The Brazilian agricultural sector offers great opportunities for agtech companies.
Technology could be one of the main allies of the Brazilian rural producer. Despite this, more than half of the entrepreneurs in the sector still do not use any electronic tool to facilitate their activities.
The Rural Producer Survey 2017, conducted by the Brazilian micro and small business support service (Sebrae), reveals some interesting facts. For example, it shows that more than 65 percent of the respondents in the state of Mato Grosso’s perform financial and inventory management on paper or simply do not. Of those who use a digital system, spreadsheet software (20 percent) is the preferred choice. This shows that the use of technology in agribusiness still needs to go a long way.
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The Confederation of Agriculture and Livestock of Brazil (CNA) has only recently formed a committee that will map start-up ecosystems that seek innovation for agribusiness in Brazil. According to the president of CNA, João Martins, the intention is to transform the sector with innovative ideas from start-ups. “The CNA is diving into this because our sector is increasingly seeking new technologies. We are seeing people who want to grow, but do not have the conditions and at the same time we see investors who would like to put money in the agricultural sector.”
According to a study headed by the Brazilian Confederation for agriculture and animal production (CNA), the share of agribusiness in the national gross domestic product (GDP) of US$ 2.056 trillion in 2017 reached 24 percent. Projections for the coming years are very optimistic, with even greater growth. This proves that the sector plays a fundamental role in the Brazilian economy. In fact, on many occasions, it was agriculture that held the Brazilian GDP positive. At the center stage of the agribusiness is the rural producer, who strives hard for better production results. Despite the great importance, the rural producer in Brazil faces many challenges and needs to be prepared to win the future with confidence.
SP Ventures is the investment manager of the Innovation fund of the state of São Paulo (FIP), a vehicle that has the resources of a number of organisations aimed at innovation. The fund has equity of € 25 million, aimed at technology-based start-ups in the state of São Paulo.
A majority share of the financial resources is directed to the agricultural and livestock sector, with investment portfolios concentrated in Agtech Valley. This agricultural entrepreneurship center is located in Piracicaba at the agricultural faculty of the university of São Paulo (USP).
The investment manager also works on the structuring of the Brazil Venture Debt I Fund, an initiative led by the national bank for economic and social development (BNDES). It is the first credit instrument dedicated to innovation start-ups in the country.
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According to the Brazilian Start-up association (Abstartups) more than 20 percent of Brazilian agtech start-ups already make more than € 250.000. ABstartups recently made a first survey of technological innovation companies that work directly in Brazilian agribusiness. According to the survey, there are currently 182 agtechs start-ups in operation in the country. Most of them, still in the initial phase, have 3 to 10 employees. Around 30 of the total of companies have a turnover of € 250.000 or more.
One of the data that calls attention is the number of companies that have software as a product. More than 76 percent depend on this to generate revenue. Although the quantity of companies is considered high, the productive sector still has great potential for entrepreneurs. ABstartups believes that agtechs’ ecosystem in Brazil will be strengthened when large companies in the agricultural industry become interested. When they start investing or making contributions or hiring these companies, there will be a boom in this segment.
Brazil, according to statistics from the Statistical Office (IBGE), has about 5 million agricultural entrepreneurs and 64 million hectares of arable land. In addition, there are about 150 million hectares of cattle farming. Over 4 million of the agricultural companies are counted as family businesses and their production area is less than 100 hectares. They account for 40 percent of the value of total agricultural production and also produce the largest amount of milk, pigs and poultry. There are approximately 400 thousand farms with a production area larger than 100 hectares. One of the biggest is the Amaggi group that grows grain and cotton on some 320 thousand hectares.