Ag drone maker XAG has raised ¥1.2 billion ($182 million) in a funding round co-led by Baidu Ventures — the VC arm of Beijing-based internet search company Baidu — and SoftBank Vision Fund II, the Japanese tech giant’s new AI-focused mega-fund.
Also joining the round were Sinovation Ventures, Guangzhou Yuexiu Industrial Investment Fund Management, Guangzhou Emerging Industry Development Fund, and existing investors Chengwei Capital and Mingtai Capital.
The Guangzhou-based startup was co-founded by former Microsoft exec Peng Bin in 2007 under the name XAircraft. He decided on a rebrand after a road trip through China’s northwestern Xinjiang region in 2012.
While traveling through the province’s vast tracts of farmland, Peng was struck by the sight of elderly farm laborers spraying crops with heavy pesticide tanks strapped to their backs – and little in the way of protective clothing to shield them from the harmful chemicals.
“I could smell the acrid stench of pesticide from afar, and I thought maybe my unmanned aircraft could help,” Peng told the South China Morning Post in an interview last year.
The following year, the company pivoted from producing recreational unmanned aerial vehicles (UAVs) to dedicate itself to agricultural applications of drone technology.
Today, XAG offers a range of UAVs designed for crop protection, fertilizer spraying, remote sensing, and seeding that can be controlled from a smartphone. The startup has also branched out into other ‘unmanned’ farm tech such as ground-based ag robots, surveillance cameras, and weather sensors.
XAG says its products and ancillary services are available in 42 countries worldwide, and claims they operate across more than 100 million acres of farmland. Its customer base includes almost 5 million smallholder farmers. The startup has partnered with the likes of German agro-chemicals major Bayer, Chinese telecoms giant Huawei, and European aircraft manufacturer Airbus.
In a statement, Peng said the new funding will be used to enhance XAG’s research and developments capabilities, manufacturing capacity, and sales channels. He added that some of the capital will also go towards development of “digital agricultural infrastructure” to help XAG’s clients build completely unmanned farms in the future.
Investors in China are pouring more and more capital into the burgeoning agricultural UAV space. According to the most recent edition of AgFunder‘s annual China Agrifood Startup Investing Report, venture funding into farm management technology in the country increased by over 3x between 2018 and 2019. China’s largest farm tech deal last year went to XAG competitor McFly, which raised $14 million in Series A funding from investors including Baidu Ventures. Another ag drone player, Skysys, closed a $10 million seed round. [Disclosure: AgFunder is AFN‘s parent company.]
A recent report from Fortune Business Insights predicts the global agricultural drone market to reach $3.7 billion in value by 2027, at a compound annual growth rate of over 18%.
The report suggests that the key factor behind this projected growth is “expected levels of demand for food and grains worldwide in the next few decades,” with the UN’s Food & Agriculture Organization estimating that a 70% rise in food production — and a doubling of production in developing countries — will be required.
“Agriculture drones will play a central role in supporting the efforts of governments in elevating their farm yields. UAVs offer wide-ranging and decisive advantages to farmers, who can make enormous gains from these machines,” the report says.
“Asia Pacific is expected to generate tremendous growth opportunities for this market as [countries in the region] are heavily dependent on agriculture and are making massive investments to make agriculture more technology-driven.”