Investing in the Future of Food: Ag-tech attracts record funding in 2020 for supply chain, production challenges exposed, intensified by pandemic

By Elizabeth Crawford contact

- Last updated on GMT

Related tags: Investing in the Future of Food, Ag-tech, Innovation, Investment, Supply chain

While the pandemic may have slowed the flow of venture capital funding in some segments of the packaged food and beverage industry earlier this year, analysis from Finistere Ventures shows it threw open the tap for the food- and ag-tech sectors, which saw an unprecedented influx of $11.6 billion in the first three quarters of 2020.

The influx of funds comes as innovators – and investors – look for solutions to many long-standing food production and supply chain challenges revealed and intensified by the pandemic as well as growing awareness of the impact on the industry of climate change and global trade.

In the next two episodes of FoodNavigator-USA’s Investing in the Future of Food​ we take a closer look at where investors are directing their funds and see the most promise first for ag-tech and then, in next week’s installment, food-tech. We also explore where the market is maturing and what the new year might hold from an investment and innovation perspective.

[Editor’s note: Discover where else investors are placing their bets and get tips from entrepreneurs to make it the competitive food and beverage industry by viewing previous installments of Investing in the Future of Food​.]

Looking first at ag-tech, Finistere Ventures​ notes that investment reached a whopping $3.07 billion in the first three-quarters of 2020 – up from $2.7 billion in 2019. The $825.8 million invested in the space in the most recent quarter represents the second strongest quarter for ag-tech investment since 2010 – and an 8.8% increase from Q3 2019.

“Ag has always been a really, really innovative industry. We say it has been around for 12,000 years. It’s really driven by change in human society and we have to continue innovating and investing in this really important segment in order to live the way we want to live,”​ Ingrid Fung, investment director at Finistere Ventures, told FoodNavigator-USA.

Currently, she said, investors are most interested in mitigating supply chain risk, which includes “doubling-down” ​on indoor farms that grow fresh produce closer to cities. For example, Plenty raised $315m, InFarm $170m and Bright Farms $100m.

“The other piece within ag that’s getting a ton of interest and investment is in the crop protection space,”​ which Fung said is “partially because of the interaction between life sciences and crop protection discovery. So the interest in investing in life sciences-based technologies because of the pandemic had an uptick.”

Examples include a $45m investment in Enko Check, $102m in GreenLight Bio and $100m in Pivot Bio.

“The last piece that’s driving a lot of investor interest is in the automation side. With ag and food production, there’s a ton of human manual labor that goes into it,”​ which has been compromised by the threat of the coronavirus and immigration restrictions, Fung said. “So, there’s been a ton of interest in automation tools that are not going to completely replace the labor piece, but reduce the need for human labor and food production.”

Increasing consumers acceptance of ag-tech, food-tech

There was a time, not so long ago, that the mention of tech and food together might have given investors pause as the juxtaposition likely would trigger alarm bells for consumers who shunned ag-tech, such as genetic modification or the use of chemicals on crops. And while those concerns persist among some consumers, Fung notes that younger consumers tend to be more open-minded if they can understand the benefits offered by ag- and food-tech.

“Among Gen X there was a lot of mistrust against large corporations, a lot of pushback against establishment. Millennials and Gen Z tend to be a little bit more technology-friendly, a little bit more open to technology if it accomplishes the end goals they’re hoping to accomplish,”​ Fung said.

These goals include increased sustainability, improved animal and worker welfare and increasingly equality and social justice, Fung said.

“The drive for equality and sustainability … hand in hand with social justice. And as people become more aware of that, they tend to weigh the costs and benefits of technology use a little bit more nuanced than they maybe would have in the past,”​ she explained.

Fewer deals but more access in to investors in short-term

Looking forward into 2021 and beyond, Ingrid expects to see a quieting of the market to balance the substantial investments made this year to help existing portfolio companies weather the pandemic. But, she also sees plenty of dry powder and a unique opportunity for entrepreneurs and innovators to cold call investors as they continue to shelter in place while we wait for a coronavirus vaccine to be deployed and in-person events to slowly return.

Be sure to tune in for next Wednesday’s installment of FoodNavigator-USA’s Investing in the Future to learn where investors are looking for opportunities in food-tech and how the space will continue to evolve in coming years.

 

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