The rise of Agritech

30.07.2020
3 min read

In a time when there is so much uncertainty, we know that food is an absolute necessity. But what happens when even the food we eat starts to run out? Perhaps we could see this period of uncertainty less as time of chaos, but as an opportunity to change the way we eat altogether. We discuss below what agrifood and agritech are and whether we should be worried that levels of investment into this industry have decreased.

What are Agrifood and Agritech?
What do we mean when we say “agrifood”? Combining the words “agriculture” and “food,” agrifood is the industry that is concerned with producing food agriculturally. And the industry was worth an estimated $7.8 trillion, making up 15% of globalGDP (1). Given its size, it is easy to see why investment in the agrifood may be essential.

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Of course, the agrifood industry is not only a source of employment and sustenance for the global population, but a cause of pollution and wastage. The United Nations reported that a total of 1.3 billion tonnes of food was wasted globally in 2019. Not only that, but this wastage released around 3.3 billion tonnes of CO2 into the atmosphere last year alone (2). So yes, agrifood is a huge industry. Yes, it contributes to the world economy. But there is also a heavy price to pay.
That’s why agritech is here to help! Agritech, as opposed to agrifood, is the application of technology to the field of farming.
. And to solve the key issues concerning food in the modern day, the development of agritech should be very important.

When talking about agritech, it is important to note two key terms: “upstream” and “downstream” (1): ​​​​​​​

Downstream agritech companies are the in-store restaurant and retail, online restaurants, eGrocery and Restaurant Marketplaces that you see from day to day. And in total, it is these downstream companies that have received less investment over the past year. ​​​​​​​

Upstream agritech companies are those that are concerned with novel ways of farming and innovative food solutions all the way to biotech, farm robotics, biomaterials and more. And these companies are growing in popularity among investors, despite generally receiving less money than the downstream agritech companies.

Not only has venture capital funding decreased for downstream agritech companies by nearly 5%, but total venture capital funding decreased by nearly 11% last year (1, 3). Should we be worried that agrifood, a vital industry, isn’t getting the attention it needs?

Investment in upstream vs. downstream

  • The upstream startups are increasingly becoming more popular with venture capitalists. Although investments grew a mere 1.3% in the past year, the public listing of Beyond Meat and the $300 million investment into Impossible Foods mean that the upstream may soon become big hits (1,4).

  • By contrast, however, downstream companies have received less investment over the past year. A 56% decrease in funding into meal delivery marketplaces has contributed to a fall in downstream interest from venture capitalists for the first time since 2016! Companies, like Blue Apron (which provides meal preparation services), lost a significant portion of their value. And not to mention that outliers, like Cloud Kitchens, skew the results by raising more money than the other 452 downstream startups combined (raising around $400 million Series A in 2019) (1)

Where does the money go?​​​​​​​

Even if upstream companies are growing in popularity and are gradually receiving more attention from investors, downstream companies still own the largest portion of funding. Last year, downstream startups received 62% of all agritech venture capital funding despite making fewer deals and raising less money in the past year. Getting a total $12 billion in investments, even if a decrease from 2018, downstream companies still received $4.4 billion more than their upstream counterparts (1).

But where specifically does the money go? Farm robotics as well as bioenergy and biomaterials received less than $1 billion in funding over the course of 2019, while downstream sectors such as cloud retail and restaurant marketplaces received over $5 billion in funding during 2019 alone. It seems, then that even with upstream companies growing in popularity among investors, there is still a tendency to favour the downstream. However, we can only see if this continues in the future (1).

Should we be worried?

Agtech industry is big with total funding not even equal to that of the Fintech. Just up to 9% of venture capital invested globally in 2019 vs. 16% in fintech (1,3)

The Bottom Line

The world’s population is set to increase to 9 billion by 2050 (1) and mother nature can only offer so much for all of us. But as we find ourselves in times of crisis at the moment, there are also hidden opportunities.

Agritech, then, may serve as the key to a healthier, more sustainable, and environmentally friendly life. And although investment has decreased last year certain companies are steadily becoming more popular and if our dream of a healthy, ecological lifestyle is to be realised, it may take just a little more money and time to see if this can happen.