Alternative investments are no doubt appealing when global markets are in flux, but an investment in agrifoodtech is also an investment in helping to secure our future and one of our most basic human needs. Year over year, Venture Capital (VCs) threw +85% more money at the sector than they did in 2020, totaling $51.7B. The team at Agfunder recently released its annual AgFunder Agrifoodtech Investment Report which I encourage everyone to read in its entirety. Below are just a few of the highlights.
Investments into eGrocery Ventures… grew an astounding +188% year-on-year, laying claim to more than a third of all agrifoodtech funding. The category was fueled by companies raising multiple eight, nine, and 10-digit US dollar rounds as the trend towards ‘contactless’ shopping and convenience continues. Interestingly, the trend was also consistent worldwide as several startups launched only 12 to 15 months have raised the biggest rounds.
Cloud Retail Infrastructure… including on-demand enabling tech, dark kitchens, and delivery robots, among others, saw its investment grow +97.5% year-on-year to hit $4.8 billion, accounting for more than 9% of all investment activity.
Innovative Foods… including alt-protein, witnessed +103% growth last year. Familiar names such as Impossible Foods, NotCo, Perfect Day, Future Meat, and Nature’s Fynd were behind the category’s biggest rounds. It’s worth mentioning, Impossible Foods was the only upstream startup to close a round above +$500 million in 2021.
In geographical terms, the US remains the world’s single largest market for agrifoodtech venture funding, with US-based startups raising 41% of all invested capital and accounting for 34% of global deals in 2021.
US deals were split roughly 50-50… between upstream and downstream categories and given the generally longer time horizons, perceived higher risks, and ‘deep tech’ nature of upstream solutions, this points to the relative maturity of the US market compared to its peers elsewhere.
“Upstream vs. Downstream”… these terms are tossed around a lot in the business and investing world. In elementary terms, using the metaphor of a river, upstream production refers to all the activities needed to gather the materials required to create a product. The upstream stage of the production process involves searching for and extracting raw materials. The upstream part of the production process does not do anything with the material itself, such as processing the material. This part of the process simply finds and extracts the raw material, i.e. a farmer growing #2 yellow corn or an energy company exploring and drilling for crude oil or natural ga. Downstream operations refer to the final processes in the production and sale of goods, where finished products are created and sold to consumers. Sales may be at the wholesale level, business-to-business (B2B), or at the retail level, business-to-consumers.
Agrifoodtech investment… in the rest of the world remains largely focused on the downstream. Non-US companies raised $30.7 billion in 2021, 70% of which went to downstream ventures; with 44% going to eGrocery companies, compared to 24% in the US. Case in point, of the $7.3 billion raised in total by Chinese agrifoodtech ventures during 2021, three-quarters went to eGrocery businesses.
Europe… a seeming lack of growth and late-stage deals may suggest that many of the continent’s agrifoodtech startups are struggling to grow and scale while a small handful of players secure the big bucks. Several European countries are ‘one-deal markets.’ In the Netherlands, for example, eGrocery venture Picnic’s single late-stage round accounted for 77% of the country’s $916 million in total investment capital. It was a similar story in Finland, Germany, and Spain.