Smart farmers

Background

$ 2 billion expected to be invested in agtech in 2018

As of the third quarter of 2018 $ 1.6 billion has been invested in agtech globally. Agtech deals are on track to meet or exceed $ 2 billion, according to a report by Finistere Ventures.

The report, developed by Finistere Ventures in collaboration with PitchBook, with additional input from DLA Piper, EY and Wells Fargo, found that $ 1.6 billion has been invested in agtech globally in 2018 as of Q3 2018. With agtech deals on track to meet or exceed $ 2 billion, median deal size rose to $ 10 million as shifting consumer preferences drove a funding surge in burgeoning investments areas such as alternative proteins.

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The last 10 years have seen remarkable growth in agtech investment, with $ 6.7 billion invested in the last 5 years and $ 1.9 billion in the last year alone - Photos: Mark Pasveer
The last 10 years have seen remarkable growth in agtech investment, with $ 6.7 billion invested in the last 5 years and $ 1.9 billion in the last year alone - Photos: Mark Pasveer

Need for innovation in agriculture

The fact that investments in agtech keep growing, does not come as a surprise, according to Arama Kukutai, Managing Partner at Finistere Ventures: “The need for innovation in agriculture has never been greater. Agribusinesses across the value chain increasingly face pressures from rising costs of inputs such as seed, fertilizer, chemistry and labor; changing land use priorities; and consumer demands for transparency and sustainability. As commodity prices continue to stagnate with no signs of reprieve, there is intensifying recognition that new solutions are needed to provide relief for these pressures.”

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Although the US enjoys the advantage of the most robust venture scene globally, investors across the world are dialing up their agtech investing pace.
Although the US enjoys the advantage of the most robust venture scene globally, investors across the world are dialing up their agtech investing pace.

Remarkable growth in agtech investment

The last 10 years have seen remarkable growth in agtech investment, with $ 6.7 billion invested in the last 5 years and $ 1.9 billion in the last year alone, per the PitchBook Platform. Arama Kukutai: “This outpouring of investment and hunger for innovation can be attributed to a number of industry and technological tailwinds. Firstly, cost reductions across life sciences, imagery, computation and automation technologies have enabled previously cost-prohibitive toolsets to be applied to agricultural problems. Secondly, redundancies stemming from M&A at the top levels of the industry have improved access to experienced ag talent for startups. As financing activity has grown, so have the number of new companies in the ecosystem.”

The need for innovation in agriculture has never been greater

According to the report, Agtech startups are on pace for another record year of financings in 2018. Thanks to a record haul in Q3, which brought in $ 895 million, the agtech sector is a mere $ 132 million off of the record high in financings in 2017.

“If current financing trends continue, 2018 will surpass 2017 in both total capital invested and number of deals transacted. Helping bolster this year’s numbers is an upswing in late-stage activity, where median deal size is trending at $ 10 million (up from $ 9 million last year),” the report says.

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Investors dialing up their agtech investing pace

Although the US enjoys the advantage of the most robust venture scene globally, investors across the world are dialing up their agtech investing pace, with Europe and Asia emerging as heavyweights especially in the past few years, the report states.

“Not only is there plenty of capital within venture and increased interest in agtech in general, but enough of both to keep funding even fledgling startups with their first institutional round of financing. All in all, agtech is scaling sustainably, with multiple companies across the lifecycle raising successfully.”

Key findings from the report:

  • Agtech investment continues to grow year to year, with 2018 financings on track to match those of 2017.
  • Total capital invested so far in 2018 is $ 1.6 billion across 209 deals in agtech, with median deal sizes rising to $ 10 million at the late stage.
  • Key drivers of this surge in funding, many of which are discussed across the Q&As in the following pages, include fast-shifting consumer preferences encouraging rapid investment in areas such as alternative proteins, healthier exit volume over than past three years and growing collaboration between ag corporations and venture.
  • A common theme that emerged from multiple conversations with industry experts was the convergence between agriculture, technology and finance yielding a sizable market opportunity in translating the all-too-common risks borne by farmers across all regions into more readily measurable and trackable events, enabling greater financialization and credit opportunities of ag in general.
  • Some subsectors within agtech are more highly invested than others, with crop protection & inputs management and precision ag & analytics making up the lion’s share of capital invested. However significant opportunity exists within agtech to capitalize upon scalable, value-building technologies in underinvested sectors.
  • By and large, data reveals that most agtech subsegments are enjoying upward trends in both venture deal value and volume, even though some may be off historic highs in 2017.

Also read: "Farm-centric" investment model for venture capitalists

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