The Bigger Picture
Venture Capital, Agtech, and Foodtech
Driven by the hype surrounding companies like Impossible Foods and Beyond Meat, foodtech and agtech startups have grown in popularity. This trend is intertwined with a growing emphasis on environmentally-friendly businesses: Crunchbase recently reported that climate-friendly companies are now the benefactors of the highest public- and private-market valuations. While clean companies previously failed to deliver on returns, heightened consumer interest has changed that. For example, according to Polaris, the market for plant-based meat alternatives could see 15.8% growth through 2027 (see graph).
That has driven VCs to get in on the action. Jim Kim, the founder of Builders VC, claimed that foodtech and agtech deals have reached over 300 per year. In fact, as of June 30th, 55 deals in bio-engineered foods have been done so far in 2020 (see graph). These companies have to deal with massive input costs. Nick Cooney, the managing partner at Lever VC, noted that lab-grown meat currently costs $100 to $150 per pound to develop, but many companies hope to reduce costs to around $5 to $10 per pound. Venture capital investment in cultivated meat startups for 2020 has so far jumped about 116% YoY, according to PitchBook data.
But startups in the food and agricultural space include, beyond meat substitutes, new ways of managing agricultural supply chains. Native, in which Kim invested, handles the meat supply chain, which long suffered at the hands of numerous intermediaries. It was recently valued at $46M during its second round. Sustainable farming in general is becoming more attractive as new satellite imagery and data collection reveal the degree to which current practices are decimating the environment.
According to Pitchbook, VC investment in agtech reached $2.1B in Q2’20, up 170% YoY, giving it a 33% compounded annual growth rather from 2010 to 2019. This was driven primarily by climate change and global population growth, with $1B alone going into agricultural biotech over 20 deals. Prior to 2020, the median deal size and valuation grew across all stages, with particularly strong growth for late-stage companies (see graph).
This is in spite of, or perhaps due to, the global pandemic. Jonathan Henry, Managing Director of John Deere, UK, and Ireland, pointed to the particular difficulty of preparing fields during the spring lockdowns, which emphasized the need for more automation in agriculture.
A report by Agfunder saw the total investment in agtech in 2018 come in at $17B, up 40% YoY. The same report put the sum for mid-year 2020 at $8.8B across 798 deals, substantially higher than Pitchbook’s figure. Crunchbase provides yet another set of figures, claiming that VC put $4B into agtech startups in both 2018 and 2019. It further claimed that, based on the $2.6B invested so far in 2020, the year is on track to meet or surpass previous years’ totals. To go a little deeper, check out this interview with Brian Frank of FTW Ventures, which just closed a $4M fund for foodtech and agtech startups.
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