Venture Capital Pours Into Ag
Venture Capitalists Pour Record $2.8 Billion Into Agtech Companies in 2019
MOUNT JULIET, Tenn. (DTN) -- Venture capital investors poured $2.8 billion into agtech startups across the globe in 2019. And while the top-line dollar investments have increased fourfold since 2015, more of the money is going toward successful startups aiming to scale up, as opposed to early stage startups looking for seed money and angel investors.
The 2019 AgriFood Tech Investment Review, which Finistere Ventures developed in collaboration with Pitchbook, provides an in-depth analysis of global financing activity across the agtech industry. The report found that 70% of all venture capital invested in agtech was allocated to later-stage venture deals.
"The flow of money is shifting as the market matures," Arama Kukutai, co-founder and partner at Finistere Ventures, said in a news release. "While more money pours into advanced crop protection technologies, indoor farming, alternative proteins, ingredient refinement, and supply chain advances, investment in mainstays like digital ag is beginning to drop as leaders start to emerge."
While investments in indoor farming startups showed the fastest growth in 2019, crop protection and input management attracted the most capital: $967 million, or 37% of the total agtech investment. These businesses focus on improving plant yields through the development of synthetic and natural active ingredients, biologicals, seed treatments and the like, and include companies like Indigo, Pivot Bio and Gingko Bioworks. The report found that six companies were responsible for more than 70% of the investment in this segment, "Speaking to the maturing nature of this vertical, which is unsurprising given the $58 billion market technologies in this segment address globally."
Investment in digital technologies (which combines the independent sectors of imagery, precision agriculture and sensors and farm equipment) made up about 41% of overall deal activity, although the report noted that the total number of deals dropped 4%, while capital investment only had a marginal uptick.
"This reflects cooling interest in a segment that previously resulted in landmark exits with the likes of Climate Fieldview, Granular and Blue River," the report stated, adding that much of the growth in 2019 came from robotics advancements and proprietary technology.
The digital transformation of agriculture has taken longer than many investors anticipated "due to challenges with farmers (and channel partners) integrating diverse data and insights into meaningful action. We believe that there will be a second wave of investment focusing around not only integration, but working with partners downstream who value the data sets being collated at farm level -- for example, in climate certification or consumer valued insights such as traceability. The age of big data on farm is likely to morph beyond agronomy, to consumer and value chain benefits."
Investments in fintech and ag marketplace startups turned in their top year in 2019, doubling deal values compared to 2018 and exceeding $270 million. The cloudy picture around trade as well as stressed farm finances has "encouraged the ongoing revision of strategies for lending against the value of farmland." The increased investment reflects renewed interest in farm management systems that can help farmers create cost savings.
"As the evolution of agtech has illustrated over the past decade, emerging technologies developed for farming have ready applications in the areas of risk management, including at the nexus of banking and insurance that have more readily appealed to outside and nontraditional ag investors of late," the report stated. "The confluence of these developments could do more than any other to shape the broad contours of the venture investment landscape in the coming decade, as the field of investors has started to diversify, drawing on a growing base of established, generalist pools of capital, with the likes of Amazon, KKR, Microsoft, Sequoia, SoftBank, Temasek and T. Rowe Price anchoring some of the largest rounds transacted in 2019."
You can find a copy of the report, which includes a map of the agtech market, here: http://finistere.com/…
Katie Dehlinger can be reached at firstname.lastname@example.org
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