Agri-food-tech investors bet on plant-based, microbes, fermentation and eGrocery as start-up capital soars

25 Feb 2021 --- Agri-food-tech start-ups raised US$26.1 billion in 2020, according to the venture capital firm AgFunder. This 15.5 percent year-over-year increase is anticipated to balloon to more than US$30 billion as new deals come to light.

Much of the increase was due to significant growth in late-stage deals, where the report’s analysts saw investors doubling down on their existing portfolios and bank on the boom in plant-based innovations, the rising “eGrocery” phenomenon and cloud retail technologies. 

The newly unveiled 2021 AgFunder AgriFoodTech Investment Report highlights an influx of stateside investment, with a loss in China’s market share in deal activity terms.

“I think most of the technologies presented in the report are exciting as they are all working to make the food system more efficient, sustainable and equitable,” Louisa Burwood-Taylor, head of media and research at AgFunder, tells FoodIngredientsFirst.

“On the food ingredients front, start-ups using microbes and fermentation to produce innovative food such as meat and dairy alternatives are making great strides to replace the incumbent products,” she details.

“It’s also very exciting to see how the first wave of plant-based product start-ups are maturing and raising mega rounds from a wider range of investors. These all fall within our ‘Innovative Food’ category where investment more than doubled on 2019 levels.”

Global agri-food-tech investment outlook
Investment in US companies regained market share in 2020 to 37 percent of deal activity and 51 percent of dollars committed, up from 34 percent and 44 percent respectively, AgFunder reveals.

This notably bucked the trend of the last few years where other geographies attracted more substantial investment from domestic and overseas investors, as “agri-food-tech ecosystems” developed.

The venture capital firm pegs the return of US capital as a “slight flight to safety” in the wake of the COVID-19 pandemic, as investors are doubling down on previous and now “more mature” bets in their portfolios.

The newly unveiled 2021 AgFunder AgriFoodTech Investment Report highlights an influx of stateside investment, with a loss in China’s market share in deal activity terms.

US companies like Lineage Logistics, Impossible Foods and Nuro that have raised more than US$500 million in funding rounds are evidence of this trend.

Those deals did not skew the analysis as there was also a 30 percent year-over-year increase in the number of deals in the US. China lost market share in deal activity terms, with a 21 percent drop in the number of deals. 

“We’ll be digging into this in our dedicated China report coming out soon so I can’t comment for now,” Burwood-Taylor tells FoodIngredientsFirst.

Deal activity and investment in Europe remained relatively unchanged year-over-year, with just a slight 5 percent increase in the number of deals closed.

Solid value proposition is what Burwood-Taylor underscores as one of the most challenging aspects of today’s evolving market. “There are many start-ups, particularly at the farmer end of the supply chain, that do not have a clear enough value proposition to make them invaluable technologies to adopt.”

“In the alternative protein space there are also many ‘me-too’ companies launching, so they will need to be careful and offer some differentiation to consumers.”

Riding the second wave of alt-food investments
The second wave of agri-food-tech innovators continues to benefit from increasing sector recognition by a “widening spectrum” of venture capital investors, AgFunder highlights. Recent developments include launches of accelerator programs from PepsiCo, Nestlé, Future Food-Tech and StartLife.

Investment in US companies regained market share in 2020 to 37 percent of deal activity and 51 percent of dollars committed.The COVID-19 pandemic continues to emphasize the importance of efficient supply chains and alternative ways of growing, processing, transporting and selling food to consumers. The sourcing of raw materials and food ingredients is also underscored.

“Surprisingly, many start-ups focused on the restaurant industry still managed to raise funding despite the huge hit that industry has taken during the pandemic,” comments Burwood-Taylor.

Innovations in the midstream – between farmer and retailer – got a much-needed investment boost, AgFunder’s report details. As the food delivery gained ground, industry saw a rise in “eGrocery” platforms alongside more investment activity in cloud retail technologies supporting at-home dining.

Shifting meal ordering occasions over the F&B landscape have led to the rise of “dark kitchens” and new smart technologies – a self-sanitizing takeout-window conveyor belt, for instance – which aid pandemic-impacted brands in adapting and powering through.

Crowdsourcing data
AgFunder gathers publicly-available information – such as press releases and US Securities and Exchange Commission filings – as well as crowdsourcing directly from the industry. 

The venture capital firm then supplements this with data from its own collection methods, including private communications with investors and companies. 

“We also collect data from partners across the globe,” notes Burwood-Taylor.

“The raw data are painstakingly curated by the AgFunder team to ensure they are relevant, accurate, up-to-date, and categorized according to AgFunder’s proprietary tagging system.”

“We improve our dataset continuously, meaning total figures from previous years’ reports will shift as our dataset becomes more accurate,” she explains.

“In most charts and commentary in the report, we’ve included our predictions for where totals will land 12 months from now to make our comparisons more accurate. We’ve based this on patterns from inbound data across previous years.”

On the whole, 2020 was dubbed a “breakout year” for AgFunder. The company’s notable investments included a final close on Fund III, the launch of our first dedicated Impact Fund, and our US$20 million “New Carnivore” Fund.

By Benjamin Ferrer