JAKARTA It came as something of a surprise when Mimosa Technology won the Vietnam round of Seedstars World, a competition for emerging-market startups, in May. There were over 70 fledgling Vietnamese companies taking part in the contest, some focused on sexy areas like health care. MimosaTek, on the other hand, specializes in information technology for agriculture.
Interest in "agtech" -- which covers everything from biotechnology to online food retailing -- is heating up. Last year saw $4.6 billion in venture investment, comprising 526 deals by 672 investors, according to AgFunder, an online investment marketplace for agriculture. Although the pace is expected to slow in 2016 due to the decline in activity by venture capitalists, agtech still managed to rake in $1.8 billion in the first half of 2016, spread over 307 deals involving 425 investors.
MimosaTek uses sensors to continuously monitor environmental factors and soil humidity, crunching the data and using a smartphone app to let large and small farmers know when and how much to irrigate their crops. Farmers can even activate equipment such as water pumps remotely, and record crop growth using the app. MimosaTek claims its system can cut water and electricity use by up to 30% and increase yield by up to 25% for some crops, such as tomatoes.
"When I started a strawberry farm in [the southern Vietnamese city of] Dalat in 2012 with my friends, I had difficulties deciding the irrigation schedule. Each farmer I consulted gave me different advice based on their own experience," said MimosaTek CEO and founder Nguyen Khac Minh Tri. "We aspire to use technology to help enhance the quality of farming practices [and] agricultural produce, and that in turn will help millions of Vietnamese farmers' families have better lives," he said.
TAKING ROOT Precision ag -- which uses drones, satellites, robots and other high tech gear -- is one of the fastest growing areas in agtech, attracting investment of $661 million in 2015, a 140% increase compared with 2014. Now, much of the investor attention is turning to e-commerce, with the subsector gaining $1.65 billion in venture investment.
Food safety scandals in the China have encouraged middle-class consumers to look abroad for trustworthy products. Savvy companies are taking advantage.
One example is Womai, an online retailer of fresh food set up in 2008 by state-owned food conglomerate China National Cereals, Oils and Foodstuffs Corporation, better known as COFCO. Womai has raised $330 million over three rounds of funding, according to online database CrunchBase, with part of the cash going toward increasing food imports. Its latest round of funding in October 2015 raised $220 million from investors including internet services company Baidu. Benlai Life, an online retailer of fresh fruit and vegetables, is another popular startup. It raised $117 million in May 2016.
A similar trend is also visible in India, where the Bangalore-based bigbasket.com raised $150 million in a follow-up round of funding. With its massive population, the growth opportunities for online grocers are immense. Bigbasket's late-round funding was led by the UAE's Abraaj Group.
Japanese investment company Mistletoe is getting in on the act as well. Mistletoe, led by Taizo Son, younger brother of SoftBank Group CEO Masayoshi Son, has invested in two Indian startups over the last two years, aiming to create a supply chain connecting farmers directly to consumers. Mistletoe officials said that the company is looking to invest in more startups in India, to support people "who [are helping] India solve agricultural and food problems."
Roger Royse of the Royse Law Firm, which sponsors the annual Silicon Valley AgTech Conference, said: "The world's population is growing, but the amount of land is not growing. A better, cheaper and more efficient way of producing food is needed," adding, "Agtech is going to continue to attract a lot of money, even though there is a downturn in other sectors."
But things are not all plain sailing, especially for those investing in the online grocery business in India. According to local media reports, online retailer Flipkart shut down its grocery delivery business in February. Grocery delivery app PepperTap stopped operating in 10 locations early this year. On-demand delivery service Grofers also halted operations in nine cities in early 2016. Thin margins, high marketing costs and fickle customers have all been blamed for the hiccups.
The e-grocery business has been here before. U.S. company Webvan, founded in 1996 at the peak of the dot-com bubble, promised to deliver products to customers' homes within 30 minutes. It was hugely popular, but could not keep up with ballooning costs. It collapsed in 2001.
Thinning -- uprooting unhealthy plants to help others grow -- is common in farming. The agtech business may need a bit of thinning, too. Arvind Singhal, chairman of Technopak, an Indian management consultancy focusing on retail and consumer products, argues the food and grocery businesses are especially tough. The perishable products they handle have "huge costs involved when customers return them."
Nikkei staff writers Mamiko Fujita in Silicon Valley, Yuji Kuronuma in New Delhi and Kim Dung Tong in Ho Chi Minh City contributed to this article.