Sean O’Connor is venture capital fund manager for Conexus Venture Capital, which invests in Saskatchewan-based startups
Canada is a country of innovators with the seventh-largest amount of arable land in the world. Surely, we must be an agriculture-technology leader, right? Think again.
According to Royal Bank of Canada’s 2019 Farmer 4.0 report, Canada imports more farm machinery than we make, while our share of global agtech investment is just 3.4 per cent. One of the main challenges in Canadian agtech is the lack of private capital to fund research and development, with just 11 per cent of today’s contributions coming from the private sector.
The result of this underperformance in farm-to-fork innovation means that most of our agriculture products are shipped as raw materials, which has caused our share of global agriculture exports to continuously fall since 2000. However, this trend is about to start changing.
To go from laggard to leader in agriculture technology, we need a strong Prairie startup ecosystem, new government programs to support agtech and an influx of private capital to help startups grow. Over the past 12 months, Canada has begun to see these critical factors come to fruition, and are in the early innings of a profound movement in Canadian agtech.
When looking over the Canadian Venture Capital Association’s 2019 results for how capital was deployed across Canada, we see a year of growth for the Canadian Prairies. The surge of investments into Saskatchewan startups, combined with the consistently steady Alberta results, propelled Prairie-based companies to raise $345-million of venture capital, representing 5.5 per cent of the total capital deployed across Canada.
After receiving $145-million in 2018 and $56-million in 2017, there was a view that the Prairies had finally arrived as a formidable Canadian tech ecosystem. Through a variety of government programs, particularly within Saskatchewan and Alberta, Prairies-based startups were able to find equal footing with their Toronto peers.
As we look ahead to the future of Canada’s tech environment, experts are optimistic that the growing agriculture-technology sector will become the catalyst for the Prairie tech ecosystem to take another large step forward. Until recently, the Prairies had to put their own spin on creating startup ecosystems based off the Toronto, Waterloo, Ont., Montreal and Vancouver models.
Whether it was the growth of mobile phones or software earlier this century, or the recent flood of venture capital in financial technology and artificial intelligence over the past five years, the natural places for ecosystem development have always been Ontario, British Columbia and Quebec. With each of these waves of innovation, our provincial stakeholders had to determine how to be successful using the bigger province’s playbooks.
This all changes with the emergence of agriculture technology as one of the next big waves of Canadian innovation. With the world’s population increasing to an expected eight billion people in 2023, and nine billion by 2037, the need to improve our food production has grown exponentially. Combined with the pressure to reduce pesticides, rapidly develop food traceability in this new COVID-19 world, and improve the environmental sustainability used in food production, a massive opportunity is arising to create new Canadian solutions that can have global success.
Given the natural advantages of the Prairies, these programs are starting thousands of kilometres away from Bay Street.
This Prairie advantage is a result of the provincial government programs, along with a strong foundation of agribusiness in the Prairie provinces. Alberta recently announced a grant to cover up to 20 per cent of R&D spending, boosting the tech sector.
Additionally, it has committed to investing $175-million over three years into Alberta Enterprise Corp. to expand access to venture capital, with one of the core focuses being agtech. Saskatchewan recently announced its intention to invest $15-million in a privately managed VC fund that focuses on agtech. This new injection of capital, combined with the Saskatchewan Advantage Innovation Fund, Saskatchewan Technology Startup Incentive, and a $1-million agtech growth fund, are all key drivers to pushing Saskatchewan forward.
While Manitoba paces behind the other two Prairie provinces, its 45-per-cent Small Business Venture Capital Tax Credit and Innovation Growth Program help provide advantages for agtech companies.
Lastly, Protein Industries Canada, one of Canada’s five innovation superclusters, is based in Regina and is expected to make an economic impact of more than $4.5-billion over 10 years through co-investing alongside private industries into agrifood-enabling technologies, including genomics, processing and information technology.
These new government programs add value to an area that has significant natural advantages. The Prairies are home to many of Canada’s large agribusinesses, including Nutrien, Richardson International, AGT Foods, Viterra, Brandt and the headquarters for Farm Credit Canada.
These companies, along with the dozens of other Prairie agribusiness leaders, need to actively participate in supporting this wave of innovation through partnerships with startups and corporate venture investing. Most importantly, with 130 million acres of farmland (81 per cent of Canada’s total) spread across Manitoba, Saskatchewan and Alberta, this truly is the heart of Canadian agriculture.
The third critical factor in harnessing the Canadian Prairies to become global agtech leaders focuses around ensuring sufficient investment capital comes in from the private sector. At Conexus Credit Union, we have been working alongside a large group of Canadian farmers, agribusinesses, industry leaders and financial institutions to launch a new VC fund later this year. Our fund is joining a growing list of new funds that are focused either entirely, or partly, on farm-to-fork innovation, including Forage Capital, District Ventures, Rio Partners, Build Ventures, Telus Ventures and Business Development Bank of Canada’s Industrial Innovation Fund.
While the next wave of agtech innovation is a long way from harvest season, the growing conditions look promising. We have a Prairie tech ecosystem that’s as strong as it’s ever been, a full suite of new support programs in their early stage of deployment, and a growing list of investors looking to place capital.
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