Investment value in the Agtech startup scene fell 30% to $3.2 billion, on the back of increased investor scrutiny, dropping venture sentiment and general uncertainty. Investors remain keen on funding SEED stage companies, with particular appetite for the food marketplace/e-commerce sector. In total, investment volumes saw a 10% uptick.
Investment in the agriculture startup market increased from $400 million in 2010 to nearly $4.6 billion in 2015. The growth in investment followed wider market trends within the startup space, which, according to KPMG’s Venture Pulse, hit $141 billion in 2015. While interest in startups remains hot, concerns about valuations began to surface over 2016, as the investors began to take a closer look at the realistic revenue/profit potential of their investment stock. Total venturing investment in the startup market dropped noticeably on the back of concerns, falling to $127 billion.
In a new report from Agfunder (‘Agtech Investing Report’), a similar trend is noted in the Agtech startup market, with total investments between 2015 and 2016 falling around 30% to just over $3.2 billion. Food e-commerce and delivery and biotechnology startups were the biggest drawcards for startup funding in 2016.
This follow years of explosive growth, as investment in the segment increased from $900 million in 2013 to $2.4 billion in 2014.
The drop was, however, only noted in terms of value. Volume in startup investments was higher in the first three quarters with respect to the same quarter the year previous. In Q1 2016, value stood at $716 million compared to $1,255 million the year previous, while volume increased from 155 to 168. Only the last quarter of 2016 saw a drop in volume like for like, from 116 investments to 107, while value fell from $1,262 million to $695 million.
Aside from a change in investor sentiment, the firm’s analysis notes that a decrease in funding to bioenergy, drone technology and food delivery drove the downward investment trend. The final quarter of 2016 was further impacted by political uncertainty as Trump, unexpectedly, took power in Washington – driving investors into, among others, a ‘wait-and-see’ mode.
The sector breakdown of deal activity shows that the food marketplace/e-commerce sector continues to draw the lion’s share of interest from the investment community, counting 158 deals and almost $1.3 billion in inward investment. Agricultural biotechnology companies come in second, at 85 investments totalling $718 million. The robotics, mechanisation and other farm equipment segment saw a decrease of 39%, largely on the back of lower investments in drone technology.
The research notes some changes in investors’ appetite over the past three years. Aside from the decrease in investment in robotics, mechanisation and other farming equipment, bioenergy and biomaterials too saw a significant drop in funding. Food marketplace/e-commerce, which exploded onto the scene in 2015 in terms of funding, continues to attract funding – in part due to the potential $60 billion market from which successful startups may derive revenues. Agricultural biotechnology companies have seen funding increase again, following a dip in 2015, while most other categories report relative steady results on the years previous.
In terms of funding round volume and value, SEED funding is out ahead in terms of volume, at 337 investments for a total value of $217 million – with average investments at $0.9 million and median deal values at $0.5 million. Stage A investments saw 86 startups unevenly split $459 million, averaging $6 million each with median pay-outs of $4.5 million. Stage B and C saw increasingly smaller numbers of startups (55 and 22 respectively) split, again unevenly, around $800 in each category.
The researchers note that it are particularly late stage startups whose funding levels saw decreases in the face of investor caution. Deal activity, the firm’s analysis notes, is skewing towards SEED investment, up from around 45% in 2014 to almost 60% in 2016. Stage A funding was particularly hard hit in the latest funding round, while C and D too saw contractions. Late funding was, however, up slightly as a % of total deals compared to the previous two years.
For the full report from Agfunder, visit the Research section of their website.