The rise of Agritech: revised in 2020
Covid-19 showed how important the role of food in our health as people with food-related diseases like diabetes are among the worst affected by the new virus. The current situation also highlighted the need to digitalize the whole industry – from farm to fork. That’s why it’s both a crucial and beneficial time to keep developing the food industry.
Despite the fact that the whole world was put on hold this year, figures show that the agritech industry didn’t suffer as much as one can assume. We revised the situation on the market based on investments in the first half of 2020 after two years of rapid rise.
What is Agritech?
We’ve already discussed that food is an absolute necessity, but the agrifood industry itself is not only a source of employment and sustenance for the global population, but a cause of pollution and wastage. And here agritech comes to help humanity with the side effects of food it produces.
Agritech, as opposed to agrifood, is the application of technology to the field of farming with the aim to solve the key issues concerning food in the modern day. According to AgFunder review, annual financings of agritech have almost doubled since 2017 and don’t seem to drastically sink even in uncertain times of Covid-19. (1)
How did the Agritech market change?
By the middle of 2020 agritech industry has got $8.8 billion investment which is a little bit lower than the half of 2019 investments. (1) Since the year is not yet over the final figure may change, but overall the outcome is promising with some market categories doing much better than the others.
But that’s in general. With a closer look we see two major changes: first, how categories of online grocery shopping and logistics become major in the sector, second, upstream agritech companies got more investments than downstream for the first time since 2014.
We’ve explained the difference between these two directions of agritech, but, in short, downstream agritech companies are the in-store restaurant and retail, online restaurants while upstream agritech companies are those that are concerned with novel ways of farming and innovative food solutions.
What are investments of Agritech in 2020?
No wonder that while people had been spending time at home under quarantine eGrocery retained its top funding spot, accounting for 20% of all agritech funding this year so far. The precondition for the first place is that it has already been the most funded agritech category in 2019. It already raised $1.8 billion which isn’t quite on pace with $3.9 billion last year, but still fared well amid a global pandemic. (1)
However, the other main food delivery category – Restaurant Marketplaces – lost its position in the top three categories landing on the fourth place in the first half of 2020 while having substantially higher median deal size than any other categories. As US-based DoorDash raised $400 million, India’s Zomato and Swiggy each raised about $115 million, and Finland’s Wolt raised $108 million, they enabled Restaurant Marketplaces to secure 11% of all agritech funding. (1) These deals reflect demand for food delivery tech, which started out of consumer interest and continues out of necessity.
In comparison to 2019, Midstream Technologies and Innovative Food was on the rise in the first half of 2020 bumping Cloud Retail Tech and Restaurant Marketplaces out of the number two and three spots respectively. Midstream Technologies that supports food logistics, supply chains, and traceability is already on its way to beating its $2.1 billion 2019 total with $1.6 billion raised. (1)
The proof of the second trend of the pandemic era – higher funding of upstream agritech companies over downstream ones – is the rapid rise of the Innovative Food category, including the alt-protein segment among others, to the top three. The category has already surpassed its total 2019 funding in the first half of the year. (1) Another sign of this trend is a bump in Ag Biotechnology investment that raised $862 million in the first half of 2020 compared to $1.1 billion last year. (1)
Cloud Retail has probably the biggest fall in investment in 2020 as it attracted only $80 million so far in comparison to an astounding $3.6 billion last year. (1) Experts say the figures are falling despite Cloud Retail’s increasing importance supporting at-home dining. Since the category indicated better performance in July, the situation may still change by the end of the year.
The situation of investment into In-Store Retail & Restaurant Tech is surprisingly good but still highly ambiguous. US-based Toast’s $400 million raise accounted for 43% of the category’s funding thus allowing it to hold its place in the top five. On the other hand soon after closing the round in February Toast laid off 50% of its staff amid lockdown. So no other significant deals for In-Store Retail & Restaurant Tech are expected and the category may keep falling in the top in the second half of the year.
Pandemic made adjustments to the agritech investment in the first half of 2020, showing that upstream companies may soon be in higher demand than downstream ones. Anyway, the whole situation of the agritech market is quite optimistic as median deal sizes generally stay in line with 2019 levels, showing one of the best performances of recent years.
- AgFunder AgriFoodTech. Mid-Year Investment review, H1’20
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