Editorial: Lessons from an enthusiastic agriculture IPO

Farmers Edge has gone public on the TSX, the stock exchange in Toronto, and the large interest around it saw share price rise quickly after the launch.

The company is a Winnipeg-based provider of data-driven agronomy and farm management services. An initial public offering (IPO) allows a company to raise funds and sell ownership of some of the company to the public through a stock exchange.

Farmers Edge has been a darling of Silicon Valley and one of the first Canadian agriculture technology companies to be driven through the system by which consumer technology companies grow from startup to expansion to being taken public. An IPO results in a payday for the original investors and founders that drive the company — and the ability to scale quicker by accessing capital.

Like many other technology startups, Farmers Edge also has grown rapidly, but continues to spend more than it earns. According to the Globe and Mail, Farmers Edge lost $68 million in the first nine months of 2020. It operates in six countries and serves farms working 25 million acres.

The initial public offering for Farmers Edge had excellent timing as a surge in public offerings in Canada in late 2020 and early 2021 have found eager investors.

“It really leaves us with a clean balance sheet and dry powder to go out and really grow the business at a time when digitalization is really happening at a rapid pace in agriculture,” company chief executive officer and co-founder Wade Barnes said during a news conference marking the conclusion of the IPO, as reported by Western Producer.

There was a huge amount of interest from investors in the Farmers Edge offering, which allowed it to increase its IPO from $100 million to $125 million.

It’s estimated that nine orders to buy were put in for every share available.

An IPO is one way to generate investment in a growing company, but the success of the Farmers Edge IPO should make other agriculture companies, especially those building ag technology take notice.

Agriculture may finally be getting a more equal standing with consumer tech companies.

The success of the Farmers Edge IPO is also about the fact that many day-trading investors have come into the market during the pandemic, driving many new stocks to sometimes unreasonable highs.

Still, Farmers Edge is serving as a model for future agriculture tech companies.

The challenge for agriculture technology is that it doesn’t fit the template for technology commercialization that has propelled many consumer-facing products into the market.

There are several reasons for this, including the fact that agriculture technology takes longer to prove (growing seasons take time and livestock need a while to get through their growth cycles), the technology is often dealing with biology, which is unpredictable and most farms are diverse small businesses that require more time to build to a larger scale.

I’ve talked to startup agriculture technology companies that have found the traditional technology startup process frustrating due to a lack of understanding about the timelines of agriculture tech.

That’s why we need to continue to grow a system for technology incubation and then a route to market that fits agriculture. It needs access to mentors, early stage funding and spaces to test in farm conditions. Lots has happened in the past year.

Bioenterprise has become the lead in creating an agriculture and food incubation network, partnering with universities, colleges and groups across the country. Universities like Guelph are thinking about how their experts can help and create offshoots into which technology companies can easily flow.

We also need more of an entrepreneurial and risk-taking culture in Canadian agriculture technology. Use Ontario as a base to grow globally. 

Dominic Barton, whose 2017 report pointed to agriculture as a potential global leader for the Canadian economy, recently said during a Canada’s Food Day interview that Canada continues to lack five to 10 world-leading companies in agriculture and food.

We’re not even close to that, as we watch any that get to the world stage be bought out. 

Bold, global thinking is critical.

But back to the starting line of companies: Farmers Edge is unique in that it had people who waded into the world of the global tech giants. It had people who had the necessary connections and who understood the game. Other Canadian companies need to learn lessons from Farmers Edge and we need to see them launching their own agriculture IPOs.

Source: Farmtario.com