Climate change and geopolitical instability is wreaking havoc on agriculture. To gauge how VCs are responding to these issues, we spoke with seven investors.
For starters, rising greenhouse gas emissions are driving punishing droughts and storms, which are damaging crops, exacerbating food insecurity and threatening countless livelihoods. At the same time, Russia’s invasion of Ukraine is rattling global grain supplies, driving up costs and further straining supply chains.
Even as these crises and others hit the multi-trillion dollar industry, start-up investors see the potential for huge returns with technology that could increase yields, reduce emissions and mitigate waste.
“There are development opportunities [and] adopting new technologies across the food value chain that will impact key issues such as food safety and emissions,” Adam Anders, managing partner at Anterra Capital, told TechCrunch. Among the areas where he sees the greatest potential impact, the investor cited improving plant genetics, increasing the shelf life of more produce, and putting digital tools in the hands of farmers.
Consumer behavior is another piece of the proverbial puzzle, as knowledge of the climate increasingly changes the way people shop.
“Over the past few years, we’ve seen a surge in interest in sustainability from consumers and food brands, and awareness of the negative impacts of agriculture continues to grow,” Ting- said. Ting Liu, investor at Prosus Ventures. “People are not only paying more attention to emissions from agriculture, but also to the amount of land and water needed to sustain the global food supply and the amount of runoff generated,” he said. she stated.
Liu argued that this demand creates strong tailwinds for companies striving to address the environmental impact of agriculture, ultimately generating more capital in everything from cellular agriculture to carbon reduction solutions. methane for livestock.
Still, agtech isn’t immune to some of the broader trends in the business.
As the value of agtech VC deals rose from $6.5 billion in 2020 to $11.4 billion in 2021, several investors told TechCrunch they noticed a slowdown in agtech deals this year amid the broader technological downturn of 2022.
“2021 was a banner year for VC across the board. In 2022, VC investments across the board are around 30% lower year over year, and I would expect a similar downturn for agtech,” Monica Varman, partner at G2 Venture Partners, told TechCrunch. “In the medium to long term, however, I expect funding for agtech VC to increase, given the challenges of supply chain, traceability issues and advances in enabling technologies in synbio and robotics,” she added.
Agtech investors are also still largely funding men. Of the nearly $11 billion distributed to agtech in 2021, 78% went to companies with all-male founders, according to PitchBook. The disparity has only worsened so far in 2022, reaching 81% (of nearly $7.3 billion) as of September 14, according to the data firm.
To assess whether (and how) VCs are responding to these issues and more, we reached out to:
- Brett Brohl, Managing Director, Techstars Farm to Fork, and Managing Partner, Bread and Butter Ventures
- Monica Varman, Partner, G2 Venture Partners
- Jinesh Shah, Managing Partner, Omnivore
- Adam Anders, Managing Partner, Anterra Capital
- Ting-Ting Liu, Investor, and Ashutosh Sharma, Head of India, Prosus Ventures
- Camila Petignat, Partner, The Yield Lab
Brett Brohl, Managing Director, Techstars Farm to Fork, and Managing Partner, Bread and Butter Ventures
Agtech VC deal value has grown from $6.5 billion in 2020 to $11.4 billion in 2021. Will this type of growth continue?
It’s not going to continue in the short term, largely because of macroeconomic factors that you just don’t see – for example, there are a lot of late-stage deals in the works recently – so in the short term, definitely not.
In the long term, the sector has tremendous opportunity and scope for innovation, so over time you will see continued growth and investor focus on agtech.
Agriculture is responsible for around a quarter of global GHG emissions. How has the climate crisis changed the way you invest?
This is a huge reason why deal values have skyrocketed in 2020 and 2021. Investors understand that this challenge creates opportunity. Agtech is not as mainstream as many other sectors, so we need more eyeballs and capital. If you make the food system more effective and efficient, you make it more sustainable.
We’re not a big enough fund to fund a startup forever, and we’re dependent on later-stage investors, so this attention and the resulting influx of capital helps remove some risk from our portfolio.
Which emerging technologies, such as cellular agriculture and AI-powered robots, have the greatest potential to impact key issues such as food security and emissions over the next decade?
We are 100% believers in cellular agriculture and are also big fans of space robotics, especially robotics that solve very specific pain points and have low BOMs.
“Automation and computer vision will transform agriculture over the next decade, especially as food production moves closer to the point of consumption due to food safety concerns.” Monica Varman, Partner, G2 Venture Partners
We also like the packaging space – a lot of packaging is used for the transport and movement of food. We are also enthusiastic about anything related to logistics, manufacturing or transportation that makes the food chain more sustainable.
When investing in an agtech startup, what green flags do you look for? Are you open to supporting founders who don’t have industry experience?
Investing in agtech startups is no different than any other business. A great team can take an idea in C, pivot, iterate, and make it work. But a C founder will put any idea in the ground, no matter how good.
While the fit between the founder and the market can be an advantage for a company, great entrepreneurs are smart, have great work ethics, are coachable, and know how to surround themselves with people who compensate for their weaknesses. Industry experience is therefore not a requirement for us.
What areas of agtech have received the most attention from early-stage founders in recent years? In which areas would you like to see more work or investment?
The obvious answer is alternative proteins. So much capital has been poured in and so many founders are building cool things in space.
I’d like to see more attention to things that are a bit downstream, like manufacturing, logistics, and the future of food retail. Over the past few years, you’ve seen traditional agtech investors move their thesis further downstream, so it’s happening.
I’m also very interested in fintech applications in agriculture, like what Traive and Milk Moovement are doing.
What are you doing to fund underrepresented founders in agtech?
We actively seek out investors, forums and networks that support underrepresented founders and invest or work with entrepreneurs who are at an earlier stage than where we are investing. We also maintain a diverse investment team – 75% of our fund are women.
Finally, we host open hours for all each week and offer free public education through multiple channels to help founders progress.
Prior to the invasion, Russia and Ukraine accounted for about 28% of world wheat exports and 15% of corn exports. How did the Russian invasion of Ukraine affect the making of deals with Agtech VC given its impact on the global supply chain and global grain supply?
I don’t think it’s done much for agtech founders or venture capitalists. The macroeconomic effect of the war has at least, in part, been a tightening of the money supply, which will trickle down to early-stage startups. However, the impact has not yet been significant in the early stages.
Bayer bought Monsanto for $63 billion in 2018, and a year earlier ChemChina acquired Syngenta for $43 billion. Today, Bayer’s market capitalization is less than the value of this deal, and the Chinese ambassador to Switzerland called the Syngenta acquisition a bad deal for Beijing. Have the results of these deals affected investors’ hopes of late-stage searing exits?
I wouldn’t call these acquisitions of “modern” agtech companies. Monsanto has been around for over 100 years, and Syngenta was created over 20 years ago, and even then it was a spin-off. Moreover, this happened in 2017 and 2018. Investments in agtech have exploded since then, indicating that the market does not believe that these two acquisitions indicate underperforming venture capital investments.
The results of companies like Upside Foods, FBN and Indigo Ag will be much more important to the agtech ecosystem. Unfortunately, it’s a very tough market for early-stage companies right now, which will slow exits and reduce the ROI of many venture capital investments, not just agtech deals.
How do you prefer to receive pitches? What’s the most important thing a founder should know before calling you?
I’m open to warm introductions, cold, thoughtful emails, or introductions during my business hours. If you offer me a call, the first thing is to be yourself.
Do you have anything else to comment?
I think the blurred lines between food tech and agtech are really interesting. What is agtech? It’s not just agricultural inputs; there’s a lot more than that and that, to me, is exciting.
Monica Varman, Partner, G2 Venture Partners
Agtech VC deal value has grown from $6.5 billion in 2020 to $11.4 billion in 2021. Will this kind of growth continue?
2021 has been a banner year for VC. In 2022, venture capital investments across the board are around 30% lower, and I would expect a similar slowdown for agtech.
In the medium to long term, however, I expect funding from agtech VC to increase given supply chain challenges, traceability issues, and advances in enabling technologies in synbio and robotics.