Venture Capital and the Transformation of Private R&D for Agriculture

This paper shows that venture capital (VC) investments in research and development (R&D) intensive startup companies in agriculture has increased substantially from almost nothing in the early 2000s to several billions of dollars by 2018. Such VC investments have not typically been accounted for in estimates of national or global agricultural R&D spending. These investments are supporting new entrants in highly concentrated markets, where incumbents may have been taking relatively incremental approaches to R&D strategy. Such technology-based startups can be an important channel for commercialization of results from public sector agricultural research, in both developed and developing countries. This chapter analyses recent trends in agricultural technology startups and VC investments and seeks to explain the recent upturn. We construct a dataset of more than 4,500 startups located in 125 countries. Simple regression analysis on a subset of these startups with detailed financial data shows that the overall supply of venture capital in the economy, growth in agricultural commodity prices, and previous successful exits by agricultural startups—including initial public offerings (IPOs) and mergers and acquisitions (M&As)—are all associated with the recent higher levels of VC investment in agriculture.