Investing in Smart Agriculture

Jul 27

Japan startup Sagri is transforming family farming with AI

Artificial intelligence (AI) gets a lot of attention these days, but its application to farming is not often in the spotlight.

Recently, I had the opportunity to talk with Shunsuke Tsuboi, chief executive officer of Sagri Co., Ltd., which uses AI, machine learning, and mapping technologies to solve social problems.

On my podcast, Disrupting Japan, Tsuboi and I discussed the challenges that agricultural technology (agtech) startups in Japan face when it comes to funding, as well as the benefits of their technology.

Taking Root

Sagri was founded in June 2018 and uses satellite imaging and data to analyze farmland. The technology scans areas of up to 10 hectares in size, making it particularly suited to Japan, where farms are generally small. The data can be accessed using a smartphone app, and the goal is to help farmers better understand the condition of their soil and identify the best time for harvesting.

The idea for the company took shape in a laboratory at Yokohama National University, where Tsuboi is a mechanical engineering graduate student. His lab is using space-based technology to examine soil, and he and his business partners have been able to apply some of this to their platform, which shares the name of the company.

Applications

If you’ve walked around the Japanese countryside, you’ve probably seen small plots of abandoned farmland. Sometimes these even intermingle with residences in neighborhoods not far outside the capital.

Whether farmland is in use or abandoned makes a difference from a tax perspective, so the government manually checks the status of land each year. The AI behind Sagri’s analysis can determine with 90-percent accuracy whether a field is abandoned, drastically reducing the amount of work required of government staff.

Apart from taxation, the government is also interested in identifying farmland that can be revitalized. Satellite data that provides soil analysis can make that process easier.

Tsuboi noted that a big reason for the abandonment is that the farmers are getting older and are unable to maintain the land. One benefit of the Sagri platform is that machines can receive the data analysis and automatically perform tasks such as applying fertilizer.

Beyond Japan

Agtech is an area in which Japan has a great opportunity to be a world leader, and Sagri is putting its technology to work in India, where there are also many small farms. But getting the financing needed to keep operations going can be difficult. Sagri believes it has a solution.

“Many Indian farmers need loans, but they don’t have the chance to get them,” Tsuboi said. Because there are so many farmers, it is difficult for banks to spread enough money around. To have a better chance of funding, farmers want to show banks that they are a good investment, he explained. Banks cannot get that sort of information using present methods, but the satellite data analysis provided by Sagri can allow them to check the farmland’s condition and potential yields.

Tsuboi sees Africa as the company’s next market, noting potential in countries such as Kenya and Rwanda. Areas of Southeast Asia are also within Sagri’s sights.

Funding

There are not many agtech startups in Japan, but it seems that there should be. With lots of small farms, lots of creative people working on agtech at universities, and venture capitalists (VCs) with money to invest, why don’t we see more?

Tsuboi feels one reason is that VCs and the government both see farmland as low-growth opportunities. And attracting money from abroad, such as from Silicon Valley VCs, is not easy because they are focused on large-scale industrial farming. The farms on which Sagri is focused in Japan and India are too small to attract their interest.

But Sagri has had some success inside Japan, and announced in June that they have secured ¥155 million ($1.4 billion) in funding from a group led by Real Tech Holdings Co., Ltd., who was joined by Minato Capital Co., Ltd., Senshu Ikeda Capital Co., Ltd., and Hiroshima Venture Capital Co., Ltd. Also participating is Bonds Investment Group Co., Ltd., whose Hyogo Kobe Startup Fund, established in March, is making its first investment.

Sagri is a great example of a Japanese startup that can assist people at home and also have a much bigger impact—and earn a much bigger profit— abroad. Globally, the company can help millions of small family farms thrive, and they can bring great returns for investors in the process.