FTFL-GE: Robots Bring Good News

June 2025 issue of From the Front Lines (Green Edition), Bowen’s dedicated sustainability sector newsletter, spotlighting tech trends and insights in Agriculture, Water and Waste, and Energy.

It has been a challenging couple of years for investment in early-stage ag tech companies. Investors retrenched in 2024, with aggregate deal values and deal counts each dropping around 25%. VCs moved to later-stage deals, if they invested at all. The stock prices of public agriculture conglomerates have generally returned to pre-pandemic levels. The ag venture market overall has been tough for the last couple of years, plagued by poor liquidity and numerous high-profile failures. The length of time it takes to build a successful and scaled ag tech company has proven to be greater than what traditional tech investors are used to. However, robotics for agriculture has been a major bright spot.  

AI generally merits the hype, but nothing happens in agriculture until it touches the real world 

The best efforts of Mark Zuckerberg notwithstanding, we don’t yet live in the metaverse. Translating data and analytics into action requires hardware and always will. There is a tremendous amount of innovation in sensor technology, image analytics, and soil health that can drive farm efficiency and sustainability – but it requires hardware to collect and act upon it. Capital requirements are often higher and time to market is longer, raising the barrier to entry for hardware companies. However, those companies that generate unique value have been rewarded.  

Here are five high-profile robotics financings that were done in 2024 at substantial valuations. All integrate their own hardware solutions with control software to provide a high level of autonomy and/or remote operator control.  

Only two of them, Monarch and Burro, manufacture complete robots. The others integrate their own hardware and software with tractors from existing manufacturers. A few key messages stand out here. Unless the customer is looking for a completely new propulsion technology, like Monarch’s fully electric platform, basic tractor capability is commoditized, but automation capabilities clearly are not. We think this will play out much like self-driving cars. It will take years to sort out the technologies required to perform effectively in the field, and companies that develop tightly integrated hardware and software will be the winners. Only after that, which we suspect is quite a few years away, will the hardware piece of it become commoditized. For now, in order to be a viable player, one has to integrate and develop both aspects of the product. 

The takeaway 

We wrote about our belief that success in agriculture requires hardware and services closely integrated with software in the February FTFL-GE. The pricing dynamics for robotics investments and exits support that thesis. M&A multiples have been healthy. The median EV/Revenue exit multiple in precision agriculture over the last three years is 6.3x. Compare that to the median exit revenue multiple of 4.6x for SaaS, the VC industry’s favorite business model. There has been a steady stream of ag robotics/precision agriculture acquisitions. The Blue River acquisition by John Deere in 2017 can be looked at as a harbinger of things to come. John Deere has subsequently made four additional acquisitions in the space, most recently of Sentera, a drone-based analytics company. In 2022, CNH Industrial paid 37x trailing EBITDA for Raven Industries, an autonomous farming company. 

While plenty of money will be invested in radical new technology, M&A will focus on products with a proven commercial track record. The hurdle for M&A will be higher for newer technologies. Also, row crops represent a larger market and often simpler logistics than specialty crops, so we see innovation being accepted there first. 

Areas we particularly like are: 

• Integration with data, imaging, and analytics to turn insights into actions 

• Reduction in farm inputs, including crop nutrition, herbicides, fungicides, and pesticides 

• Labor-reducing automation 

• Robotics-as-a-Service business model 

As always, please reach out if you’d like to discuss the topic further or catch up in general. 

We wish those in the US a wonderful Fourth of July holiday. It is a great time to enjoy family and the beauty around us, as well as take the opportunity to reflect on the values to which our country has aspired, and recommit to living them as best we can.