Post #10: Hungry for agtech - Heptagon Capital – Production

How to feed the world? This is a question that has occupied us for some time particularly given its population is growing at the same time as climate change and…

Post #10: Hungry for agtech

How to feed the world? This is a question that has occupied us for some time particularly given its population is growing at the same time as climate change and environmental pollution are causing land degradation and limiting access to water. Unsurprisingly, we are not the only ones concerned about this topic. It was therefore with interest that we noted the release last week of one of the most important annual publications on this matter, the 2018 Investing Report from AgFunder, a VC platform focused on the agtech sector. The good news: increasing sums of capital are being committed.

Funding for new agtech projects totalled $16.9bn in 2018, a 43% annual increase. This is the second consecutive year in which funding has grown by over 40%. For further context, even 5 years ago, just $2.1bn was invested in the sector. Agtech is an intentionally broad term that takes in everything from farm to fork with a lot of software in between, not forgetting also the burgeoning meat alternatives market. Thinking bigger, there is a much larger prize at stake: consider that the overall agrifood sector is a $7.7tr industry, responsible for feeding the planet and employing over 40% of the global population (all data points from AgFunder).

Two main things in the report stand out to us. First, deals in the ‘upstream’ segment of the market are outpacing those in the ‘downstream.’ Focusing on the farm (as opposed to the consumer) arguably has more attractive prospects at present, since the segment is less mature with fewer competing players. Next, many of the sector’s largest deals are currently occurring in Asia. We believe this may be a function of greater urgency (bigger populations to feed) and more pragmatic regulators. 

Succeeding in the agrifood sector will not be without challenges. The overall industry involves many established incumbents with complicated supply chains and vested interests. For investors, meanwhile, the debate is how best to deploy capital given the size of the addressable opportunity. Nonetheless, we see a clear hunger to participate in the space.

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The document is provided for information purposes only and does not constitute investment advice or any recommendation to buy, or sell or otherwise transact in any investments. The document is not intended to be construed as investment research. The contents of this document are based upon sources of information which Heptagon Capital believes to be reliable. However, except to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to the accuracy or completeness of this document or its contents and, Heptagon Capital, its affiliate companies and its members, officers, employees, agents and advisors do not accept any liability or responsibility in respect of the information or any views expressed herein. Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. Where this document provides forward-looking statements which are based on relevant reports, current opinions, expectations and projections, actual results could differ materially from those anticipated in such statements. All opinions and estimates included in the document are subject to change without notice and Heptagon Capital is under no obligation to update or revise information contained in the document. Furthermore, Heptagon Capital disclaims any liability for any loss, damage, costs or expenses (including direct, indirect, special and consequential) howsoever arising which any person may suffer or incur as a result of viewing or utilising any information included in this document. 

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