Kevin Danner, President and CEO of Carbon Lock Tech and Rodrigo Santana, CEO of BeriTech Inc., Director of Food and Agribusiness at GHD and Bioenterprise Canada Innovation Advisor, discuss challenges faced by Canadian agri-tech and food-tech startups, potential solutions, and the future of Canada’s agri-food sector
By Tabitha Caswell for Bioenterprise
Agri-tech and food-tech startups play a vital role in addressing critical issues like food security and sustainability. These innovative companies leverage advanced, cutting-edge technologies to revolutionize farming practices, improve crop yields, and reduce environmental impacts. However, when it comes to bringing their innovations to commercialization, startups in the agri-food sector face numerous challenges that can hinder their growth and success.
In this article, we’ll identify and examine these common hurdles and discuss potential practical solutions for Canadian agri-tech entrepreneurs. Additionally, we’ll explore how organizations like Bioenterprise Canada provide crucial support in navigating the journey from concept to commercialization and beyond.
Joining the conversation is Rodrigo Santana, Innovation Advisor at Bioenterprise Canada. With more than 25 years of entrepreneurial and executive experience in ag-tech, cleantech and food processing, Rodrigo has skillfully supported the scaleup of fast-growing, technology-driven public and private organizations such as Dow AgroSciences, CubicFarm Systems Corp., and more. He is the co-founder and CEO of BeriTech Inc. and Director of Food and Agribusiness at GHD.
Also here to share his perspective is Kevin Danner, President and CEO of Carbon Lock Tech, a Canadian company focused on developing sustainable clean technology solutions for the removal and sequestration of atmospheric carbon. As an experienced entrepreneur, Kevin is well-versed in the language of Canadian startups.
Identifying the Challenges
Canadian agri- and food-tech startups face several unique challenges that hinder their growth and success, including financial obstacles and lack of funding options, regulatory and compliance issues, slow technological integration and adoption, difficulties with market access and scalability, and talent acquisition and retention. Like pillars of a building, these challenges work together to support the foundation. If one pillar is weak, the entire structure is at risk of collapsing. Unable to overcome challenges, a new business venture can sit stagnant, or worse, fail.
Rodrigo points out that the food and agriculture sector is unlike other tech-driven sectors like biotech, cleantech, finance or fintech, and information technology (IT). He says, “Agri-tech startups typically require heavy research and development infrastructure, such as equipment, space, and other resources. In comparison to other sectors, they might require a longer development time to validate proof of concept, as in testing tech on crops with long growth cycles. For these reasons, startups face additional roadblocks and investors sometimes have a hard time understanding the agriculture sector.”
Kevin Danner adds, “For me, the top three challenges for Canadian agri-tech startups are access to funding, fragmented funding across different levels of government, and the slow pace of technology adoption by farmers and producers.”
By understanding the most common challenges Canadian agri-tech startups face, we can explore potential solutions and the role of organizations like Bioenterprise Canada in providing crucial support to help these entrepreneurs navigate their journey from concept to commercialization. But where to begin?
Ask any entrepreneur this question, and the topic of investment and funding will likely sit near the top of the list. However, before we dive straight into finance, let’s take a look at a few other, equally important, topics.
Regulatory and Compliance Issues
Understanding and navigating provincial and federal regulations are major challenges for agri-tech and food-tech startups.
In Canada, agri-food businesses must comply with regulations set by the Canadian Food Inspection Agency (CFIA) and adhere to various provincial standards. These regulatory requirements can be a significant hurdle, particularly for small startups lacking dedicated compliance teams. Solutions include hiring regulatory affairs experts, staying updated on regulatory changes, and engaging with industry associations for guidance.
“Entrepreneurs should be aware of the many regulatory approvals for new agriculture products and technologies such as GMOs (genetically modified organisms), pesticides, and equipment,” Rodrigo says, adding, “There are several regulatory and compliance issues to sort through. These include environmental regulations for land use, water use, and waste management; food safety standards; data privacy; IP (intellectual property) protection; labour laws; and the import and export of goods. Entrepreneurs must hire knowledgeable and trustworthy legal experts to ensure industry standards and compliance.”
Further, interprovincial trade can be tricky to navigate since each province has its own set of rules and regulatory frameworks that can impact various aspects of food and agricultural operations – from environmental compliance to food safety, and even marketing.
For those entrepreneurs looking to expand outside of Canadian borders, there are even more important points to consider. Globally, startups must ensure compliance with a myriad of international standards, which can be both time-consuming and costly. In the United States (U.S.), agri-tech companies face stringent regulations from bodies like the U.S. Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA), along with state-specific agricultural laws that add layers of complexity.
The Bioenterprise Canada team provides valuable support in this area by offering regulatory resources and connecting startups with trusted regulatory experts. This assistance helps startups navigate compliance challenges more efficiently, allowing them to focus on innovation and growth without being bogged down by regulatory complexities.
Regulatory and compliance issues can sometimes walk hand-in-hand with market access, which can require some heavy lifting when scaling a business.
Market Access and Scalability
Breaking into competitive markets and scaling operations from local to national and international levels are significant challenges for Canadian agri-tech and food-tech startups.
Considering the regulatory and compliance differences between provinces, gaining access to other markets inside Canada can be a real obstacle for startups. In the food and agriculture space, entrepreneurs can expect roadblocks for innovations like biologics, pesticides, veterinary drugs, and more.
In the U.S., startups benefit from a large domestic market but face high competition, with opportunities for export and international expansion. Canadian startups, dealing with a smaller domestic market, often rely on exports and benefit from trade agreements like the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and the United States-Mexico-Canada Agreement (USMCA).
Solutions include developing a robust market entry strategy, leveraging trade agreements and international partnerships, and scaling operations efficiently while maintaining quality.
As the sector aims its focus on tackling critical priorities like climate change, food security, disease mitigation, environmental sustainability, and labour shortages, Rodrigo goes on to say, “To increase competitiveness in the market and scale operations successfully, there are many things Canada can work toward like offering more tax incentives for boosting early stage capital and encouraging more accelerators, incubators, and funding programs specific to ag-innovation.”
“Importantly,” he adds, “to navigate through this fragmented ecosystem, Canada must improve collaboration between startups, research institutions, and established agricultural industry companies to better drive innovation and accelerate market adoption of new technologies.”
Organizations like Bioenterprise support startups by offering market research, entry strategy support, and facilitating connections with international partners, enabling them to navigate these challenges and achieve sustainable growth. And to Rodrigo’s point regarding Canada’s fragmented ecosystem, the team at Bioenterprise Canada is working to uncover and address the issues surrounding this disconnect in their National Roundtable Series. Discussions with agricultural leaders across the country reveal not only a need to connect but also a strong desire to do so.
Connecting the disjointed, regional pieces of Canada’s agri-food sector will help the tech startups in their commercialization journey as they scale their businesses and access new markets. Better communication and collaboration will, in turn, encourage the adoption and uptake of new technologies as well.
Technological Integration and Adoption
Although there is a growing adoption of precision agriculture and smart farming technologies, startups in this space often struggle to bridge the gap between research and development, and practical application. Integrating new technologies with traditional farming practices poses a significant challenge for these startups. Farmers and producers sometimes resist adopting unfamiliar innovations, preferring to stick with proven, traditional methods.
“Most traditional farmers are risk-averse to changes and are not interested in covering or sharing the initial costs associated with the adoption of innovation and technologies,” says Rodrigo.
Kevin echoes this sentiment adding, “Yes, farmers’ reluctance to test and adopt new technologies mainly stems from their aversion to risk, but it’s also due to the costs associated with adoption, and this is especially true for early adopters.”
He offers practical suggestions for Canadian policymakers who are keen to make positive changes to the current system. “I’d love to see funding programs that not only fund the startups who are developing the innovations but also the farmers and producers who are willing to partner with them. This kind of model could be a game changer.”
Demonstrating the clear benefits and return on investment (ROI) of new technologies is crucial. Offering training and support to farmers, and collaborating on technology development, are effective strategies. Creative funding programs that match farmers with startups can also open doors for both the startups looking to scale and the producers keen to adopt.
Since we’re on the topic, it’s time to address the elephant in the room: funding.
Funding and Financial Constraints
One of the most significant challenges agri-tech startups face is securing sufficient funding and financial resources. The high costs associated with research, development, and scaling operations can be daunting. Startups often struggle to attract investors who may be hesitant to invest in unproven technologies or market niches.
Agri-tech and food-tech entrepreneurs in Canada are supported by a relatively small pool of venture capital, so they often rely heavily on government programs and grants. These grants are beneficial but can be highly competitive and require thorough preparation and understanding of the application processes.
For this reason, startups sometimes seek support in the U.S. where venture capital is more accessible. Rodrigo says, “Going to the U.S. has advantages and disadvantages. The size of the market is larger than in Canada, there is more investment capital available, and the currency exchange rates can work in our favour. However, there is more competition, and the regulatory landscape can be complex. Without strategic networking, it can be tricky to navigate.”
Considering Canada’s unique market dynamics, Rodrigo says, “In comparison to the U.S., for example, support for innovation in agriculture relies heavily on our federal and provincial governments through funding programs, research grants, and policies. In the U.S., government grants are more limited, so funding and support come from different sources.”
Access to funding can make or break a startup, making it crucial for entrepreneurs to explore all available options. Canadian and U.S. opportunities can feel competitive and confusing for entrepreneurs.
Bioenterprise Canada plays a pivotal role in addressing financial challenges. By providing access to a network of investors, offering guidance on securing funding, and assisting with financial management, the team helps startups navigate the complex funding landscape. Their support enables agri-tech startups to focus on innovation and growth, increasing their chances of success in a competitive market.
Talent Acquisition and Retention
Retaining top talent can be particularly challenging for agri-tech startups. Although the level of talent is high in Canada, the country has a relatively smaller talent pool in comparison to countries like the U.S. This means new companies face stiff competition with both the agriculture and the technology sectors.
Kevin says, “Talent acquisition and employee retention in this space is very important. In general, offering competitive salaries and providing opportunities for professional development are top strategies. Unfortunately, however, these strategies aren’t cheap, especially for startups that don’t have a lot of funding.”
Solutions include building a strong company culture, offering professional development, and providing equity and incentives. Scaling agri-tech and food-tech businesses can also conduct targeted recruitment through sector partner relationships. Organizations like Bioenterprise assist by connecting growing businesses with Engine network partners like vetted service providers for human resources support, talent acquisition, and academic institutions.
As entrepreneurs work to overcome challenges with regulations and compliance, market access, on-farm adoption of their products and services, sufficient funding, and top talent, what is likely needed most is some sound advice.
Mentorship and Advisory Services
As we’ve discussed here, navigating the Canadian agri-tech ecosystem presents unique challenges that require expert guidance.
Kevin puts it simply, “Advisory services and mentorship are extremely important for agri-tech entrepreneurs. Through this process, they’ll receive guidance, key industry insights, and valuable networking opportunities that might otherwise be difficult to access.”
These mentor relationships and advisory services play a crucial role in helping startups overcome expected, and unexpected, hurdles. Experienced mentors provide insights into market dynamics, regulatory requirements, and technological advancements specific to the agri-tech sector. They assist startups in refining their business models, developing effective strategies, and making informed decisions.
Additionally, advisory services offer support in areas such as financial planning, scaling operations, and accessing new markets. This guidance is essential for startups to build resilience, innovate effectively, and achieve sustainable growth in a competitive environment.
What’s Ahead for Canadian Agri-Tech and Food-Tech Entrepreneurs?
While it’s clear that Canadian agri- and food-tech startups face many unique challenges when bringing their innovations to commercialization and scaling their businesses, the future of the sector looks promising.
Expressing his perspective on where things are headed, Kevin states, “Building a sustainable agricultural sector in Canada comes with significant challenges, especially given the evolving climate and shifting economic and political landscapes. However, I believe we’re only scratching the surface of innovation in this country. There is a tremendous opportunity for us to reinvent how agriculture is practiced, paving the way for a more resilient and sustainable future.”
As the food and agriculture ecosystem continues to advance and evolve technologically, it is quickly becoming a crossroads of AI (artificial intelligence), automation, the IoT (Internet of things), and robotics.
Rodrigo says, “Driven by Canada’s goals of promoting sustainable practices and increased productivity, agri-tech and food-tech startups are bringing innovative solutions forward, solutions like crop resilience, less pesticide use, and water management. Pair this with a push for increased productivity through higher yields and lower labour costs, and I think agri-tech startups are poised to excel.”
Addressing the common stumbling blocks standing in the way of progress is essential for driving innovation and sustainability in Canadian food and agriculture. Leaders like Bioenterprise, Canada’s Food & Agri-Tech Engine, play a crucial role in supporting these startups, offering resources, guidance, and connections to help them overcome obstacles and foster growth.
Agri-tech and food-tech entrepreneurs and startups looking for more information are invited to reach out to the Bioenterprise Canada team for support.
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