The Global Startup Ecosystem Report Agtech & New Food Edition

Global Agtech & New Food Trends

COVID-19 related lockdowns and restrictions in the hospitality and travel industries have accelerated shifts in consumer behavior and rapid innovation in food and grocery delivery. The sector has climbed steadily in recent years, and in 2021, delivery accounted for 6% of deals in Agtech & New Food globally. The dollar value amounts to 11% of the $1.6 billion invested in the sector, up from 6% in 2020 and indicating that a small number of companies are taking a large share of the dollar amount in this sector.

In 2016, two huge deals – Uber’s $5.6 billion Series G and Beijing-based Meituan’s $3.3 billion Series F – created a spike in the delivery sector’s percentage share of investment. These two deals made up 82% of the total share in delivery in 2016 in terms of dollar amount.

Meanwhile, interest in the formerly buzzy cloud or ghost kitchen space has been cooling. The total amount invested into ghost kitchen startups – which produce food for delivery from a commissary rather than a restaurant – has seen year-on-year decline since 2019. This may be due in part to the growth of delivery platforms from traditional restaurants crowding out investment.

An overarching theme in Agtech & New Food in recent years is an ambition to tackle climate change and improve food yield through technology. As such, the sub-sector often intersects with Cleantech, Industry 4.0, and AI and Big Data. This includes innovation throughout the supply chain, such as gene modification for increased yield and pest resistance, and food packaging that both prolongs shelf life and is more environmentally friendly.

Examples of startups include Berlin-headquartered Infarm, which is growing a global network of urban vertical farms to provide more efficient access to fresh food, the UK’s Deep Branch, which is developing a biotechnology solution to turn industrial carbon-dioxide and hydrogen into animal feed, and Israel’s Homebiogas, which converts kitchen waste and animal manure into cooking gas and liquid fertilizer.

The use of drone technology within Agtech & New Food reached a 10-year high in 2020, with over 35% of the sector share by deal amount. Drone technology in general saw overall decline in both deal count and amount in both 2019 and 2020. 2021 saw growth in the number of deals, from 99 in 2020 to 110, but more notably hit $1.8 billion in amount, a huge increase from $762 million in 2020. This figure includes Chinese agricultural drone manufacturer XAG’s $236 million IPO in November 2021, and the $69 million acquisition of ​​American Robotics by ONDAS Networks.

Consumer demand for more sustainable food sources is revealed in the continued growth of alternatives to traditional meat. Within that area, startups that create vegan products (both food and other items) and non-cultivated meat alternatives overtook cultivated meat in terms of deal amount at the seed stage in 2021, suggesting increasing early-stage innovation in the meat alternative field.

Funding & Investment

The global number of Agtech & New Food Series A deals and the deal size have largely held steady, with small variations year on year. Fewer startups are receiving later-stage investment, but those receiving Series B+ funding are raising much larger rounds. This is likely due to a wider trend of deal size inflation as more available investment dollars chase a limited number of deals.

The deal amount at Series B+ rose from $3.8 million in 2017 to $11.5 million in 2021, and the amount invested into Series B+ in Agtech specifically rose 43% in 2021 year-on year. Latin America has seen a particularly steep increase in the size of Series B+ deals in Agtech & New Food, with the total raised jumping from nearly $42 million in 2016 to $142 million in 2020, before more than doubling again to $485 million in 2021. One part of this growth is Rio de Janeiro’s Fazendo Futuro, which creates a plant-based meat alternative — the startup raised $21.3 million at Series B in 2020 and $53 million at Series C in 2021.

Within North America, the amount of VC investment in Agtech & New Food almost doubled from $5.7 billion in 2020 to $9.3 billion in 2021 to, while deal count declined by 36% to 370 deals. North America accounted for 70% of Series B+ deals in 2021, with the total invested in North American Series B+ deals up from $4.3 billion in 2020 to $7.9 billion in 2021. Both Asia and Europe saw a slight decline in deal count in 2021.

Overall exit counts and exit amounts have also largely held steady worldwide. North America dominated Agtech exits specifically, which accounted for 63 of its 75 exits in the sub-sector in 2021. North America increased its share of exit count within Agtech & New Food from 42% to 53% in 2021.

MENA saw a spike from three Agtech & New Food exits in 2020 to 11 in 2021, including Valmont Industries’ acquisition of Prospera Technologies, which uses AI and machine learning to optimize agricultural processes. Israel-based NRGene, which works on genetic testing and improvement of crops, and NextFerm, which uses fermentation to create nutrients, are other examples. Both startups IPOd in early 2021.

Further, the number of African Series A deals in Agtech & New Food rose from one deal in 2017 to nine in 2020. While that still remains a tiny sliver of overall global deals, it is an impressive rise in deal count. Nairobi-based SunCulture, which provides farmers with solar technology and accessible financing, and Cape Town’s Aerobotics, which uses AI and drone technology to provide agricultural insights, were two of the nine.