Venture capital investments in the agtech sector nearly doubled in 2020 from the year before, totaling $5 billion. Around $15.9 billion has been raised across the agtech sector since 2010, according to an annual overview of the industry by Finistere Ventures, an agriculture and food venture capital investment firm based in California.
This is a report I look forward to reading every year. I often get news releases when a company closes an investment round, but it's hard for me to report on it because I don't have all the context. Is this a large or small amount of money? Is this one investment going to alter how a part of the industry works? Why do farmers care?
This report identifies trends and provides analysis of which subsectors earned the most investor interest, who is investing in these companies and why. What's more, it evaluates exit values as these companies mature beyond their startup roots either by going public with an initial public offering (IPO) or being purchased by a larger corporation or special purpose acquisition group.
One of the key findings in this year's report is that late-stage deals, which include companies that have gone through many rounds of fundraising and have become more well-known (like Farmers' Business Network and Indigo Agriculture), with high-dollar figures were much more common. Investors favored established portfolio companies, which the report states is an indication of generalist funds seeking less risky investments. I've included a list of the Top 10 venture capital deals in the agtech sector below.
It also finds that corporate venture capital became a much bigger player. Corporate venture capital means that a corporation directly invests its funds in an external startup, and there are a lot of different ways it can look. In 2020, corporate venture capital participated in 107 funding rounds that represented $3.2 billion of the $5 billion of capital committed to agtech.
"Low interest rates and a soaring equity market have provided a backdrop unseen in the relatively short history of the sector," Finistere Ventures co-founder Arama Kukutai said in a news release. "Investors attracted to the potential disruption of massive total addressable markets fueled increases in investment across all stages and segments."
Biotechnology attracted $1.3 billion in 2020, keeping it in its perennial spot atop the list of sectors that attract the funding. Indoor agriculture -- which also attracted $1.3 billion of investment -- doubled year over year, largely due to supply chain issues related to the pandemic, but also to changing consumer preferences for local, fresh produce.
Investment in the animal technology sector soared, which the report also says is linked to the pandemic. Historically, this was a lackluster sector, yet it pulled in $847.8 million in investment in 2020. I think it's worth noting that there were two massive deals accounting for most of the gain in this sector, and both were to companies that raise insects to use as feed products.
Most other agtech sectors notched new records in 2020. The report says digital technologies, precision agriculture, plant sciences, ag marketplace and fintech also drew strong investment.
The report also highlights that while corporate venture capital investments are on the rise, very few have led to outright acquisitions. "There is a broader level of interest developing in agrifood tech both from technology and financial investors that means traditional corporates cannot sit on their hands given they will face increasing competition for the best companies, and these will also have the option of public listing," the report states.
One thing I found interesting in the report was the discussion about special purpose acquisition companies, also known as a SPAC or a blank-check company. It is a company that has no commercial operations and is formed strictly to raise money through an IPO for the purpose of acquiring a company. For example, indoor-farming company App Harvest was listed on the NASDAQ with Novus Capital, a SPAC, in February. It raised $475 million.
"While not without its skeptics and critics, the rising number of SPACs looking for targets will likely give access to greater levels of capital and liquidity to the maturing cohort of startups in agrifood suited to this investment model. At the time of writing, more than 350 active SPACs are in-market with greater than $50 billion in committed capital," the report said.
While I focused on the agtech side here, the report also notes that investment in food technology is far higher, tallying $17.3 billion of investment in 2020, largely due to big investments in meal kit, food delivery and e-commerce categories as a response to the pandemic's massive disruption of the sector. You can view a copy of the report in its entirety here: https://finistere.com/….
Top Venture Capital Deals in AgTech in 2020
1. Indigo Agriculture, $500 million (crop protection and inputs management)
2. Ynsect, $371.5 million (animal tech)
3. Farmer's Business Network, $250 million (marketplace and fintech)
4. Revol Greens, $203.7 (indoor ag)
5. Infarm, $201.3 million (indoor ag)
6. Xaircraft, $179.9 (imagery)
7. Plenty, $175 million (indoor ag)
8. InnovaFeed, $165.2 million (animal tech)
9. Benson Hill, $159.1 million (plant sciences)
10. Plenty, $140 million (indoor ag)
Katie Dehlinger can be reached at email@example.com
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