and new ways to prepare and market food. I’m sure that somewhere some brilliant young mind is thinking about how to kill pigweeds, keep cows from burping, and generate revenue from cover crops. When those ideas are ready to go to market, backers can’t afford to take a shortcut around farmers.

Biologicals are a great example. There is a growing body of evidence they offer hope for increased yields and lower use of traditional inputs. And, while it might have taken longer, those companies who took the time to include farmers well before their strategic launches are leading the pack today.

Investors and entrepreneurs will learn from the present difficulties, concentrate on ideas that are easier to bring to market, learn to be more efficient, and of course we can hope that they spend some time visiting with people who understand the challenges of working within the constraints of nature and the weather. 

I’ve got a few dollars I might invest in some of those ideas. It won’t be the first time I’ve thrown good money after bad, and maybe I can make a difference in the kind of future agriculture enjoys. What the heck. Lightning might strike, and I might invest in a company that actually makes it to the finish line, and goes public or sells to a private equity firm.

Even writing that sentence made me smile, given my investing history. I don’t know how to pick a winner, but I do know that an active and large venture capital market in agriculture is a good thing for all of us. 


Blake Hurst is a Missouri Farmer and Greenhouse Operator. He is former president of the Missouri Farm Bureau and a current member of Stratovation Group’s Board of Advisors.