30% Decline in AgTech Investments Doesn’t Tell Whole Story
Agtech investments experienced a 30% decline in 2016 compared to the year prior, according to AgFunder’s 2016 AgTech Investing Report. The report provides a primer on current market activity and offers insights into the market’s future direction.
Despite the overall decline, the findings were not all doom and gloom. Deal flow increased year-over-year last year and some categories, such as Ag Biotechnology and Farm Management Software, showed exciting potential. Greater resources and infrastructure aimed at building capacity for startups also began to bear fruit.
The decline in total dollar investments followed the overall downward trajectory of the global venture capital market. A few poorly performing IPOs and the uncertainty that came with an extraordinary presidential election were cited as major factors behind the downturn. The sector has also lacked major exits for agtech startups, which likely depressed investments in later stage funding rounds. In fact, AgFunder in partnership with Boston Consulting Group released a report last year lamenting the void of M&A activity from large agribusinesses.
On the bright side, overall deal flow increased by 10% in 2016; meaning more agtech startups received funding than the year prior. This trend was especially strong at the seed stage, where investments rose 16% and represented 57% of total deals. This trend separated agtech from the global venture capital market, which experienced its heaviest declines at the seed level. A big reason agtech seed investments performed well was the emergence of sustained resources and new infrastructure in the form of startup accelerators. As more and more accelerators are spawned, early stage startups are benefiting by the increased structure and support.
Food marketplace and e-commerce startups represented the largest category in 2016, accounting for 40% of total investments. This despite the rash of recent, high profile failures in the category. Farmigo, Good Eggs, and Relay Foods are a few of the big names that scaled too fast and folded. Yet investors remain bullish, putting their faith (and dollars) into 5 startups that each secured over $100 million (Yiguo, FreshDirect, Bigbasket, Benlai Life, and Thrive Market). Rabobank estimates the entire e-commerce market to be worth $60 billion.
Ag biotechnology was the second largest category, taking home 22% of total investment. It also represented the fastest growing, increasing by 150% over 2015. Startups in this category are employing microbiomes and gene-editing technology to improve agriculture yields and prevent food waste.
In the end, when you peel back the numbers there’s much to be excited about in the agtech sector.
Originally published at www.thymefries.com on March 9, 2017.
