If the private sector is the growth engine of economic development, the entrepreneurial ecosystem within is the propeller – without a strong enabling environment in place that develops new ideas with intentionality, consistent growth and momentum are difficult to maintain.
Entrepreneurial ecosystems can vary by context (especially in informal and developed economies) but several common underpinnings are often present that are vital to the ecosystem’s success, including access to financing, policy and public sector support, physical and digital infrastructure, human capital, and strong industry networks and resources that provide connectivity between the elements.
These ecosystems take time to develop, and due to their varying level of complexity – and by extension, the complexity of the associated industry – are difficult to measure. One of the most critical sectors contributing to future economic growth and development required is agricultural technology. Food production is vital to economic security and growth, and it is in society’s collective best interest to understand, promote, and nurture the conditions that lead to innovation in this space.
This study is intended to showcase the unique factors present in Brazil’s operating environment that have led to the thriving AgTech ecosystem present in Piracicaba, a designated “smart city” located in the southern territory of São Paulo state. The collection of top agriculture universities provides an unparalleled pipeline of talent for the ecosystem; as a result, Piracicaba has become a teeming intersection of entrepreneurs, nearby accelerators and incubators, businesspeople, and industry giants.
There are common identifiable domains key to the success of entrepreneurial ecosystems. This study examines the contextual conditions in Piracicaba – and Brazil at large – through these lenses to understand the current state of the ecosystem and the opportunities present for further development there. The domains examined in this study are finance, public policy, human capital, and infrastructure, and the connectivity between them.
Overall study recommendations
- The AgTech Valley in Piracicaba has experienced such strong growth that it may benefit from some added self-governance to be positioned to effectively advocate for the Valley’s/AgTech’s interests where needed and to effectively move promising startups through a discernible pipeline of development.
- There is a need for further socialisation of potential investments as living along a continuum – this will create better matchmaking between investors and opportunities (categorised by expected return, desired risk profiles, and so on). This will also aid in the flow of information to incentivide more [corporate/impact] investment, highlight angel/VC opportunities at various growth stages (and ticket sizes), and better involve other “unencumbered” sources of capital (private /public sector grants, foundation money) by addressing the unique factors of Ag investments (for example., longer lifecycle, commodity pricing and so on.).
Finance recommendations
- Farmers, agricultural executives, and cooperatives should become better organised to serve as an accessible source of seed/angel capital.
- AgTech can become more innovative in sourcing early investment – for well-matched opportunities – by utilising methods like crowdfunding. In 2017, Brazil passed a law to create a framework for crowdfunding which has proved successful in raising equity for some companies.
- Universities have a vast network of successful alumni working in the industry and in government; for example, Escola Superior de Agricultura Luiz de Queiroz (ESALQ) has an alumnus as the former Minister of Agriculture. It would be beneficial to further emphasize the leveraging of these networks as sources of capital or expertise (for example, ESALQ does not yet having an angel alumni group, which represents a great development opportunity).
- Universities should consider defining a pipeline to move research ideas from the lab into the field (for example, ESALQ is trying to address this through ESALQTec, which incubates ideas).
- In some cases, startups may look to partner with foreign universities that are unencumbered by state university policy. They may look to incorporate or patent abroad to harness foreign capital and get around funding challenges.
- Corporate venture capital should deepen its partnerships with startups, incubators, and accelerators and provide non- financial support such as infrastructure inputs, data for experimentation, or mentorship (a successful example of this is the Sygenta and InstaAgro partnership)
- Further marketing and socialization of the federal and state funds available to entrepreneurs may increase awareness of how to begin developing venture ideas.
Public policy recommendations
- The existing system for inflation targeting should be strengthened and the clarity of fiscal operations improved. Risk assessments from credible research agencies that show progress and the promising future outlook could serve to increase (foreign) investor confidence.
- Brazilian AgTech faces a dearth of early investment – the Piracicaba municipality should move towards offering more support in the form of funding mechanisms or programs tailored towards the local innovation community.
- Key AgTech representatives should work towards building stronger relationships with Serviço Brasileiro de Apoio às Micro e Pequenas Empresas [the Brazilian SME development organisation] with the aim of increasing private-sector participation in the long-term credit market.
- Advocacy should be focused towards the establishment of a more streamlined tax system that imposes fewer compliance costs (with the larger goal being movement towards a unified national tax system).
- To benefit the Piracicaba ecosystem, the municipality should consider working towards improvements in its tax regulations and policies for venture entrepreneurs, offering incentives to open their firms in the city.
- An analysis of labor force training programs should be conducted to place greater focus on market insertion as an outcome and on the transferability of skills – coordination can then be initiated with relevant policymaking bodies to implement suggested changes.
- The government may commission a third party (for example SEBRAE) to identify the most critical points of improvement to create a strategy for infrastructure development.
- The government should consider commissioning a review to determine which tax and credit incentives most encourage private investment, and further develop those incentives.
- Key AgTech Valley leaders should look to establish closer collaboration with SEBRAE – and others such as Empresa Brasileira de Pesquisa Agropecuária [Brazilian Agriculture Research Corporation] and HubSP [São Paulo innovation centre] – to strengthen AgTech’s representation and create a foundation for engagement with policy-makers. This will provide a platform for voices to be heard around issues affecting regulatory processes and IP regulation and protection, which deeply affect the successful development of the industry.
Human capital recommendations
- An internal review of higher educational programs should be initiated that incorporates student feedback towards different areas of study, with an eye towards increasing the intersection of and engagement between different areas of study, specifically, with business (for example, business and agronomy).
- Partnerships with other agriculture universities (for example, Agro Paris Tech) can be utilised to gain insights regarding their academic approach towards integrating a business curriculum.
- Mentorships and professional development opportunities within hubs such as Pulse and Invest SP are vital to a startup’s development. Hubs could consider making core business concept learning modules available to their entrepreneurs through established online platforms such as CrossKnowledge or D2L, to bridge business skills gaps among their entrepreneurs.
- A professional networking forum should be formalised that allows entrepreneurs to establish important linkages within the industry that sharpen and complement their skills, as well as create business opportunities or funding connections.
Infrastructure recommendations
- The agricultural industry and AgTech ecosystem should improve organisation for advocacy efforts at the municipal, state, and federal level for improved infrastructure investment specific to agricultural needs.
- Investment from private and public investors should be actively promoted to continue building out digital connectivity for producers.
- New entrants should seek to replicate the success of Coplacana to bring solutions to market that address producers’ specific needs. Equip producers with the means to determine the root of the problems they experience so that they can identify the correct solutions for their situation.
This is an edited extract of a full report published in March.