What a decade it’s been for the advancement of the food and agriculture industries! It was a decade spent catching up with other industries in the technological revolution. In many respects the industry is still in catch-up mode — vast tracts of the industry are still without internet connection as one clear example — but many of the industry’s tech breakthroughs in the last 10 years would have been the stuff of dreams in 2010.
Few would have imagined that cell-replicated dairy would be on our shelves already, courtesy of Perfect Day, or that the meat counterpart would be just a few years away. That a plant-based meat company would have had one of the decade’s most successful IPOs — thanks Beyond Meat — would also have been unbelievable along with the determined shift of a growing number of western consumers towards increasingly plant-based and animal-free diets. Few consumers cared or thought about where their food came from at the start of the decade — the focus remained on availability (in the West that meant access to all foods at any time of year and convenient processed foods), and cost — but the next decade will see the consumer increasingly dictate what’s grown in the fields and produced in factories, and how.
While it’s been a tough road for technology adoption on the farm, farmers are increasingly ditching their notebooks and Excel spreadsheets and have more information than ever before about their farms and the factors that could impact their success (e.g. weather) with the once futuristic arrival of drones, daily satellite-based images, and near-autonomous robots. Ensuring farmtech startups have a clear value proposition is now more important than ever, however, as many farmers, particularly in the Western world, are fatigued by an onslaught of new tools of varying benefit. Many farmtech offerings have provided just incremental benefits or “pretty pictures” of their farms, as was increasingly the case with the first wave of drone startups in agriculture. Add to that the continually tight margins farmers face all over the world — reasons ranging from low commodity prices and labor shortages to broken supply chains and limited access to markets — and farmtech startups need to be an obvious investment for them to make.
Most of the large companies across food and agriculture have been slow to act making just a handful of notable tech startup acquisitions — Climate Corp, Granular, Blue River Robotics being the most stand-out — and some innovation programs little more than lip service, threatening their future survival. Many need to wake up to the disruption facing them if they don’t act fast.
The decade also saw the emergence of a group of investors dedicated to investing in tech startups across food and agriculture. (You can find a list of the most active investors in 2018 here.) While this pool of capital continues to grow as new funds launch each year, the industry needs more capital, particularly growth capital, as the first wave of startups matures into the later stages of startup life. Increasing numbers of generalist investors are entering the space but as a complicated and very nuanced industry, the more expert investors supporting its tech revolution, the better.
We asked a few of these dedicated investors what they’re expecting in 2020 and beyond. Here are some of their responses.
Better Food Ventures – IT-focused agri-foodtech investor.
Responses from Brita Rosenheim, Seana Day, Michael Rose and Rob Trice
There will be more appreciation for the need to break down the “messy middle of food” between the farm and the fork (though it will be difficult to find differentiated venture solutions solving for this need). Existing players from across the value chain will come together for greater pre-competitive collaboration to remove barriers to digital adoption and accelerate the transformation of the food system.
We will have at least one high-profile agtech and one high-profile foodtech VC-backed flame-out in 2020 as investors raise the bar for follow-on commitments to cash-burning startups.
There will be greater recognition of the current economic limitations (cost of production) to scaling some Indoor Agtech solutions (like sunless vertical growing) and greater recognition of the potential of others (like fully automated greenhouses).
Australia will emerge as a leader in digital agtech adoption.
Consumers will increasingly consider the sustainability of packaging in food purchase decisions (for CPGs, as well as restaurants).
The urgency of cannibalized restaurant margins will support a new surge of tech adoption among operators as they look to optimize operations, uphold their own brand, and funnel customers into more profitable channels.
S2G Ventures – the industry’s most active investor.
Responses from Sanjeev Krishnan, managing director
Mainstream investors are beginning to recognize the massive potential of ag/foodtech to reinvent our global food system. Beyond Meat’s 2019 IPO was a game-changer – and proof that there’s no shortage of investors hungry for sustainable food startups. Expect to see renewed interest – and investment – in this space in 2020.
S2G plans to continue betting on the “Amazon-proof” branded perimeter – poultry, produce, dairy, etc. – vs. center store packaged products.
More entrepreneurs will explore the concept of “food as medicine,” backed by scientific validation and clinical claims. The next big acquisition of a food brand by health companies like Pfizer or Merck could be right around the corner.
As the food industry shifts from analog to digital, data science teams are becoming the new farmers and chefs of our global food system. By harnessing the power of data and emerging technologies like AI, agtech startups will meet the needs of today’s consumers like never before – bringing them healthier, more diverse and flavorful food at a lower cost.
The future of food is being driven by demand from growing markets like China and Brazil, which has major geopolitical implications. Ag/foodtech and foreign policy will increasingly converge in 2020 and beyond.
Cultivian Sandbox – the first-ever agri-foodtech investor.
Responses from Amanda Donohue-Hansen and Kevin Zussman
Bullish on fintech innovation in agriculture. There has been tremendous innovation from finance, insurance, and investing startups in adjacent industries (e.g. SoFi, Credit Karma, Root, Acorn). We predict we’ll see greater collaboration and new startups emerge to capture opportunities in farmland and agriculture financing. For example, both FarmlandFinder and Tillable raised funding this year to disrupt the farmland rental and real estate market. And Rabobank and Conservis announced a partnership a year earlier that will help integrate Conservis’ farm management software tools with Rabobank’s lending systems to streamline agricultural financing.
Biomanufacturing will continue to attract significant investment – Advances in synthetic biology, computational modeling, and machine learning are unlocking the potential to produce new agriculture and food products more economically and sustainably than traditional animal and land-based methods. I predict we’ll continue to see strong investment and commercial development in synbio applications for food & agriculture. (2019 saw some big deals in this space: Geltor and Gelita announced in 2019 a partnership to commercialize the world’s first ‘animal-free’ collagen for the nutraceutical market. And large fundraising rounds in 2019 for agrifood biotech companies, such as Zymergen, Gingko Bioworks, Greenlight, are examples of the continued excitement from investors.
Investment in livestock technology will start catching up to investment in crop technology both in terms of total dollars invested and round sizes. I think in 2020 we will start seeing mega-rounds for livestock technology startups like we saw over the last two years in the crop technology space (Provivi’s $85m Series C, Pivot’s $70m Series B, Benson Hill’s $60m Series C, etc.). I think Paine Schwartz’s newly-established animal health & nutrition platform is a leading indicator for the space.
Pollination startups will receive more attention in 2020. Although more than one-third of the food we eat depends on pollination, technology that addresses pollination has been significantly underinvested relative to its agricultural impact, especially compared to investment in genetics, inputs, and data. I think venture investment in pollination is low hanging fruit (pun intended) from both a yield and returns standpoint.
Fall Line Capital – a farmland investor that invests in agtech companies strategic to its land holdings.
Responses from Clay Mitchell and Eric O’Brien
A silver lining to the wrecking-ball of glyphosate lawsuits of 2019 will be the inspiration of new interest in the effects of off-target, non-selective pesticides on human health, pest resistance, and irreversible, landscape-level alterations in species distribution and population genetics. First, disparate pieces of specialized scientific research will be combined by industry and academic experts to shed new light on the effects of current non-selective products and application practices. Then it will be translated into news features for public consumption. A specific effect that will take a few years will be an end of aerial application of non-selective herbicides in the Southern US. Further, there will be more bans on some of today’s most common insecticides. Society will benefit from new classes of selectives with no off-target effects, improved application planning that is more intentional, and from improved application technology that keeps inputs on target.
The challenges of modeling complex environmental interactions affecting nitrogen fluxes and carbon stability in ag soils will slow efforts to monetize climate change mitigation at the farm-level. However, heightened interest in large-scale, statistical characterization of sequestration and other ecosystem services will create new levels of farmland digitization. Next-gen soil sampling technology and satellite imagery will be heavily featured in this revolution. With significant overlap and interaction between models of farmland’s ecosystem services and its production efficiency, farmland markets will be moved by the resulting improvements in information.
Both for farmers and investors, dollars spent on seed genetics/plant breeding will outperform dollars spent on applied microbials. New breeding platforms will accelerate the adoption of output traits.
Middleland Capital – a family office with 20+ agtech investments that also invests in consumer & enterprise startups.
Responses from Brian Mixer
Similar to S2G’s commentary on “food as medicine,” we believe there will be new developments and investment in personalized nutrition.
Automation/robotics will continue to be a key focus for investors as labor continues to be one of the biggest painpoints in the sector.
2020 will bring further consolidation opportunities in both biologicals and digital agriculture.