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2020 witnessed many successful investment rounds and new partnerships for ambitious agtech innovators rising to the challenge of revolutionizing our agri-food system.
As we turn the page to a fresh new year, what are investors’ priorities and predictions for agtech in 2021? We spoke to high profile investors in our speaking faculty to find out!
Where will see the most growth in 2021? Which trends has Covid-19 accelerated? Which new investment opportunities are investors looking for?
“While the focus on the pandemic and need for resiliency across the agrifood sectors will certainly extend into 2021, there will be a gradual shift back to addressing macro-trends in ag and food technology. Innovation driven by changing consumer and societal demands will continue. We expect focus on sustainability and climate change to take back the spotlight in 2021 on the investment side. […] As the sector continues to mature evidenced by the investment bias toward later stage companies, I expect continued interest in areas like digital agronomy, crop protection, indoor farming, alternative proteins, dine at home, and supply chain advances. With over $42B invested in the sector by venture over the last decade, there is still an incredibly long way to go as the agtech market as a whole is still under-invested. Building a truly sustainable ag and food ecosystem will take more time and capital.
As a horizontal space with a variety of connected verticals, there are diverse opportunities throughout the ag and food ecosystem. Some like digital agronomy, crop protection and supply chain tech are likely to be driven by the long adoption cycles of their B2B markets and will continue to require patient capital. Other areas such as alt-proteins, dine at home and novel farming systems such as indoor growing are seeing explosive investment and revenue growth. This is where we also see the potential for public market exits given access to lots of cheap capital, and appetite from those markets for companies addressing rapid changes in consumer tastes, as well as ESG impact investment.” – Arama Kukutai, Co-Founder and Partner at FINISTERE VENTURES
“Impact investing in ‘traditional ag’ spaces will bring growth in 2021. Covid-19 accelerated the recognition from industry incumbents, consumers, farmers, and investors that growing and building resilience for business as usual is not enough. Because of supply chain risk and shifting consumer and shareholder expectations, there is a business drive for change.” – Renée Vassilos, Director of Agriculture Innovation at THE NATURE CONSERVANCY
“Neither ‘farmer economics’ nor ‘sustainability’ are new terms in their own right. With the renewal of interest in regenerative agriculture came a number of companies focused upon the sustainability space. The technologies that we are seeing become the most transformative are the ones that create value not just for the input provider, farmer, environment, or downstream consumer but for all four. In doing so, many companies have shifted from product/input focus to more service-based models, and I expect that to continue to grow.” – Paimun Amini, Director, Venture Investments at LEAPS BY BAYER
REGENERATIVE AGRICULTURE
“Regenerative agriculture gained popularity as an impact trend, but the revolution still lies ahead. According to the UN, we have an estimated 60 years of farmable soil left on the Earth, mostly due to unsustainable agriculture. With that, regenerative agriculture, which focuses on soil regeneration and provides solutions for some of agriculture’s biggest problems – such as topsoil erosion, climate change, air and water pollution – is set to take center stage. Since building soil requires tremendous quantities of carbon, regenerative farming holds the key to moving atmospheric carbon back into the ground. It may take years for farmers to reap the large economic benefits of regenerative practices so innovative solutions in technologies and markets are needed to ease and incentivize the transition” – Ashlie Burkart, MD, CM Chief Scientific Officer at GERMIN8 VENTURES.
CARBON
“Carbon tends to be on the top of a lot of peoples minds. There opportunity to measure and effective manage carbon offsets represents a blue ocean value pool for farmers, knowing the major positive impact that soil can have a carbon sink and simple fact that even corn sequesters somewhere around 8 tons of carbon. These emerging credit marketplaces have both immediate and long term value potential.” – Paimun Amini
SCIENTIFIC RESEARCH IN UPSTREAM AGRICULTURE
“In upstream agriculture, we anticipate seeing the most growth and promise in advancing many areas of scientific research and innovation in technology toolsets across life sciences. Another natural science we find exciting is chemistry, which is a key enabler for the reliable performance of AgBiologics and could provide a much-needed lift for that entire space. Enko Chem is a computational small molecule chemistry platform leading this imperative, and Germin8 is proudly an investor. Other areas of interest include some that are very underinvested, such as mobilizing key soil nutrients and ecology besides nitrogen, which has captured the spotlight. Also, we’re only scratching the surface on the potential of beneficial microbes in agriculture, human health and plastic degradation, among others.” – Michael Lavin, Founder & Managing Partner at GERMIN8 VENTURES
INNOVATIVE MYCOLOGY
“Another focal point for 2021 will be Innovative Mycology, the practice of finding fungal solutions for many of the technological and ecological problems we face. Several start-ups are teaming with fungi to improve soil health (mycorrhizae), develop alternative proteins (mycoproteins), build materials and textiles grown out of fungal mycelium to replace concrete, plastics, and leather (mycotecture and mycofabrication), break down pollutants like plastic and crude oil (mycoremediation), and decontaminate water (mycofiltration)” – Ashlie Burkart
DIGITALIZATION
“The most growth in 2021 will come from digitalization of the food system – from the last mile to the first mile:
– Decentralization of our food system allowing for automation of local production and a reshaping of complex perishable supply chains to reduce shrink and waste.
– De-commoditization, coupled with technologies that place deflationary pressure on the industry, catalyzing breeding for attributes beyond yield, a return to polyculture farming and a shift from a strict focus on yield to profit per acre.” – Sanjeev Krishnan, CIO and Managing Director at S2G VENTURES
“Covid-19 revealed weakness in the infrastructure of agriculture. Both in the farming operations as well as the need to strengthen the connectivity of the value chain. Technologies and companies that are focused on simplifying the infrastructure and operating costs associated with farming and post-farm gate sales. Automation, Drones, and marketplaces will continue to grow and connect the value chain. These technologies will also be the ones that unlock the potential for new value areas around carbon that continue to emerge.” – Paimun Amini
INDOOR AGRICULTURE
“A record amount of capital flowed into the sector as the importance of a strong, stable food supply chain became crystal clear in 2020. In agtech, indoor growing companies benefited from the pandemic due to increasing demand for fresh produce and a strong cohort of leading companies like Plenty. With over $12B in new capital in 2020, we expect that 2021 will continue to see capital flow into the sector driven by a growing cadre of investors and a lot of companies that will be back in the market as Covid-19 headwinds recede” – Arama Kukutai
ESG & SPAC EXITS
“The Covid-19 spotlight on the food system, and enhanced public market focus on ESG issues, has broadened investor awareness of the opportunities presented by agri-food tech innovation in the context of global food security. Accelerated investment into the sector, including by ESG-focused SPACs and other new pools of growth equity capital, will hopefully enable the best new technologies to scale and reach the farm and consumers faster, and hasten progress on global sustainability goals” – Brook Cunningham, Managing Director at LAZARD
“The SPAC boom has already come into the agri-food space with deals like AppHarvest. There are some significant plays likely to materialize in this area, with indoor growing being an obvious candidate. We expect a growth in more traditional M&A activity in ag and supply chain, as key leaders emerge and cement their market position and a more diverse group of buyers from the ag world continue to look for value buys. That said, it’s hard to see big number exits in the near term in ag unless the company has really built a fundamental value story.” – Arama Kukutai
“CPG could get back to acquiring brands again. There is a massive opportunity to create a roll-up in several agtech and ingredient tech verticals. SPACS are another form of an IPO. Their exit story will depend on their aftermarket performance – both of the company and the markets.” – Sanjeev Krishnan
“In terms of M&A, we still have a ways to go until AgTech becomes an asset class with frequent, repeatable and justifiable exits to incumbents, private equity, consolidator start-ups and the public markets. And actually, I’m highly skeptical of several companies I increasingly see on the acquisition trail, using M&A as marketing or a means of establishing a new story. In some other cases, we’re seeing some acquirers on a path of M&A roulette. This concerns me greatly.” – Michael Lavin
POST-PANDEMIC GROWTH
“The pandemic did not slowdown agtech investment by any means – 2020 was a record-breaking year handily exceeding 2019, itself a record year. Ag is a bedrock of society and the need to feed the planet is fundamental, yet the level of capital flowing into agtech and the speed of change we are experiencing today on-farm is unprecedented. We are on track to change the way farming and the food supply chain works in the next decade. For a comprehensive look at investment highlights, trends by region, etc. for 2020, you can download our most recent report here.” – Arama Kukutai
Join the investment discussion at World Agri-Tech this March.
More than 100 high-profile agri-food investors will join the virtual World Agri-Tech summit on March 9-10, host roundtables, join plenary sessions and connect as delegates through 1-1 video meetings.
Are you an active investor within the agriculture industry, looking for new collaboration and investment opportunities? Or are you a start-up looking to partner, scale or raise your next round? Register here.