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There's Never Been A Better Time To Be Part of The Global AgTech Community

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This article is more than 5 years old.

Agtech seed stage funding continues to trend upward, globally, according to Finistere Venture’s 2018 Early-stage Agtech Mid-Year Report.

Finistere Ventures 2018 Early-Stage Agtech Report

Main takeaway: Investment Continues to Trend Upwards

Seed stage deal value and investment are continuing to trend upwards, while angel investment into agtech is slightly down since it’s peak in 2016. This report focuses on early stage investment activity, and it demonstrates something I’ve been observing - there are more and more early stage “accelerator” investors. A few years ago, there were so few sources of seed stage capital for agtech that most of the companies that were able to obtain investment were remarkably well vetted. We’re starting to get to a place where there’s some noise at the seed stage, and that is going to be critical for agtech’s continued growth trajectory. It means that more and more companies are receiving financing to focus on solving problems, scaling and gaining a competitive edge, and that’s going to force some of teams to think outside the box. Some of these companies are going to pivot into the right niche and have transformative impact.

Sector Breakdown: Some Surprises

I don’t want to put too much weight on sector breakdown (check out page 6 of the report for graphics), because Finistere’s 17-company survey size was small, and sorting by sector is challenging due to overlap. That said I think it’s important to hone in on the specific areas of agtech to understand where opportunities lie, so I'm going to quickly walk through their findings and my reactions.

As of June, Finistere’s surveys indicate that indoor farming investment is down (though not by much). SoftBank put $200M in Plenty last year and made its move to out-muscle other indoor farms to presumably address the challenges facing indoor farming once and for all. Personally, I think that we’re going to see another uptick in investment going into this sector in the next couple of years, as I see a huge opportunity for seed breeding in parallel with less expesnive controlled environment systems.

Crop protection & input management is up, and it is and will continue to be a hot space. Right now, agtech exits are primarily driven by M&A, and a large number of the strategic acquirers are very focused on the potential for microbial and biological crop protection solutions. 

An increase in imagery investment doesn't surprise me.  I’m personally thrilled to see more and more non-ag-specific investors playing in the hardware-for-age space. I don’t think that this overlap is going to be limited to imagery.

The growth of precision ag appears to be slowing down a bit. With 9 investments reported for H1, it remains one of the most active areas. It seems like every corporation and every investor has a play in precision ag right now, but the systems and data sets aren't talking to each other. As a global community, we still need to figure out to integrate different data sets and how to make these systems affordable and accessible.

I am surprised to see that plant science investment is down. Technical complexity and long development timelines certainly contribute to scaring investors away, but I see this space as a huge opportunity. It’s possible that I’m biased here because I’m based in St. Louis’s 39 North district and am surrounded by plant scientists much of the time.

I’m also surprised that animal tech deals are down. Again, I see this as a hugely impactful and promising area, and, between nutritional improvements and vision based systems (presumably some of these deals are getting placed in the “imagery” bucket and skewing the numbers here.) I’m betting that we’ll see at least a handful of deals in H2 this year.

But The Future Needs To Be Even Better

There was a total of $36M deployed across a total of 27 agtech seed deals tracked by Pitchbook in H1 2018. Finestere was only able to survey 17 agtech accelerators, globally, not all of whom are agtech-specific. For context, in its 2016 Global Accelerator Report, Gust tracked $206,740,005 across 11,305 startups by 579 accelerator programs.

Agtech continues to lag behind other industries in terms of dollars invested and deals done, even at the seed stage. I believe that this stems from a problem at the very early stages of the pipeline. At the Yield Lab, we’re seeing an increase in similar solutions (“fitbits” for cattle/horses, vague blockchain traceability platforms, even robotic harvesters are starting to get repetitive), without there necessarily being clear differentiators between these solutions. We need more diverse approaches to problem identification in the agtech space from founders (more diverse founding teams would help here - I’ve written about that here.) There are so many opportunities to tackle in the agtech space - unique approaches to labeling and solving problems are going to enable differentiated innovations.

Agriculture is THE world’s largest industry. Period. According to World Wildlife Fund, it employs more than 1 billion people and generates $1.3 trillion dollars worth of food. Agriculture faces perhaps the most challenges moving forward, but it also offers the most potential for innovation to address these global challenges. Agtech investment is exciting today, and it’s only going to continue to grow.

Arama Kukutai of Finistere believes that, "As the ramifications of climate change become more pronounced and threaten not just farmer income but food security globally, the agtech investment community will rally behind the innovators who can best support the effort to combat the effects of climate change."

I’m looking forward to further increases in agtech investment at year end. I’m particularly excited to see a profile of Latin American data, as I see a huge potential there for rapid adoption of technology, particularly in Argentina and Brazil. It will also be very interesting see what European investors are seeing and predicting, especially in light of the recent GMO ruling.

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