Climate change and geopolitical instability are wreaking havoc on agriculture. To gauge how VCs are responding to these issues, we spoke with 7 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 multi-trillion-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 ProWellTech. 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, principal 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 run-off 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 ProWellTech they’ve noticed a slow-down 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 ProWellTech. “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 and Ashutosh Sharma, investor and India head (respectively), Prosus Ventures
- Camila Petignat, partner, The Yield Lab
Brett Brohl, 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 under-represented founders in agtech?
We actively seek out investors, forums and networks that support under-represented 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 dealmaking 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, G2VP
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.