Why Lithuanian startups don’t target agriculture

There is a clear global trend towards growing investments in agricultural technologies. In 2014, the amount of venture capital investments in this field reached almost $1 billion. Startups are also clamouring for a slice of the pie, but not in Lithuania, where agricultural startups are few and far in between.

Petras Mičiūnas, a partner at the Practica Capital venture capital fund, says the “AgTech” ecosystem of agriculture startups is dynamic and full of ambition. However, the field is in its infancy in Lithuania.

“Since agriculture requires a lot of investment and has narrow profit margins, innovation is the key driver of long-term success. How do we optimize water and fertilizer use? Where do we have the largest need for this? When is it most efficient to take the harvest? These questions drive the introduction of technology into the agricultural field, from various air sensors to satellites and flying robots or management systems,” said Mičiūnas.

Mičiūnas also says that the greatest challenge in agricultural business at the moment is increasing harvest yields. Due to a growing global population, innovation in this field is a must.

Much work ahead

The startup ecosystem in Lithuania is just in its formation, said Mičiūnas. Therefore, Lithuania cannot compare itself to leading countries in the field like the US, where investments have reached a different level and the field itself has undergone a generational change.

“We should follow the best examples and work patiently. Yes, we know a few Lithuanian AgTech products like Farmis and AgroCount, but our portfolio does not yet have any startups like those,” said Mičiūnas.

“The importance and usefulness of agricultural business and technologies is indisputable. It’s important to link these points: technology, agriculture and investment. Therefore, larger companies in these businesses should increase their investments into innovations. We’ve heard that Agrowill is planning to do so. Practica Capital, for its part, has not rejected the possibility that it may work with larger companies as they invest,” said Mičiūnas.

A slow-moving sector

Arvydas Strumskis, a partner at the Verslo Angelų Fondas I venture capital fund, also said that there is great potential for agricultural innovations. According to him, the fund has already invested in the AgroBirža grain system and into information technologies for the management of agricultural companies. It has also made some test investments into technological solutions for the detection of various grain diseases.

“There were investments, but not many, because the sector itself is very slow-moving, various habits have formed, and it depends a lot on certain forms of support. A perfect example of this is the Lithuanian dairy industry. However, investments into agriculture are very important, especially when it comes to production. Especially because Lithuania generally has a low productivity level,” said Strumskis.

Though there is little investment in agriculture innovations in Lithuania, Strumskis says that technologies are advancing. Besides, with open markets, startups don’t need to limit themselves to Lithuania, though they will face more competition abroad.

“We can’t forget that we aren’t alone in the world. Switzerland and Germany are not waiting for us. We must also understand that the agricultural sector is not just slow in Lithuania – it is a privileged sector throughout Europe. However, in the Scandinavian countries, unlike in Lithuania, there are large and powerful corporations, almost like monopolies, that look after many sectors and can afford to experiment, even in a slow-moving sector like agriculture,” said Strumskis.

No dialogue between farmers and innovators

There are indeed very few startups developing smart solutions for agriculture, says Ugnius Zasimauskas of Enterprise Lithuania, a government agency promoting entrepreneurship and innovation.

The country’s biggest startup event, LOGIN Startup Fair, involved 36 Lithuanian startups, but only one among them, Farmis, worked in the field of agriculture. One more agriculture solutions startup came from Estonia. VitaFields is largely considered one of the most successful startups in the Baltics.

Last year, LOGIN Startup Fair, attracted 60 Lithuanian startups and not one of them was innovating for agriculture, Zasimauskas says.

Lithuania has a fairly strong startup scene which attracts considerable investment, whereas growing interest in agriculture innovations is a global trend. How is it then that Lithuanian startups have so little interest in technologies for agriculture?

“I’d say the reason is the fact that there is no dialogue between farmers and the startup community. Moreover, startups do what is interesting to them or what they see potential in. Perhaps they have yet to discover this field? Farmers themselves should seek dialogue. But perhaps they do not believe that startups can help them in any way. Moreover, businesses in Lithuania are suspicious of young entrepreneurs,” Zasimauskas says.

He believes, however, that startups are bound to start innovating in agriculture, too. “Lithuanian startups like developing hardware, that is, technology which is physically tangible. Innovation of things can enter this field, too, in the future,” he says.

Farmis, the first Lithuanian-developed agriculture app, shows that startups have something to offer to farming, he says. There are a number of similar products in the world that have been hugely successful. “For instance, America’s biggest agriculture company Monsanto has paid $1 billion for a similar startup technology,” Zasimauskas says.