Venture capital has been funneling a lot of money into the agriculture and food technology space, thanks in part to the pandemic which highlighted existing fragilities in the global food supply chain. Some of the biggest fundraising buzz has centered around alternative proteins but the number shows that “farm tech”, aka technologies for farmers, is even more popular with investors.
“Farm Tech” investing soared to $7.9 billion in 2020, topping 2019 investments by +41%, according to AgFunder’s 2021 Farm Tech Investment Report, in collaboration with Upstream Ag Insights. To put that in perspective, that acceleration is greater than the +35% increase in overall agrifoodtech funding- that’s foodtech and farm tech combined – as well as higher than than the increase in overall global VC funding in 2020, which according to Crunchbase was up only +4%.
Segments under the Farm Tech banner that saw the greatest growth were “Ag Biotechnology” and “Novel Farming Systems,” pulling in over $1.5 billion. Capital invested in Ag Biotech increased +30% from
2019, with deal activity surging +58%. Farm Management Software and IoT had the highest deal count, however, investment dollars in the space remained relatively flat for the year. AgFunder notes there is an “abundance” of platforms available on the market and only so many will be able to scale. Sensors and IoT are seen as one area of growing interest.
As for “Novel Farming”, AgFunder says the space continues to attract massive amounts of capital, partially stemming from pandemic-related fallout that increased the demand for urban agriculture. They are also attractive because of their scalability. “Ag Marketplace” companies fall into this space, which is also where the two largest investment rounds of 2020 are found: Indigo Ag, which raised two rounds totaling $535 million, and Farmers Business Network, which closed a $250 million Series F round.
The U.S. accounts for 83% of all Farm Tech investment, with California accounting for 35% of that total. However, AgFunder notes that a number of large rounds outside California, particularly deep tech hub Boston (Indigo Ag $360 mil) and agricultural strongholds like Missouri (Benson Hill $150 mil), show its possible for Farm Tech companies to succeed outside of Silicon Valley. The volume for U.S. Farm Tech deals topped $4 billion in 2020, up +50% from 2019.
Below are a few more highlights from AgFunders Farm Tech Investment Report, which is available for download HERE:
- The industry’s maturity is evident with the increase in growth-stage investments, both in terms of number of deals and dollars invested. A total of 13 deals in 2020 came in north of $100 million, eclipsing the 2019 number of 11.
- Another sign of the industry’s maturity: Early-stage companies had more success in 2020 than 2019. Early-stage investment volume and deal count declined for the second straight year, while growth stage activity accelerated.
- The most active corporate VC in the space was Bayer’s venture capital arm “Leaps by Bayer.”
What to Watch in 2021:
- ESG endeavors – Intensifying consumer and regulatory pressure is forcing mainstream businesses to realign products and practices for long-term sustainability. Farm Tech companies are capitalizing on this trend by developing better crop technologies, growing systems, circular economy solutions, and on-farm and supply chain measurement and management tools.
- Carbon markets – Verifying carbon practices and sequestration is getting increased attention and scrutiny. There is still considerable uncertainty in the accuracy and scalability of carbon sequestration measurement.
- Exits in agrifoodtech – With increased used of special purpose acquisition companies, or SPACs, to go
- public, 2021 seems primed for numerous public exits, as well as exits via large corporates making strategic acquisitions.
- Corporate VC investment – AgFunder expects to see continued investment into the space via Corporate venture arms as organizations focus on ensuring they are well-positioned to support their core businesses and get exposure downstream via technology.
- Europe – Europe, which otherwise experienced a fairly flat year in 2020 across broader agrifoodtech investing, is on the map in Farm Tech as a growing Novel Farming Systems hub.
- SPAC Attack – So far, 2021 has been all about the SPAC, aka a “special purpose acquisition company” formed to take another company public. Also known as “blank check companies”, they have taken 6 agtech companies public this year, all valuing the early-stage venture involved at over $1 billion. In the same time period, there has been just one significant acquisition that was disclosed; Prospera, a farm management software and remote sensing business was acquired by Valmont for $300 million.