Investments in agriculture technology startups boom to 4.6 billion

30 May 2016

The Agtech startup market, like much of the startup scene, has seen explosive growth in investments in recent years, with total investments increasing more than eightfold since 2010. The total $4.6 billion pie went, for the largest share to food e-commerce and delivery, followed by irrigation & water concepts. 

The agriculture startup market has boomed since 2010, jumping from $400 million to nearly $4.6 billion. Like with the global venture capital market’s investment into startups, which according to KPMG saw investments spiral to $128 billion last year, a new report by Agfunder (‘Agtech investing report’) finds that agriculture too is enjoying an investment soar as new technologies and methods converge to transform business model and industry segments. 

Global investments in Agtech startups

Agtech investment booms
The value of the agtech investment activity jumped considerably in 2013, up 75% to $900 million, following three years of relative stability. The jump was in part catalysed by a number of mega deals, including BASF acquiring seed treatment company Becker Underwood for $1 billion, and The Climate Corporation’s $1 billion exit to Monsanto at the end of 2013, supporting a $2.4 billion result in 2014. Last year completely eclipsed these figures, with investments jumping 94% on 2014 volumes, to hit $4.6 billion (526 deals). The capital flowed to 499 companies, attracted across 526 rounds of financing. High profile investors making bets in the space included Google Ventures, the Bill & Melinda Gates Foundation, and Kleiner Perkins Caufield & Byers, among others.

The large increase in capital inflow marks, according to the authors of the report, a sign that the market is picking up ground previously lost in the innovation and startup scene. The agriculture market represents about 10% of global GDP ($7.8 trillion), agtech investments however accounted for <3.5% of the total $128 billion invested in venture backed companies in 2015. Furthermore, agtech investment represents less than 0.5% of the entire agriculture market. In other words, the agtech landscape faces considerable potential for (further) expansion, in particular in light of the growing global demand for food and the convergence of technologies that is paving the way for new, and more efficient operations.

There are signs for concern as well, state the authors. The main fear is that part of the the market may be heading towards a bubble. The food e-commerce sector continues to be overheated against a backdrop of questionable unit economics and increasing competition, and the rest of the market is undergoing a financing challenge, with few deals of over $50 million in size. In addition, the globe’s key economies currently has relatively few agtech dedicated funds, and those in place are still small in size.

Deals in the Agtech startup market

The deal space, in terms of number of venture capital backed investments, as well as their values, varied considerably in 2015. The seed stage saw only a fraction of total funding, at $130 million, while involving 260 transaction. Series A funding was relatively robust at $786 million – suggesting that startups with seeds that are likely to grow into maturity face relatively good access to capital. Series B and C represented 46 and 27 investments, at $692 million and $1 billion respectively. Grant/non-equity crowd funding managed to pull in around $10 million. 

Particularly seed stage companies and B series companies saw declines since the previous year, suggesting that many early stage agtech companies continue to struggle to raise capital despite more capital entering the space. 

Investments in Agtech sectors

The sector with the most investment is food e-commerce, which pulled in more than $1.65 billion in 2015, a more than 300% increase from 2014, and a total 36% of the pie. A few large deals pushed up the irrigation & water sector segment, which attracted 15% of the total available funding. Drones & robotics came in third, at 8%, while last year’s top investment choice, bioenergy, fell to a share of 7% of total investments.

Across the board, the future remains relatively bright for the sector, say the researchers. “Gone are the days when Agtech encompassed simply seed genetics and biofuels. Today, Agtech is being driven by a confluence of technologies. We continue to believe that agriculture industry is proving to be an excellent first market for many of the most exciting technology developments because there are still so many problems to solve.”


Private equity firms ramp up sustainability focus

19 April 2019

In line with business leaders across the industrial gamut, private equity firms are increasingly on board with sustainability projects. According to a new study, the investment arms for major funds are implementing a number of strategies aimed at supporting sustainable economic development in line with global goals.

While the business world has finally begun to acknowledge the danger of climate change, effective action plans remain difficult to achieve. The Paris Agreement has stipulated a clear target for the decades leading up to 2100, although massively reducing emissions while not crashing the economy could be a tall order.

Businesses that are able to acquire capital can use it to boost productivity and output, thereby creating a virtuous cycle of development. However, some businesses are better able to utilise resources than others, both in terms of their relative productivity, as well as the value of the respective outcomes relative to costs (including environmental harms). Financing can therefore provide an avenue to select businesses that are aligned with various global sustainability goals, while shunning those that drive little or unsustainable social value creation.

Top moves made by investment arms towards responsible investment

Profit has for the longest time been the central criterion for investment decisions. Yet profit at any cost is increasingly seen as creating considerable social harms, while often delivering only marginal value. As a result, the private equity sector, which was initially sluggish to change its ways with regards to sustainability, has started to see the topic as an opportunity as much as a challenge.

A new study from PwC has explored how far sustainability goals have become part of the wider investment strategy for private equity (PE) firms. The report is based on analysis of a survey of 162 firms and includes responses from 145 general partners and 38 limited partners.

Maturing sustainability

Top-line results show that responsible investment has become an issue for 91% of respondents. For 81% of respondents, ESG (environmental, social, and corporate governance) was a board matter at least once a year, while 60% said that they already have implemented measures to address human rights issues. Two-thirds have identified and prioritised Sustainable Development goals that are relevant to their investment segments.

Change in concern and action on climate-related topics over time

While there is increasing concern around key issues, from human rights protections to environmental and biodiversity protection, the study finds there are mismatches between concern and action. For instance, concern among investment vehicles around climate change has increased since 2016.

In terms of risks to the PE firm itself, concern has increased from 46% of respondents in 2016 to 58% in the latest survey. However, the number who have taken action remains far below those concerned, at 9% in 2016 and 20% in 2019. Given the relatively broader scope of investment opportunities, portfolio companies face higher risks – and more concern – from PE professionals, at 83% in the latest survey. However, action is less than half of those concerned, at 31%.

Changing climate

In terms of the climate footprint of the portfolio companies, 77% of respondents state concern in the latest survey. 28% of respondents are taking action through the implementation of measures to mitigate their concerns.

Concern and action taken on ESG issues

In terms of the more pressing issues for emerging responsible investment or ESG issues, governance concern of portfolio companies comes in at number one (92% of respondents), while 60% have taken action on it. Firms have focused on improving awareness – setting up policies and a range of training modules for their professionals around responsible investment decision making. Cybersecurity takes the number two spot, with 89% concerned and 41% implementing strategies to mitigate risks.

Climate risks take the number three spot in terms of concern for portfolio companies (83%), but falls behind in terms of action (31%). Health and safety track records are a key concern at 80% of businesses, with 49% implementing action. Gender imbalance within PE firms themselves ranks at 78%, which is being dealt with by 31%. A recent survey from Oliver Wyman showed that there is gender balance at 13% of GP teams in developed countries.

Biodiversity is also an increasingly pertinent topic, with risks from pollution and chemical use increasingly driving wider systematic risks around environmental outcomes. It featured at number eight on the ranking of most likely global risks for the coming decade, with its impact at number six. As it stands, biodiversity is noted as an issue at 57% of firms, with 15% implementing action.