There is no doubt that the agricultural technology (agtech) ecosystem is rapidly maturing. This is demonstrated by both the number of solutions in the market and the influx of funding that has been invested. But while headline numbers signify a maturing ecosystem, the reality is that many actors, especially in the Global South, struggle to achieve product-market fit and scale. Recent setbacks of once-promising models like Gro Intelligence, Twiga, and Copia underscore these complexities.

To unpack this, ISF Advisors facilitated a comparative analysis between the agtech ecosystem and other ecosystems serving low and middle-income populations. This exploration shed light on the key drivers of innovation ecosystems, the relative maturity of different countries, and an analysis of best and worst-case scenarios for the future of agtech ecosystems in the Global South.

The Trajectory of Innovation Ecosystems

Innovation ecosystems – defined as the network of actors, relationships, and resources that play a role in taking an idea to transformative impact at scale – flourish under the following conditions:

  • Proven, scalable business models that have gained traction and commercial viability
  • The presence of later-stage deals, exits, and even unicorns
  • Large and diverse investment flows from both foreign and local investors
  • Local IP and patents
  • Equitable and inclusive governance and participation

To get to this state, ecosystems servicing low and middle-income customers tend to follow a common trajectory. This was seen with microfinance in the 1960s, PAYGO solar providers in the early 2000s, and most recently agtechs and financial technology (fintechs) in the past decade (see detailed examples in the attached slide deck).

As documented in the graphic below, ecosystems start in the irruption phase when an early group of solutions with common hypotheses enter the market. At this stage, adoption and growth tend to be slow and funding is constrained, leading many founders to bootstrap or rely on grant funding. Eventually, the solutions gain traction and massive growth begins – often defined as a “bubble” – with new innovators and ecosystem actors entering the market. During this phase, actors typically operate in siloes, and enabling environment actors are playing catch up.

Typical Evolution of Innovation Ecosystems

Then comes a turning point, often in the form of a major success story such as an exit or acquisition (e.g. Stripe acquiring Nigeria’s PayStack), that helps prove the potential of solution growth and leads ecosystems into the synergy phase. In these relatively mature ecosystems, actors begin working together to address barriers, commercial funding becomes dominant, and there is supportive infrastructure and talent to support solutions. In the final stage, the adoption of solutions is widespread. Due to saturated markets, new businesses start to spin off into adjacent sectors, as was seen with early fintech innovators (e.g. Tala, Branch) launching off the backs of microfinance institutions (MFIs).

The State of the AgTech Ecosystem

By examining the burgeoning agtech ecosystem against these common ecosystem trajectories, we see that the strength of the innovation ecosystem varies widely across regions and even markets within each region.

In mapping the number of agtech solutions across the strength of ecosystem maturity, it becomes clear that:

  • Global North agtech ecosystems are small but mighty. Despite the relatively small agriculture value-add in markets such as Israel, Germany, and France, they are frontrunners for innovation.
  • Brazil and India are Global South frontrunners. Excluding China, these two markets are far ahead of their regional counterparts in terms of ecosystem strength. We examine potential reasons for this in the next section.
  • All sub-Saharan African agtech ecosystems remain at a relatively early stage of ecosystem development. While frontrunners Kenya and Nigeria are lauded for their startup ecosystems on the continent, even these sub-Saharan African ecosystems remain relatively immature when compared to other regions.

 

Maturity of AgTech Innovation Ecosystems Across Global South & Global North

Examining the Front Runners

As noted above, Brazil and India are far outpacing their Global South peers. Several similarities between these countries have helped drive this growth, including:

  • Very large domestic markets, given the strong reliance on agriculture and sheer population size
  • Favorable local startup ecosystems, with a track record of innovation and technology-based companies
  • Available funding, due to burgeoning start-up scenes and dedicated commercial investors in the sector (e.g. Omnivore, SP Ventures)
  • Favorable government programs and policies for the start-up sector and/or agriculture sector, including the existence of digital public infrastructure 

The success of the agtech ecosystem in both countries is dependent on an array of actors, including startups, funders, and regulators. The maturity in these markets can be largely attributed to the favorable conditions across these user groups.

AgTech Ecosystem Trajectories of Global South Frontrunners: India & Brazil

Where Does the AgTech Ecosystem Go From Here?

Where the agtech ecosystem goes from here is dependent on a variety of factors. While there are promising signs of growth and innovation globally, the journey is fraught with challenges in achieving widespread scalability and product-market fit, especially in regions like sub-Saharan Africa. The successes of frontrunners such as Brazil, India, and many Global North markets highlight the potential for impactful change driven by robust startup ecosystems, available funding, and supportive regulatory frameworks.

In the best-case scenario, it could flourish as a globally integrated ecosystem driven by regional anchors (e.g. India, Brazil, Kenya, Singapore), with accessible commercial capital and supportive enabling environments. However, there’s also the potential for it to become persistently divided, with models in less mature markets stagnating and succumbing to funding cliffs.

To achieve the best-case scenario outcome, collaboration between stakeholders is key. This includes donors continuing to fund key research, data providers increasing transparency into sector funding flows, regulators fostering progressive policies, funders taking a bet on the sector, and innovators continuing to develop commercially viable models. By fostering collaboration and learning from the successes and setbacks of similar ecosystems, we can drive towards a globally integrated agtech ecosystem.

This blog was authored by Sarah Devermann, Matt Shakovskoy, and Clara Colina.

Get in Touch

If this has sparked interest or you would like to discuss ISF’s market perspective further, please reach out to:

 

  • Matt Shakhovskoy – ISF Director (matt.shakhovskoy@isfadvisors.org)
  • Clara Colina – ISF Director (clara.colina@isfadvisors.org)

Slides for Further Reading

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