Food Tech & AgTech for the Win!

How to tackle challenges in climate change and food security

As a strong believer in tech for good, I truly believe technology will help solve specific challenges we face today. A major one among them is climate change. At Earlybird, we started a ClimateTech practice, actively looking for startups tackling challenges in that space. You can read more about that here. Today I will focus on a notable sub-sector, Agriculture & Food Tech.

The food and agriculture industry represents one of the biggest industries on our planet, with a loyal customer base of 7 billion people. In fact, the World Bank estimates that food and agriculture comprise c. 10% of the global GDP, meaning that food and agriculture would be valued at c. $8 trillion.

That said, the industry faces numerous challenges and problems that if overcome, we see ways that both people and planet win:

Food production is not sustainable: 50% is at risk due to climate change, 20% of agricultural land is classified as degraded even though its maintenance consumes 30% of the energy we create, and accounts for 22% of the total greenhouse emissions.

Moreover, food is poorly distributed: Each year, we waste a third of the food we produce, often even before it reaches our tables. Furthermore, 26% of the world’s population is suffering from obesity or excessive weight, while 900m people are left hungry. On top of that, due to our growing population, experts expect a 70% increase in food demand by 2050.

Additionally, consumer demands have changed in recent years: An increased focus by consumers on sustainability, health and freshness is forcing the food industry to innovate. And this was all before a global pandemic and health crisis hit that further heightened vulnerabilities in the agriculture and food industry, exposing the need for a more sustainable and efficient supply chain.

In this post, you’ll get an overview of VC activity in the sector, key trends in AgTech and Food Tech, exemplary companies in this space, and innovative technologies that are having an impact.

VC ACTIVITY IN EUROPEAN AGTECH & FOOD TECH

In 2020, the European AgTech & Food Tech sector experienced a slight drop in VC funding compared to 2019. In total, European AgTech & Food Tech ventures raised €3.3bn in 2020. Interestingly (& unlike global trends), the drop was due to a decrease in late-stage deals while early-stage deals experienced an increase. Seed and Series A deals comprised 86% of the round counts. Globally, however, 2020 was a record year for the AgTech and Food Tech industry in terms of VC investment activity. Startups raised more than $30bn in 2020, a 35% increase compared to 2019 (Agfunder, 2021).

The overall growth of venture funding in the AgTech & Food Tech sector is a direct result of two primary factors: population growth and climate change. The global population is expected to swell to almost 10bn people by 2050, driving demand for food. At the same time, greenhouse gases are warming climates and creating increasingly frequent extreme weather events that threaten crop yields.

On a global scale, the AgTech and Food Tech sector is no longer in its infancy.

INNOVATION IN AGTECH & FOOD TECH — SOLUTIONS

Some innovators believe that the above-mentioned challenges are best solved through bottom-up consumer innovation, replacing current products and forcing incumbents to change. AgTech and Food Tech ventures explore how technology can be leveraged to improve efficiency and sustainability in producing, transforming, delivering and enjoying food.

At Earlybird, we categorize AgTech & Food Tech along the value chain “from farm to fork” in eight categories.

The first generation of AgTech and Food Tech innovation was mostly about convenience and downstream (distribution & consumption) areas such as food delivery (think Delivery Hero, etc.). The next generation of AgTech and Food Tech entrepreneurs is expected to focus more on up- and midstream (primary production and transformation) technologies.

So I’ll also focus on these categories and key trends that we see today:

AgTech

AgTech innovations are protecting crops and maximizing outputs — enabling structural changes in the agriculture system that could achieve important sustainability goals of lowering greenhouse gases, reducing water usage, and ending deforestation.

Automated machinery: Widespread agriculture, labor shortages, a growing population, and increasing requirements for high productivity from the existing farm areas are factors fueling the growth of automated machinery on farms. However, automation is still pretty early stage and experts believe that the deployment of full autonomous tractors, for example, is likely years if not decades away.

• Exemplary companies: Muddy Machines, Small Robot Company, Xihelm

Agricultural marketplaces are online platforms for buying, selling, leasing and trading agricultural equipment, inputs and outputs. Today, the buying and selling process is rather inefficient, analogue, and mostly done via phone, fax and email. Additionally, the lack of price transparency leads to farmers often overpaying.

• Exemplary companies: Indigo, FBN, Agrando, Airfarm, Agrora, Agriconomie

Novel farming systems include companies in the fields of indoor farms, aquaculture and insect & algae production. The vertical farming segment has seen a lot of hype, fueled by startups such as Infarm. Vertical farming promises significant sustainability gains on water consumption, arable land requirements, and fossil fuel emissions. However, it is still more expensive than conventional farming (estimates are 3–5x), with limited arable land and crop variety.

• Exemplary companies: Ynsect, Infarm, iFarm, SmartBreed, Farminsect

Farm management software, sensing & IoT are used to boost the production, development and growth of crops. The need for real-time data is increasing and technological trends include agricultural data capturing devices (satellite, sensors, drones etc.), remote sensing, big data analytics, and decision support software.

• Exemplary companies: Stenon, ConstellR, Hone

One to watch: STENON

As an example in the AgTech space, I’ll highlight Stenon: They offer the world’s first laboratory independent, real-time soil analysis solution for agriculture. With their IoT solution consisting of intelligent sensor fusion, AI and data analyses, Stenon aims to define a new global standard for soil analysis and disrupt manual efforts with end-to-end automation. Soil health and water management are critical components for growing healthy crops and maximizing yields. Automating manual tasks, capturing soil health data and providing meaningful recommendations is the opportunity that Stenon addresses. This helps reduce the use of fertilizers while increasing yields.

Innovative food

Innovative food is probably among the most hyped categories, especially after Beyond Meat’s IPO. Overall, plant-based/animal-free food is among the industry mega trends of the decade due to climate change threats as well as health and ethical considerations.

There is often the discussion on whether plant-based or cultured meat (or dairy etc for that matter) makes more sense. On the one hand, plant-based products are currently commercially available and affordable, while cultured meat is not. The biggest challenge here remains cost. On the other hand, plant-based products often include various additive ingredients and are highly processed, which in turn decreases the overall health factor. Cultured alternatives basically produce the real thing without harming animals or the environment to the extent we do today.

• Exemplary companies: Mushlabs, Formo, Stockeld Dreamery, planted

One to watch: MUSHLABS

How can mushrooms provide a potential new path? Mushlabs was founded in Berlin in 2018 within Atlantic Food Labs, a company builder and early stage VC focused on AgTech and Food Tech. Mushlabs develops a meat replacement out of mycelia, the ‘roots’ of mushrooms. Mushrooms lay kind of in the middle between plants & meat and offer significant benefits over the usual ingredients in meat replacements such as soy. They grow way faster (4–5 days), and their natural ‘umami’ taste as well as texture minimize the need for additive ingredients in the end product.

Midstream technologies: Food processing, safety & traceability

Midstream technologies help to drive efficiency and cut waste in the food value chain. Supply chain visibility remains one of the top industry trends as consumer awareness regarding food fraud and requirements for food traceability are increasing. Reducing food waste while improving produce quality during transportation is another massive issue – ripe for innovation as pre-consumer food waste comprises 40% of all food wasted. Reducing food waste could additionally reduce the overall required arable land. Promising emerging technologies in this segment include novel natural preservatives, edible coatings, and active packaging technologies.

Success story: APEEL SCIENCES

Apeel Sciences develops a food coating to extend the shelf life of fresh produce. Apeel uses materials that exist in the peels, seeds, and pulp of all fruits and vegetables to create a protective ‘extra peel’ that seals moisture in and keeps oxygen out. It’s an added layer of tasteless, odorless, plant-based protection on the surface of fruits and vegetables. Andreessen Horowitz invested in the company, among celebrities like Oprah Winfrey and Katy Perry. So far, the company has collected >$390m in total funding.

OUTLOOK & FINAL THOUGHTS

At Earlybird, we believe that these opportunities are just the beginning. As everyone must eat (multiple times a day) — there is still a huge opportunity for investment in AgTech and Food Tech companies. Those aiming to improve the health of our food ecosystem through sustainable agriculture, novel ingredients, enhanced food distribution, food preservation and food availability will lead the way. We believe AgTech and Food Tech startups can not only positively impact our planet and humanity but also generate significant financial returns.

Thanks for reading! Feel free to share or clap so more readers discover this.

And if you are working on smart and scalable solutions in Food Tech and AgTech, reach out to me on Twitter and keep up with Earlybird, there too!