Harvest Automation: In Search of New Capital By Walt Duflock, Vice President, Innovation Recent events in agtech and agtech acquisition activity have brought to light a new focus area for Western Growers: the need to increase capital sources for harvest automation. Let’s take a deeper dive into three recent events: 1. CNH Industrial’s acquisition of Raven Industries In June 2021, CNH Industrial revealed that it would acquire Raven Industries in a $2.1 billion deal. and they can’t be responsible for asking new capital sources to step in and fund their efforts while they ask growers to make significant operating changes. That is too heavy a lift for a startup, any startup.

Rather than startups leading, industry needs to lead and drive the change to help support all of the startups. I believe the next step is for the industry to lead the charge towards new capital sources, specifically: (1) banks like Rabobank and Wells Fargo and credit unions like Farm Credit Union that have been long-term partners of ag and agtech and benefit from thriving ag and agtech industries; and (2) strategic investors such as equipment dealers (including John Deere, Yamaha and Kubota) with a market opportunity for potential growth in ag and agtech. Western Growers, with our large member base of global specialty crop leaders and long-term relationships with those potential investors, is in a unique position to start these conversations. What is it going to take to push these conversations forward? The biggest challenge with these new sources of capital is that they have a very different risk profile than VCs. They can’t live on a high percentage of strikeouts with a few home runs that leave the yard. This would break their entire business model. We need to figure out how to de-risk the harvest automation investment space so that the investments make financial and strategic sense. The first step is starting these conversations to find out what kind of risks need to be reduced. The second step is working with growers to figure out how much of the risk they can help mitigate for harvest automation investments. The third step is to work with startups with the outcomes of the first two discussions so they understand what is required for the path to investment from the investors and the growers so that they can build the right sales cycle and roadmap. Starting this month, Western Growers is going to take on this challenge and begin driving these conversations. A successful outcome will help open capital sources beyond venture capital that can take a more patient and strategic approach that benefits all parties. Startups will have more access to capital to help them build their product and business model and get to scale faster. This new capital can also be leveraged with funding from state and federal grant programs meant to drive innovation. This leverage can be used by both Western Growers and individual startups. I strongly believe that the private side of the economy needs to move first so we can increase the odds of the public funding options being willing followers and potentially matching funders.

2. John Deere’s acquisition of Bear Flag Robotics In August 2021, Deere & Company signed a definitive agreement to acquire Bear Flag Robotics for $250 million. 3. Abundant Robotics’ demise In July 2021, Abundant Robotics (the tech startup that appeared to be leading the race to commercialize a robotic apple picker) officially shut down stating that it was unable to raise enough investment funding to continue development and launch a production system. The company raised a total of $12 million. Together, these three events do not signal great news for a significant segment of agtech mechanization: harvest startups. These recent activities make it clear that the current acquisition activity in agtech mechanization is focused on the software side of the technology stack— and not on the hardware side. This makes sense for multiple reasons: 1. Hardware takes longer and requires more capital to build prototypes, run field trials and get to manufacturing at scale. 2. Harvest solutions generally work on only one crop type, so the addressable markets are limited to the labor spent on harvest in those crops. These market sizes are always smaller than the comparable markets investors see in fields like mobile apps and e-commerce solutions. The extra time and money required are often two strikes against harvest automation startups before they even get to pitch a venture capitalist (VC). 3. The increasing need for multiple business models—capital equipment purchase, as-a-service and subscription— make the sales process and fundraising requirements challenging. Planning for scenarios where 75 percent of your sales can either be equipment sales or as-a-service purchases increases the capital required to adequately support both options (or it requires startups to only offer one, which shrinks the addressable market again). Combine all the above with the Abundant Robotics outcome and investors have an increasing number of reasons to shy away from further harvest automation investments, and likely toward software and digital plays. Let’s get to the “so what” part—regardless of the ongoing challenges, the startups are still going to need the capital



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