Expert guide: why blockchain will define AgTech opportunities and who will win
Food & Agriculture
Food & Agriculture
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Blockchain technology will be a game changer for AgTech stocks says chairman and co-founder of the Cicero Group, Mathew Walker.
What excites you in the AgTech space at the moment? Is there one change or trend in the past 12 months that has really caught your attention?
The alternate currency phenomenon has polarised the investment community, but the one component of this megatrend that is acknowledged by the overwhelming majority is the indisputable value of the blockchain — and associated smart contracts — in providing efficiencies to the supply chain via reduced transactions costs, greater transparency and proof of providence.
Providence of product is a trend most have noticed on the dining menu over the last five years as the consumer desires to know where the product they are about to consume has originated from.
Increasingly, and pleasingly, the consumer is also insisting on being reassured what they are about to consume has been produced ethically.
Agricultural products are for the most part low in respect of their value to their weight, hence transport and supply chain issues are critical in any successful model.
The application of blockchain technology to the sector will have enormous commercial benefits to the industry, not only in respect of cost savings to the producer, but also in respect of consumer and animal welfare.
[Ed’s note: Blockchain is a technology used to secure online transactions. It’s best known as the basis of cryptocurrencies such as bitcoin but is increasingly used in other applications such as verifying supply chain data and digital contracts.]
This sector sees so many businesses announce world-first or completely new inventions and approaches to agriculture. What do investors need to look for in this sector to separate a novel idea from one that has commercial legs?
In this instance technology businesses in the agricultural sector do not differ to those in other areas of technology.
Most technologies are not world firsts, nor are they completely new inventions, nor will a patent protect them from competition.
Most inventors do not differentiate the difference between the ability to do something clever and doing something of commercial significance.
What will protect you from competition is a brand name. And currency in a brand name is dependent of doing it first and doing it best.
All technology entrepreneurs are chasing the unicorn, and to get there you need to be the category killer in your chosen field.
Think Uber, think Google, think Amazon –if you have plenty of money feel free to compete with them. Their technology won’t cause you to fail, their brand name will.
What sets Australian agtech inventors apart from the global market?
Regrettably the challenges they face.
I have the utmost respect for so many of the Australian inventors I have met, particularly from rural backgrounds, many of whom are young and wonderfully clever, that come to me with excellent ideas and bold aspirations.
The challenge is to support them financially and otherwise. In Australia we do not have a venture capital market to speak of as you would in say the USA, the UK or Israel.
Any recent initiatives in this regard in Australia, for example the taxation incentives provided to ESVCLP’s [Early stage venture capital limited partnerships], have failed to gain any traction.
Private equity in Australia is restricted to traditional earnings businesses for which technology start-ups do not qualify, and the poor support shown by Australian private equity to Australian agriculture businesses is well documented.
The ASX has traditionally been the vehicle for early stage technology businesses that in an overseas market would be incubated, and supported, in a private environment prior to being exposed to the rigours of the public domain.
In recent months, following some spectacular public failures in the technology space, the ASX appear to understandably be applying stricter criteria to the listing process.
The unfortunate consequence for our technology entrepreneurs though is that it deprives them of their only current source of capital.
Are there opportunities catching your eye over the past six to 12 months?
Yes, there are two in particular.
As mentioned, supply chain aggregation businesses that utilise the blockchain and smart contracts to increase supply chain efficiency and transparency.
There are some, like ASX-listed Yojee Limited (ASX:YOJ), that focus on the macro logistics industry, but not specifically the agricultural sector or aggregation opportunities.
There is an enormous opportunity in agriculture in my view, based on the specific requirements in agriculture for transparency and providence of product, to replicate or build on their success.
Secondly [aside from agtech], in alternate medicine and applications in the biotechnology space.
Medicinal marijuana, its broader acceptance in the medical community and its success in the investment community, is well documented.
Expect to see others soon. Medicinal kava is one example of an alternate medicine that appears set to succeed at both the product and investment level.
Mr Walker owns shares in Yojee (ASX:YOJ).
Mat Walker is a businessman and entrepreneur with extensive experience in the management of public and private companies, corporate governance and the provision of corporate advice. In a management career spanning three decades, He has served as executive Chairman or Managing Director for public companies with operations in North America, South America, Africa, Eastern Europe, Australia and Asia. He is Co-Founder and Chairman of the Cicero Group (Cicero) www.cicerogroup.com.au, Co-Founder and General Partner of technology incubator Alchemy Venture Capital www.alchemyventures.com.au and Founder and Director of beef cattle enterprise the Stone Axe Pastoral Company www.stoneaxepastoral.com.au.
He has served as Managing Director of his family livestock business, Westholme Wagyu, which was sold to Australia’s largest beef cattle producer the Australian Agricultural Company Limited (ASX: AAC) in 2006, described by AAC at the time as “the world’s largest and most credentialed full blood herd outside of Japan and is viewed as Australia’s premier Wagyu Business”.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.