Last month, San Francisco-based indoor farming startup Plenty scored a win for the California ag tech scene when it secured a $200 million investment from SoftBank’s Vision Fund, one of the largest rounds ever for an ag tech startup. With $2 billion invested in California ag tech startups since 2010, it’s not surprising that California is the most promising place for ag tech — it’s the state with the largest agriculture sector by cash receipts, according to the USDA. But new data from Pitchbook indicates that other states with strong farming sectors are still having trouble cashing in on ag tech.
The good news: Among the 10 states that receive the most ag tech funding are Heartland states like Missouri, Michigan, and Illinois. The bad news: Ag tech startups in California received more funding from January 2010 to June 30, 2017 than all ag tech startups in the other top 10 states for ag tech combined during that same time period. And states like Iowa, Nebraska, and Minnesota — the states with the second, third, and fifth largest agriculture sectors respectively — are nowhere to be seen.
Rob Leclerc, the cofounder and CEO of Agfunder, an online investment platform for ag tech startups, explains that just as in any other sector, ag tech startups have to consider what city will put them in close proximity to their customers, venture capitalists, and good talent before deciding where to place their headquarters. Though states like Iowa and Nebraska have larger agriculture sectors and thus offer ag tech startups closer proximity to more customers, states with smaller, yet still prominent, agriculture sectors like Illinois and Michigan are home to more large universities and cities — and thus larger talent pools, as well as more corporations to potentially partner with.
Jesse Vollmar, the cofounder and CEO of FarmLogs, a startup that provides crop management software to farmers, decided to set up its headquarters in Ann Arbor, Michigan after participating in Y Combinator’s accelerator program in 2012. They settled on Michigan because both Vollmar and his cofounder, Brad Koch, are from there. Additionally, Ann Arbor, home to the University of Michigan, offered FarmLogs close proximity to talent, as well as a major airport that Vollmar and Koch could reach quickly.
“We considered Chicago, but we just didn’t have an established network there,” Vollmar says. “It’s not located in as close proximity to farmers.”
While a high concentration of ag tech funding in California is great for the state, one concern is that it could lead to a lack of diversity in the types of problems that new ag tech startups look to solve.
“If you look at California, there’s a lot of local talent that allows you to solve sort of different types of problems — problems around robotics, around automation. The problems that farmers here often have are specifically around labor,” Leclerc explains. “If you go to the Midwest, what you’re dealing with is much much larger farms; the farms are often so big that you can’t possible go and survey them all entirely, so you really have a big data problem.”
While ag tech startups in places like Iowa and Nebraska may be lacking funding, there’s still plenty of enthusiasm to cultivate a large ag tech sector there. Last year marked the opening of a new ag tech accelerator in Iowa, called the Iowa AgriTech Accelerator, which secured investments from companies such as John Deere and DuPont.