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AgFunder Releases Agrifood Tech Investing Report 2017
While it may be small, Agrifood tech is a growing segment of the start-up and venture capital community. The goal of those entering this segment is to improve or disrupt the global food and agriculture industry from the farm to the consumer, which is broadly inefficient.
Faced with increasing demands and constraints like changing consumer preferences, a growing population, climate change, environmental degradation, and waste, entrepreneurs are seizing the opportunity to develop new efficiencies in this area. Whether its software, artificial intelligence, biotech, IoT, or robotics, 2017 will go down as a year that saw a major contraction in seed funding with growth coming from larger deals at later stages. A sign, says the AgFunder AgriFood Tech Investing Report 2017, that this budding sector is gradually maturing.
According to the report, there was a 29% year-over-year growth in agrifood tech funding. However, deal growth saw a 17% decline, particularly at seed stage. In total, there was $10.1 billion invested across 994 deals.
"Overall deal activity actually declined, but larger, later-stage deals pushed up the total in what looks like a new normal for venture-backed agrifood tech," says AgFunder's Rob Leclerc. "The size of these rounds and the nature of the investors – which include private equity capital – indicate the intention of some start-ups to build stand-alone businesses with no plans for acquisition by the majors."
Following are nine highlights from the report.
- Early-stage investments decrease. Seed stage funding dropped 27% in 2017. There was also a 28% decline in the number of companies funded. "While we applaud the maturing of the market and the larger investment levels coming in the later-stage deals, this trend could indicate a weakening pipeline ahead," says Michael Dean, AgFunder CIO.
- Large deals increase totals. There were a number of impressive deals. For example, Plenty, a vertical farming group, raised $200 million from Japan’s SoftBank. Indigo Agriculture, a biotech start-up, raised $203 million from Dubai’s sovereign wealth fund and others. Ginkgo Bioworks, a microbe farming ingredient company, raised $275 million from private equity investors and Bill Gates.
- Agrifood is an investment destination. As this sector matures, it has become an investment destination. The largest growth in investment was at the Series D stage where funding increased by 108% to reach $2.3 billion. eGrocery grew by 96% in funding, which was driven largely by international deals. Despite multiple VC-backed failures, investors don’t seem to be turning away from this challenging field.
- Farm technologies investments increase. This sector saw a 32% year-over-year growth raising $2.6 billion. "Farm tech finally saw some exciting exits, however, with John Deere acquiring robotics company Blue River Technology for $305 million and DowDuPont acquiring farm-management software platform Granular for $300 million," says Leclerc. “Both exits were applauded by investors, as large agricultural corporations look to acquire the innovation they find difficult to foster in-house.”
- Novel farming systems get some serious attention. This segment, which includes insect farms and vertical farms, raised $541 million – a year-over-year increase of 233% – and was backed by GV, SoftBank, and IKEA.
- Agribusiness marketplaces seen as a value. With a 73% increase in investments year-over-year, it's clear investors are beginning to see the value of using technology to disrupt the traditional relationship-based supplies procurement process and how farmers market/sell their produce in the U.S. and abroad.
- Sector includes unique investors. There were 1,487 unique investors who contributed in 2017, including Silicon Valley VC funds, dedicated agrifood investors, corporate venture arms, governments, and pension funds.
- Investing is a global market. Start-ups raised funding in 59 countries. The U.S. continues to dominate in this area with 42% of the deal activity and 45% of the deal volume. Deal flow is increasing internationally as countries like Argentina, Brazil, Australia, and Ireland gradually build their agrifood tech start-up ecosystems with early-stage support from incubators and accelerators.
- Agtech exits. Of the 61 mergers and acquisitions highlighted in the report, the U.S. was the target country for 39 of those deals. Of note, Land O'Lakes acquires Ceres, AGCO acquires Precision Planting, John Deere acquires Blue River Technology and Hagie Manufacturing, DowDupont acquires Granular, and The Climate Corporation acquires SupraSensor and VitalFields.
You can view the entire AgFunder AgriFood Tech Investing Report 2017 at agfunder.com/research/agrifood-tech-investing-report-2017.
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