AgriFood Tech investment on track for record 2021
AgriFood venture firm Finistere Ventures has reported the latest findings of its AgriFood Tech Investment Review series. This provides a comprehensive assessment of global agrifood tech financing activity and breaks down important trends by region, subsector, and stage for both agtech and foodtech ecosystems.
According to Finistere Ventures’ 2020 AgriFood Tech Investment Review, a report developed in collaboration with PitchBook Data, total global investment in agrifood tech companies in 2020 surged to $22.3 billion – $5 billion in agtech and $17.3 billion in foodtech – and continues to grow at 50% compound annual growth rate (CAGR, 2010-2020). Finistere expects 2021 to exceed this record year based on early investment data.
“While 2020 presented some interesting and, at times, surprising outcomes for the agrifood sector, we saw fear turn into fear of missing out (FOMO) with favorable results for startups, particularly those in later stage situations with meaningful revenue and strong growth stories,” said Arama Kukutai, co-founder and partner, Finistere Ventures, in a news release. “Low interest rates and a soaring equity market have provided a backdrop unseen in the relatively short history of the sector. Investors attracted to the potential disruption of massive total addressable markets fueled increases in investment across all stages and segments.”
The report provides a detailed analysis of which sub-sectors earned the most investor interest in 2020 (from whom and why), breaks out investment trends by region and stage over the course of the decade, evaluates exit values, and includes a preliminary look at investment activity in early 2021, say Finistere Ventures officials.
Based on the report, the race for innovation access is heating up and creating a new level for agrifood investing, say Finistere Ventures officials. A renewed focus on climate change and carbon offsets is gaining momentum, and rising ESG (Environmental, Social, and Governance) interest is spilling over into venture-backed companies across agrifood. Involvement from new or non-traditional players – family offices, large pension and sovereign wealth groups, late-stage private equity (PE) – swelled and the role of CVCs (corporate venture capital) across the space continued to grow. In fact, 2020 saw 8,054 unique investors participate across over 9,000 transactions in the agrifood space.
Key Agtech Findings
* Due to the industry’s successful adaptation in the midst of the pandemic, investment into agtech continued to expand through the end of 2020, with the $5 billion total capital invested comprising almost one third of the $15.9 billion raised across agtech sectors since 2010.
* Biotech kept its stronghold as the top agtech investment area, attracting $1.3 billion in 2020, and starting off 2021 strong with $268.2 million secured in the first quarter.
* Interest in indoor ag spiked, driven by supply chain and sustainability factors, as well as growing consumer preference for local, fresh produce with superior taste and quality –reaching $1.3 billion in funding for 2020, more than doubling the $601 million raised in 2019.
* Due in large part to pandemic pressures, animal tech investment exploded in 2020 reaching $847.8 million after lackluster interest over recent years.
* Subsectors including digital technologies, precision agriculture, plant sciences, ag marketplace and fintech also broke investment records in 2020 as stakeholders made their commitment to help growers manage climate change and overcome mounting sustainability pressures clear.
Predictions for 2021
* With a growing cohort of later-stage companies in the sector, we expect to see both more merger and acquisition (M&A) activity by corporates and traditional IPOs – a major departure from historical patterns in agrifood where exits have been driven mainly by corporate buyouts.
* The rise of environment, societal, and governance (ESG) principles within the investment industry has further accelerated the growth of agrifood tech investing, and with over 1400 agrifood companies having significant implications and impact on ESG metrics, we anticipate that this trend will intensify in the years to come
“We are on the precipice of a decade of vital agrifood tech advancements as investments and profits boom – the roaring 20s just earned a new meaning,” said Kukutai. “We expect 2021 to dwarf 2020 numbers as capital continues to flood into the technology categories with absolutely massive disruption potential like indoor ag, supply chain technologies, animal health, novel ingredients and alternative proteins. Valuations, deal totals and market sizes will continue to climb thanks to low interest rates, free-flowing capital, and trillions of dollars of pent-up consumer spending power. However, as the market inevitably right sizes and new categories of innovation emerge to meet these monumental shifts, we also expect substantial consolidation and the rise of distinct market leaders.”