Low-Hanging Fruit Gone, Ag & Food Tech Investors Pay More for Deals
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$300 million allocated to ag research grants. Funding for ag and food startups must come from other sources. But some of the NIH-sponsored research in human health can be repurposed into agricultural research applications, Dombrosky said.
Large agrifood companies invested in just 2 percent of deals, AgFunder says. But the universe of ag and food tech investors is becoming more diverse. Citing data from VenturePulse, AgFunder says that corporate involvement in global venture deals hit an all-time high, accounting for 15 percent of investment dollars and 20 percent of deal activity. AgFunder counts 24 corporate agrifood venture funds, which are funds that are either managed internally or that have the company as the sole investor. In some cases, these funds invest in venture capital funds, which gives the corporation insight into the market and access to potential deals.
Crop technologies accounted for most of the 30 AgBiotech deals, which totaled $262 million in investment. Investments in Innovative Food, including startups developing replacements for dairy and meat products, increased 60 percent to $206 million in 18 deals. The biggest was the $50 million Series B round raised by Soylent, a startup that makes drinks intended to replace meals. But AgFunder notes that cultured meat startups did not attract similar investor interest.
“It remains a small part of the agrifood tech ecosystem, despite the media attention, with some question marks around the cost of bringing food products to market,” AgFunder says.
The Novel Farming Systems category saw a 560 percent year-over-year increase to $198 million due to some large investments, including several indoor farming deals. New Jersey-based AeroFarms raised $34.3 million in a Series D round; Bowery, based in New York, raised $20 million in a Series A round; and Freight Farms of Boston raised $7.3 million.
AgFunder had investment totals for some states. California kept its dominance in U.S. ag and food tech investments. The $1.2 billion invested in the Golden State in the first six months of 2017 represents 39 percent of U.S. dealflow and 63 percent of dollars invested. New York and New Jersey, analyzed as a single market in the report, combined for a distant second place, accounting for $173 million invested. Texas was third with $120 million, followed by Massachusetts with $109 million. North Carolina, Colorado, and Michigan accounted for $39 million, $35 million, and $22 million in investments respectively.
AgFunder expects investments in the ag and food sector to continue an upswing. Some large deals were announced in mid-summer, such as the $200 million raised by indoor farming startup Plenty. Based on third quarter activity, AgFunder projects that the sector could reach $8 billion by the end of the year, which would be close to the record set in 2015.