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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