Climate change and geopolitical instability are wreaking havoc on agriculture. To gauge how VCs are responding to these issues, we spoke with seven investors.
For starters, rising greenhouse gas emissions are driving punishing droughts and storms, which are harming crops, exacerbating food insecurity and threatening countless livelihoods. At the same time, Russia’s invasion of Ukraine is rattling the world’s grain supply, driving up costs and further aggravating supply chains.
Even as these and other crises hammer the multitrillion-dollar industry, startup investors see potential for huge returns with tech that could boost yields, slash emissions and mitigate waste.
“There are opportunities to develop [and] adopt new technologies all along the food value chain that will impact key issues like food security and emissions,” Adam Anders, a managing partner at Anterra Capital, told TechCrunch. Among the areas where he sees the biggest potential impact, the investor cited improving plant genetics, boosting the shelf life of more products and putting digital tools in the hands of farmers.
Consumer behavior is another piece of the proverbial puzzle as climate literacy increasingly alters how folks shop.
“Over the last few years, we have seen skyrocketing interest in sustainability from consumers and food brands, and awareness over the negative impacts of agriculture continues to grow,” said Ting-Ting Liu, investor at Prosus Ventures. “People are not only paying more attention to agricultural-related emissions but also how much land and water is required to support the world’s food supply and the amount of runoff being generated,” she said.
Liu argued that this demand is creating strong tailwinds for businesses that strive to address agriculture’s environmental impact, ultimately driving more capital into everything from cellular agriculture to methane reduction solutions for livestock.
Still, agtech is not immune to some of the broader trends in venture.
While the value of agtech VC deals rose to $11.4 billion in 2021 from $6.5 billion in 2020, several investors told TechCrunch they’ve noticed a slowdown in agtech deals this year amid the wider tech downturn of 2022.
“2021 was a record year for VC across the board. In 2022, VC investments across the board are about 30% lower year on year, and I would expect a similar slowdown for agtech,” Monica Varman, a partner at G2 Venture Partners, told TechCrunch. “Over the medium to long term, however, I do expect agtech VC funding to grow, given supply chain challenges, traceability concerns and advancements in enabling technologies in synbio and robotics,” she added.
Agtech investors are also still largely funding men. Out of the nearly $11 billion dispensed into agtech in 2021, 78% went to firms with all-male founders, according to PitchBook. The disparity has only worsened so far in 2022, rising to 81% (out of nearly $7.3 billion) as of September 14, per the data firm.
To gauge whether (and how) VCs are responding to these issues and more, we reached out to:
- Brett Brohl, managing director, Techstars Farm to Fork, and managing partner, Bread and Butter Ventures
- Monica Varman, partner, G2 Venture Partners
- Jinesh Shah, managing partner, Omnivore
- Adam Anders, managing partner, Anterra Capital
- Ting-Ting Liu, investor, and Ashutosh Sharma, India head, Prosus Ventures
- Camila Petignat, partner, The Yield Lab
Brett Brohl, managing director, Techstars Farm to Fork, and managing partner, Bread and Butter Ventures
Agtech VC deal value rocketed from $6.5 billion in 2020 to $11.4 billion in 2021. Will this sort of growth continue?
It’s not going to continue in the short run largely because of macroeconomic factors you’re just not seeing — for example, many late-stage deals are going through recently — so in the short term, definitely not.
In the long run, the sector has a tremendous amount of opportunity and room for innovation, so with time, you will see continued growth and investor focus on agtech.
Agriculture is responsible for about a quarter of global GhG emissions. How has the climate crisis changed how you invest?
It is a huge reason deal value skyrocketed in 2020 and 2021. Investors understand that this challenge creates an opportunity. Agtech is not as mainstream as many other sectors, so we need more eyeballs and capital. If you are making the food system more effective and efficient, you are making it more sustainable.
We aren’t a big enough fund to finance a startup forever, and we depend on later-stage investors, so this attention and resulting influx of capital helps remove some risk from our portfolio.
Which emerging technologies, such as cellular agriculture and AI-powered robots, have the greatest potential to impact key issues like food security and emissions in the next decade?
We 100% believe in cellular agriculture and are also huge fans of the robotics space, especially robotics that solve very specific pain points and have low BOMs.
“Automation and computer vision will be transformative for agriculture over the next decade, particularly as food production is moved closer to the point of consumption due to food security concerns.” Monica Varman, partner, G2 Venture Partners
We also love the packaging space — lots of packaging goes into the transportation and movement of food. We’re also excited about anything to do with logistics, manufacturing or transportation that makes the food chain more sustainable.
When investing in an agtech startup, which green flags do you look for? Are you open to backing founders who don’t have experience in the industry?
Investing in agtech startups is no different from any other company. A great team can take a C- idea, pivot, iterate and make it work. But a C- founder will run any idea into the ground, regardless of how good it is.
While founder-market fit can be a benefit to a company, great entrepreneurs are smart, have a great work ethic, are coachable and know how to surround themselves with people who make up for their weaknesses. So industry experience isn’t a requirement for us.
Which areas of agtech have received the most attention from early-stage founders in recent years? In which areas would you like to see more work done or investments?
The obvious answer is alternative proteins. So much capital has been invested and so many founders are building cool things in the space.
I’d love to see more attention paid to things that are a bit downstream, such as manufacturing, logistics and the future of food retail. Over the last few years, you have seen traditional agtech investors move their thesis further downstream, so it is happening.
I’m also really interested in fintech applications in the agriculture space, like what Traive and Milk Moovement are doing.
What are you doing to fund underrepresented founders in agtech?
We actively seek out investors, forums and networks that support underrepresented founders and invest or work with entrepreneurs that are a stage earlier than where we invest. We also maintain a diverse investment team — 75% of our fund are women.
Finally, we hold open office hours for anyone every week and provide free public education through multiple channels to help founders level up.
Before the invasion, Russia and Ukraine accounted for about 28% of wheat and 15% of corn exports globally. How has the Russian invasion of Ukraine affected agtech VC deal-making given its impact on the global supply chain and the world’s grain supply?
I don’t think it’s done much to early-stage agtech founders or venture capital. The macroeconomic effect of the war has at least, in part, been a tightening of monetary supply, which will trickle down to early-stage startups. However, the impact has not been significant at early stages yet.
Bayer bought Monsanto for $63 billion in 2018, and a year earlier, ChemChina acquired Syngenta for $43 billion. Today, Bayer’s market cap is less than that deal’s value, and China’s ambassador to Switzerland has called the Syngenta acquisition a bad deal for Beijing. Have the outcomes of these deals affected investors’ hopes for blowout late-stage exits?
I wouldn’t call these acquisitions of “modern” agtech companies. Monsanto has been around for 100+ years, and Syngenta was formed over 20 years ago, and even then it was a spin-off. Additionally, these happened in 2017 and 2018. Investment in agtech has exploded since then, indicating that the market does not think these two acquisitions are indicative of underperforming venture investments.
The outcomes of companies like Upside Foods, FBN and Indigo Ag will be far more important to the agtech ecosystem. Unfortunately, it’s a very tough market for late-stage companies right now, and that will slow exits and depress ROI on many venture investments, not just agtech deals.
How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?
I’m open to warm intros, thoughtful cold emails or pitches during my open office hours. If you’re pitching me on a call, the number one thing is to be yourself.
Anything else you’d like to comment on?
I think the blurred lines between food tech and agtech are really interesting. What is agtech? It’s not just farm inputs; there is a lot more to it and that, to me, is exciting.
Monica Varman, partner, G2 Venture Partners
Agtech VC deal value rocketed from $6.5 billion in 2020 to $11.4 billion in 2021. Will this sort of growth continue?
2021 was a record year for VC. In 2022, VC investments across the board are about 30% lower, and I would expect a similar slowdown for agtech.
Over the medium and long term, however, I do expect agtech VC funding to rise given supply chain challenges, traceability concerns and advancements in enabling technologies in synbio and robotics.
The sector is starting to see winners emerge — Pivot Bio, Tridge and DeHaat — which will pull more investors in. To see sustained explosive growth, this momentum will need to translate into strong exits for the sector.
Agriculture is responsible for about a quarter of global GhG emissions. How has the climate crisis changed how you invest?
We focus on climate tech, so the climate crisis informs every investment we make. Within agriculture, this has led to two investments to date: Pivot Bio, which makes a microbial alternative to traditional fertilizer, and ProducePay, a B2B marketplace for produce.
Which emerging technologies, such as cellular agriculture and AI-powered robots, have the greatest potential to impact key issues like food security and emissions in the next decade?
Automation and computer vision will be transformative for agriculture over the next decade, particularly as food production is moved closer to the point of consumption due to food security concerns. Land and labor availability will be fundamentally different in locations like Singapore and the UAE, so producers will have to make step-changes in productivity using technology.
Synthetic biology will also continue to revolutionize agriculture (as is already happening with microbial fertilizers). The pace of innovation has accelerated over the past decade as costs of gene sequencing have come down faster than Moore’s law would have predicted. The next challenge for companies in this space is to scale production profitably. New approaches like cell-free biology hold promise.
When investing in an agtech startup, which green flags do you look for? Are you open to backing founders who don’t have experience in the industry?
We look for products and services with extremely strong ROI for growers. This is not an industry known for adopting new technology quickly, so the value proposition has to be distinctive to gain velocity.
If a company is selling hardware (robots, tractors), we look at utilization and payback on capital investments, which can be especially challenging in agtech given the inherent seasonality.
Yes, we are open to backing founders who don’t have industry experience.
Which areas of agtech have received the most attention from early-stage founders in recent years? In which areas would you like to see more work done or investments?
Most attention: Indoor/vertical farming, alternative proteins, automation.
Would like to see: More grower-oriented tools (data/software/marketplaces) to help them make their business more efficient and profitable.
Before the invasion, Russia and Ukraine accounted for about 28% of wheat and 15% of corn exports globally. How has the Russian invasion of Ukraine affected agtech VC deal-making given its impact on the global supply chain and the world’s grain supply?
The war has put a spotlight on food security — both for grain and farm inputs like fertilizer. It seems to be catalyzing more vertical/indoor farming projects, particularly in the Middle East and island nations like Singapore.
Today, about a third of food is wasted in the U.S. and that share is even higher in places without cold chain infrastructure. Food supply chain technologies, including those that offer extended shelf life, become more important.
Bayer bought Monsanto for $63 billion in 2018, and a year earlier, ChemChina acquired Syngenta for $43 billion. Today, Bayer’s market cap is less than that deal’s value, and China’s ambassador to Switzerland has called the Syngenta acquisition a bad deal for Beijing. Have the outcomes of these deals affected investors’ hopes for blowout late-stage exits?
I think the agtech sector overall is still waiting for really strong exits, and until those materialize, the sector will not get to escape velocity.
A couple of strong exits that investors like to point to are John Deere’s acquisition of Blue River ($305 million) and Bear Flag ($250 million). While these deals are not as large as the two you mentioned, they were at a healthy revenue multiple relative to where the companies were from a traction perspective.
But there have been many that haven’t created enduring value — e.g., AppHarvest raised $534 million in capital, but its enterprise value is about $386 million today. None of the other vertical farming companies (Plenty, Bowery) have faced the public markets yet. Enduring winners will pull more capital in like how Tesla did for mobility and climate tech.
How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?
Email me. We write $15 million to $50 million checks at Series B and later ($10 million+ in revenue). If I pass on a round because it’s early, it’s not just a platitude — I actually would like to stay in touch!
Jinesh Shah, managing partner, Omnivore
Agtech VC deal value rocketed from $6.5 billion in 2020 to $11.4 billion in 2021. Will this sort of growth continue?
The tech revolution in Indian agriculture has only just begun. Agriculture in India goes well beyond paddy, wheat and vegetables. There are several subsectors, what we like to call white spaces, ready for digital intervention. These would include high-value cash crops like tea, coffee, spices, plant-based proteins, agrifood life sciences, climate-controlled agriculture, embedded value chain fintech, livestock, dairy and much more.
We expect the sector to maintain a steady pace of growth in the coming years. Investment in agtech is beginning to be considered an asset class, and investors are increasing their stakes. The outlook for Indian agtech specifically remains strong.
Agriculture is responsible for about a quarter of global GhG emissions. How has the climate crisis changed how you invest?
India is one of the most vulnerable countries to climate change. Agriculture represents 20% of India’s GHG emissions, but the sector is also incredibly vulnerable to the impacts of climate change, which may begin to threaten Indian food security in the coming decade.
We have backed over 35 startups developing breakthrough technologies for agriculture, food, climate and the rural economy. Our Theory of Change (TOC) is to invest in startups that align with one or more of our four key pillars — increasing smallholder profitability, enhancing smallholder resilience, improving agricultural sustainability and catalyzing climate action.
Furthermore, innovations in Indian agriculture need to evolve beyond digital technologies (farmer platforms and B2B marketplaces), and we look to agrifood life sciences for long-term solutions to climate change.
Which emerging technologies, such as cellular agriculture and AI-powered robots, have the greatest potential to impact key issues like food security and emissions in the next decade?
Precision agritech solutions have gained prominence over the past few years, as they help farmers reduce expenditures, solve the labor shortage and navigate climate threats. Automation is another area steadily gathering momentum and climate-smart innovations for solving legacy issues in the agri value chains are gaining momentum.
Risk mitigation is linked to erratic weather conditions by distributing and creating more insurance products for farmers. Lastly, agrifood life sciences (AFLS) can be the most effective weapon in our arsenal to fight climate change. When we say AFLS, we refer to four broad categories: agricultural biotechnology, novel farming systems, bioenergy and biomaterials, and innovative foods.
When investing in an agtech startup, which green flags do you look for? Are you open to backing founders who don’t have experience in the industry?
When we assess startups, we primarily look for the four Ts: team, technology, total addressable market (TAM) and traction.
The company must have founders with relevant work experience, ideally in other startups. The technology aspect is equally important, as entrepreneurs must develop a unique solution for their customers that is hard to replicate. The pitch must show strong and early traction, indicating good product-market fit. Finally, we also like to see a robust go-to-market strategy.
We are always keen to work with entrepreneurs who have the right attitude and skills, even if they do not have industry experience.
Which areas of agtech have received the most attention from early stage founders in recent years? In which areas would you like to see more work done or investments?
Farmer platforms, fintech, B2B marketplaces and precision agriculture have seen more focus till now. In the coming years, I expect post-harvest technologies and agrifood life sciences to get more traction.
What are you doing to fund underrepresented founders in agtech?
We continue to engage and discuss this in various investor forums to get more support for founders. We have also taken some very early bets so we can guide the company and help them achieve better scale and improve their chances of raising capital.
Before the invasion, Russia and Ukraine accounted for about 28% of wheat and 15% of corn exports globally. How has the Russian invasion of Ukraine affected agtech VC deal-making given its impact on the global supply chain and the world’s grain supply?
The European war has showcased the fragility of the supply chains and world food security. We believe that this will spur countries to be self-sufficient in their food requirements or have more diversified supply partners, which in turn will help countries like India get more embedded in the world supply chain.
How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?
We encourage founders to aim for simplicity in design (use legible fonts and one or two colors at most). Create the deck in a way that tells a story of how the founder/s developed the product and avoid creating crowded slides.
A short and impactful pitch deck is always appreciated. An early-stage startup pitch should not be more than 10 to 15 pages long. Crisp 15- to 20-minute presentations with ample time for Q&A work best.
Founders should ideally avoid the following:
- Detailed financial projections in the pitch.
- Listing influential people who do not directly work with the company.
- Peppering the pitch with motivational quotes and messages.
- Strong political views.
- Direct praise of the investor attending the pitch.
My email is jinesh@omnivore.vc. Folks can reach us on funding@omnivore.vc and info@omnivore.vc as well.
Adam Anders, managing partner, Anterra Capital
Agtech VC deal value rocketed from $6.5 billion in 2020 to $11.4 billion in 2021. Will this sort of growth continue?
Agtech deal flow will be impacted in line with the global movement in flows of venture capital. One exception in this regard is that some recent unfortunate world events (the Ukraine war and related disruption to the flow of major food commodities and increase in food prices) place a spotlight on the need for our food system to change.
Agriculture is responsible for about a quarter of global GhG emissions. How has the climate crisis changed how you invest?
We launched our first agtech-focused venture fund in October 2013, citing the anticipated impact of climate change as a key reason to invest in this sector. As the climate crisis has become more tangible, our belief in the need for both consumers and farmers to change their practices has only increased.
Which emerging technologies, such as cellular agriculture and AI-powered robots, have the greatest potential to impact key issues like food security and emissions in the next decade?
There are opportunities to develop/adopt new technologies all along the food value chain that will impact key issues like food security and emissions.
We focus on digital and biotech innovations. Investment areas where we see the biggest potential impact include: improving plant genetics; developing more environment-friendly crop health products; digital tools to help farmers change/optimize their farming practices and realize new income streams; extending the shelf life of product to help decrease waste; taking out the middleman to facilitate a more equitable distribution of farming proceeds; and helping consumers make the right decisions for both their personal health and the health of our environment.
When investing in an agtech startup, which green flags do you look for? Are you open to backing founders who don’t have experience in the industry?
We like to see founders who have thought carefully about how to drive adoption while operating within the context of a global food market with many local niches. Where to start versus where to scale up, when to accelerate and who to partner with are critical and often tough decisions for an agtech entrepreneur.
When we started our first agtech fund, there were no reports on the size of the global market. The first one suggested that the global market was $360 million. At the time, we had raised $70 million. On paper, we had a 20% global market share, operating from our first office in Amsterdam and limited deal flow compared to today.
From those early days and since, we have often backed entrepreneurs from other sectors entering our industry. One of the big advantages of investing in the “slow to bloom” agriculture sector is that we can learn from the playbook, expertise and capital sources that drove a tech transformation in other sectors. As a specialist food and agriculture fund, we see it as our role to help make this connection.
Which areas of agtech have received the most attention from early-stage founders in recent years? In which areas would you like to see more work done or investments?
There has been a boom in investment in alternative proteins and indoor farming. Considering the capital intensity of both of these endeavors, we anticipate this trend to ease, at least while the global financial markets cool.
We would like to see more attention and capital going to ag biotech opportunities and to the overlap between fintech and agtech, where new ideas and technologies can be brought fully financed to the fields of our farmers.
What are you doing to fund underrepresented founders in agtech?
We are strong believers in backing female founders. Of the five companies we have incubated, two have female CEOs, and we generally promote diversity across our portfolio.
Helping emerging market founders and farmers is more challenging for us considering our investment mandate, but we work very closely with the Dutch development bank, FMO, who are doing a brilliant job of supporting entrepreneurs in emerging markets.
Before the invasion, Russia and Ukraine accounted for about 28% of wheat and 15% of corn exports globally. How has the Russian invasion of Ukraine affected agtech VC deal-making given its impact on the global supply chain and the world’s grain supply?
The terrible events in Ukraine and their subsequent impact on our food system and food prices is a disaster. I only hope that in the face of these challenges, some of the entrepreneurs we are backing will provide solutions that bring more affordable, safe and sustainable food to the table.
The unfortunate events are certainly forcing the key players in our food system to rethink their business model, right from sourcing and processing to engagement with customers. I hope and believe that some good will come from this rethink.
Bayer bought Monsanto for $63 billion in 2018, and a year earlier, ChemChina acquired Syngenta for $43 billion. Today, Bayer’s market cap is less than that deal’s value, and China’s ambassador to Switzerland has called the Syngenta acquisition a bad deal for Beijing. Have the outcomes of these deals affected investors’ hopes for blowout late-stage exits?
Compared to other more mature venture areas, it is early days for exits in agtech. More global deals will follow, but more importantly for tech entrepreneurs in our sector, the first cohort of unicorns and exits have emerged.
Now more than ever, the incumbents realize the need to change and the threat/opportunity that earlier-stage agtech companies might present. We have witnessed this both within our portfolio (four exits last year, large corporate interest only increasing so far in 2022), and from the conversations we are having with key players as they try to puzzle together the impact of the billions of venture dollars that recently entered our sector.
The combination of incumbents traditionally underinvesting in technology, empty new product development pipelines and lots of cash on their balance sheets leads me to conclude that you can expect more M&A activity in 2022/23.
How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?
Ting-Ting Liu, investor, and Ashutosh Sharma, India head, Prosus Ventures
Agtech VC deal value rocketed from $6.5 billion in 2020 to $11.4 billion in 2021. Will this sort of growth continue?
Sharma: The promise of tech alleviating issues related to the sector has led to a boom in agtech funding, including areas where agriculture has historically been unorganized, fragmented and inefficient.
India, in particular, has seen record agtech funding in recent years, as its agriculture sector is ripe for disruption. Given the fragmented land holdings, the only way disruption can scale is through the use of technology. There has therefore been an agtech evolution, given shifts in farmer access, adoption and understanding of technology.
Globally, there are currently two opposing forces at work that will decide whether growth will continue or not. On one side, geopolitical uncertainty may lead to a slowdown in agtech investments in the short term. On the other hand, higher food inflation and disruption in global supply chains has led to the realization that self-sufficiency in agriculture is very important. This urgency may lead to even more investments. We will have to see how these forces play out.
Looking ahead, we believe the following will play out in investing trends:
- Multiple companies in this space have built input and output marketplaces and have successfully scaled rapidly. We expect these companies will see more follow-on funding, including a few very large rounds.
- We believe there is much more opportunity for technology and innovation in this sector. The areas we’ll continue to see investment growth go toward include quality and traceability of produce, AI applications to better understand crop needs, and continued focus and alleviation of supply chains.
- Farmers’ access to credit in the form of a product will also see traction. This opportunity may be captured by a new crop of companies or by an existing one.
Agriculture is responsible for about a quarter of global GhG emissions. How has the climate crisis changed how you invest?
Sharma: The lowest hanging fruit in agtech is improving supply chain efficiencies. This not only reduces the use of crude oil/energy in the movement of produce but also reduces overall waste.
Moving to the next level of challenges, seasonal variability of product, for example, will continue to be impacted by climate change, meaning it is increasingly important to equip farmers with the tools to better understand what their crops need, in turn improving yield supply and quality.
This precision focus on agriculture has the opportunity to mitigate indiscriminate use of water, pesticides and fertilizers. Several of our investments in this space are already building these efficiencies for farmers.
Ting-Ting: Over the last few years, we have seen skyrocketing interest in sustainability from consumers and food brands, and awareness over the negative impact of agriculture continues to grow.
People are not only paying more attention to agricultural-related emissions, but also how much land and water is required to support the world’s food supply and the amount of runoff being generated. Because consumers (and therefore brands) are demanding better practices, we are seeing significantly more global pressure to shift agricultural practices to be more regenerative and less resource intensive.
This is creating strong tailwinds for players developing step-change innovation that can fundamentally reduce the environmental impact of agriculture. We have seen a lot more funding go toward things like biologicals, precision farming, indoor farming, cellular agriculture, food waste reduction methods, livestock methane reduction solutions, etc.
We have widened our investment area to explore more of these deep tech opportunities. For example, one of our more recent portfolio companies, Biome Makers, is using genetics to diagnose soil microbiomes.
Which emerging technologies, such as cellular agriculture and AI-powered robots, have the greatest potential to impact key issues like food security and emissions in the next decade?
Sharma: The use of technology will depend on the context of the country that it is deployed in. In emerging markets, we anticipate the majority of tech proliferation to farmers will be over smartphones. The land holdings are not large enough to support the use of AI-powered robots here.
That said, artificial intelligence and digital technologies can resolve multiple challenges that farmers are facing. AI technologies are needed to build data-centric models that can better predict weather events, pest attacks, harvests and crop yields with more accuracy. AI can also provide affordable, portable and accurate solutions for soil moisture, nutrition, crop health, quality assessment and so on.
Bridging the science and tech — understanding what individual crops need with automated recommendations and “early warning solutions” — can optimize yield and soil health.
Ting-Ting: Anything that can shift people away from eating meat is extremely interesting, given livestock’s disproportionate impact on emissions, water consumption and land use. While we have seen more willingness to try more plant-based diets, the reality is, it is very difficult for people to fully give up real meat, and thus global meat consumption continues to grow.
From this perspective, cell agriculture is indeed interesting, and the science has progressed to a point where growing meat in a lab at (very) small quantities is a possibility. We are seeing companies get to edible products much faster than they did before.
However, the challenge here remains scaling and bringing down costs, which is a function of increasing the densities that cells can grow at in the bioreactor and reducing or even removing expensive components such as growth factors. Structure is also still an ongoing challenge — how do you get cells to grow in a way that replicates whole cuts versus a clump of cells?
Though innovation has been accelerating in the space and there are a number of players making headway, I’d say we are at least a few years away from seeing any sort of product being produced at commercial scale. Even then, it is still a question of price-competitiveness, consumer acceptance and longer-term health impacts. In the near term, I think it is more likely we will see “hybrid” products hit the market or meat made from a mix of real cells and plant-based ingredients, which will be cheaper to make and easier to scale.
We’re also interested in the concept of precision fermentation, which is the process of using microorganisms such as bacteria and yeasts to make real animal proteins. This is a slightly more mature technology and is already used to produce things like insulin for pharma.
Anything that reduces the use of fertilizer is also interesting, given synthetic fertilizer is a significant contributor to global emissions. We have seen a lot of interesting approaches: biologicals that can stimulate plant growth and replace chemical fertilizer; better pollination techniques to boost yields; and greener ways of producing fertilizer. Precision agriculture also has the potential to help farmers optimize how much product they use to reduce unnecessary application, and in turn, emissions.
Lastly, any technologies that can help reduce food waste and improve supply chain efficiency will also have a significant impact on reducing emissions. We are seeing companies develop novel coatings, packaging technology and ingredients that can help extend shelf life and prevent spoilage. This is a particularly interesting segment, because limiting losses in the supply chain is also a clear opportunity to improve the bottom line, so there has been a lot of interest from various players along the supply chain to adopt technology that works.
Which areas of agtech have received the most attention from early-stage founders in recent years? In which areas would you like to see more work done or investments?
Sharma: We have seen the most capital being deployed within input- and output-side marketplaces. The input-side marketplaces connect farmers with input manufacturers directly. These marketplaces solve for transparent pricing, broad SKU availability and the availability of genuine products. The output-side marketplaces connect the farmers directly with the industry that consumes produce. They solve for fair prices for the farmers and timely availability for the industry.
We anticipate more investments in credit for farmers, use of AI in precision farming, providing education for the farmers on new crops, techniques, etc., and in the enablement of community farming.
When investing in an agtech startup, which green flags do you look for? Are you open to backing founders who don’t have experience in the industry?
Sharma: Due diligence is very different in this space. As investors, we are not users (unlike say, ride hailing) of these services. It is therefore very important for us to interact in person with ecosystem participants. One therefore has to travel to remote areas and talk directly with farmers. The pandemic made this even more difficult, because we could not do this in person. We used video conferencing to get the company teams, farmers, etc. together to do the due diligence.
The level of positive emotions farmers show toward a service is the biggest green flag for us. If we get the sense that this product or service has been life-changing for a farmer, we see it as a positive, obviously. Farmers are very blunt with their feedback. Once we see these signs, we then look at the business model, monetization potential, competitive landscape and societal impact to build a full investment case.
Ting-Ting: From the lens of deep tech and climate tech specifically, agriculture is a tough space to disrupt. This is heightened in markets like the U.S., where there are many big incumbents, and the industry is highly relationship-driven, making it difficult for outsiders to break in.
Farmers can be hesitant to change practices and are mindful about ROI, so disruptors often need to go through years of pilots and field trials to test the impact on their crops, gradually signing on more and more acres each season. This means it can take years before disruptors capture 100% of a farm. However, the flip side to this is that once new practices are adopted, they are often sticky.
When evaluating potential disruptors, we pay close attention to metrics like retention and captured share of the farm. Essentially, are customers coming back year after year? If so, are they expanding to more acres? This is usually a good indicator that the product is delivering value with positive ROI.
What are you doing to fund underrepresented founders in agtech?
Sharma: We are a global investor. Our investments are focused across India, Southeast Asia, Latin America, EMEA and the U.S. We have always funded a diverse set of founders across geographies and sectors.
How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?
Ting-Ting: I personally prefer to see the deck beforehand so I have some context and can get to the nitty gritty questions more quickly on our call. It’s also important to me to see that the founders know their market and customers extremely well and have developed expertise in their specific field.
This is especially important in spaces like agtech, which are inherently complex and have nuanced industry dynamics — it’s important for us to see that founders can navigate these dynamics when going to market.
Camila Petignat, partner, The Yield Lab
Agtech VC deal value rocketed from $6.5 billion in 2020 to $11.4 billion in 2021. Will this sort of growth continue?
We expect that after such growth in recent years and against the backdrop of more cautious asset allocation, agtech deal values may moderate in 2022/2023.
However, we see positive growth ahead as the industry continues to mature and expand, attracting increasing capital flows from a broader investor base. When this industry reaches convergence with the private equity world, we may see a new level of deal values.
Agriculture is responsible for about a quarter of global GhG emissions. How has the climate crisis changed how you invest?
Climate challenges are not new to anybody operating in the broader food and agriculture space, so our approach is to invest in solutions that can help mitigate and adapt to climate change.
Some of the themes we look at include soil and water conservation, improved use of crop inputs, the shift from chemical to biological crop protection solutions, and reduction of food waste. We could argue that the increased awareness of carbon markets in recent years has triggered new opportunities at the intersection of agtech and fintech, a space that we are interested in.
Another interesting impact of the climate crisis becoming evidently urgent is the appearance of new business models that now align incentives between farmers and the rest of the supply chain. This drives digitalization and tech adoption in a sector that has traditionally been slow to permeate.
Which emerging technologies, such as cellular agriculture and AI-powered robots, have the greatest potential to impact key issues like food security and emissions in the next decade?
In many ways, the solutions that can be most effective in improving food security and reducing emissions are not necessarily high tech. The productivity gap in many markets, especially in the emerging markets of Latin America, Africa and Asia, calls for the introduction and adoption of basic technology, right from improved seeds and basic mechanization and irrigation to more efficient physical supply chains.
On the high-end range of emerging technologies, we believe a combination of solutions can have the most impact in the long term. Crop breeding, including gene-editing and improved biological solutions have immense potential to deliver impact at scale.
When investing in an agtech startup, which green flags do you look for? Are you open to backing founders who don’t have experience in the industry?
We focus on the team and the talent. This has consistently been the main driver of success or failure, in our experience.
Other than that, the agtech world combines multiple technologies and business models applied to different agriculture areas, and we recognize that the rate of adoption is different depending on the problem and solution you are looking at. So traction should always be an important green flag.
Particularly for our third fund, we assess the feasibility of adding a disruptive business model layer — to better align incentives through the value chain — that could monetize agtech/food tech insights from a climate and sustainability perspective. This is something that we work on with the company, as we have seen how impactful it can be.
We are open to backing founders new to the industry. In our experience, though, most founders have a considerable amount of experience, and this has proven to be positive. A team’s diverse background can also bring strength to a startup.
Which areas of agtech have received the most attention from early-stage founders in recent years? In which areas would you like to see more work done or investments?
In Latin America, around 50% of the agtech/food tech startups are digital. Another 30% are more focused on novel production systems, biological aspects of crops and livestock, mechanization, as well as supply chain solutions and innovations around biomass and bioenergies. The remaining 20% is more focused on food tech, including innovative food and beverages, and new sales channels.
In recent years, we have seen growth particularly in fintech for agriculture, which is increasingly connected to the carbon market, as well as in solutions for enabling, measuring and verifying carbon sequestration. We have also seen more activity in new sales channels, especially around different farm-to-table business models.
We are glad to see all the innovation spreading along the food and agriculture value chain, because that brings opportunities to diversify our portfolio.
What are you doing to fund underrepresented founders in agtech?
We work very actively in many local agtech ecosystems across Latin America and the Caribbean, which lets us connect with founders from many different backgrounds. We see particular underrepresentation both in terms of women founders and founders from smaller nations in the region, specially in Central America and the Caribbean. That is a focus for us and we are devoting resources to stimulate innovation from these founders.
Before the invasion, Russia and Ukraine accounted for about 28% of wheat and 15% of corn exports globally. How has the Russian invasion of Ukraine affected agtech VC deal-making given its impact on the global supply chain and the world’s grain supply?
COVID-19 and the war in Ukraine have finally put the food and agriculture sector in the spotlight of global finance. Both cases have highlighted the relevance of food security, and investors recognize that technology has a growing role to play in improving the way we produce, process, transport and consume food around the world.
In our view, the net effect is positive in terms of investment flows. However, one has to recognize that there are also macro headwinds — high inflation, increasing interest rates and a recessionary economic environment — that have affected the broader VC space as well as other asset classes.
Bayer bought Monsanto for $63 billion in 2018, and a year earlier, ChemChina acquired Syngenta for $43 billion. Today, Bayer’s market cap is less than that deal’s value, and China’s ambassador to Switzerland has called the Syngenta acquisition a bad deal for Beijing. Have the outcomes of these deals affected investors’ hopes for blowout late-stage exits?
The wave of failing SPACs probably had a worse impact on investors’ perception, quite likely because it is a much more recent development and was more connected to tech companies.
In any case, investors increasingly tend to understand that successful agtech investments are not about reaching unicorn status but about building businesses that create new markets, operating profitably at scale, and consolidating leading positions in their local or regional markets.
How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?
Founders can reach out to us in multiple ways. We invite them to connect with us by email, through our website and the different social and business networks. We have an open application, and we are extremely reachable.
Most often, founders either know us through the extensive work done across different local ecosystems in LatAm or know somebody in our network via warm introductions.