State of the European Foodtech and Agtech Investment Landscape — Part I

Me and my co-founder Erik Byrenius recently launched Trellis Road, a new initiative investing in and supporting pre-seed and seed stage high-impact foodtech startups. Me and Erik have spent the last few months deep-diving into the global, but especially European, high-impact foodtech and agtech investment landscape and in a series of blog posts we’ll share some highlights of what we’ve learned. In this first part we’ll focus on key takeaways from publicly available data and reports about the investment landscape.

There’s a ton of great information available out there, but in this post we’ve focused on data from these three reports:

1. Atomico’s report The State of European Tech 2019 (hereafter referred to as “the Atomico report”).
2. Five Seasons’ The State of European FoodTech 2019 (hereafter referred to as “the Five Seasons report).
3. AgFunder’s 2020 European Agri-FoodTech Investment Report (hereafter referred to as “the Agfunder Report”).

A few things are worth noting before we go into the findings:

• These three different reports are based on multiple different data sources, with somewhat different sector definitions, categorizations and time periods. The Atomico report as well as the Five Seasons report were published during fall 2019 and hence include incomplete numbers as well as full-year estimates of 2019 numbers, whereas AgFunder looks at all of 2019. This post tries to focus on the trends and overall patterns so don’t focus too much on the absolute figures.
• In all reports covering the VC landscape there are often a handful of outliers skewing the underlying dataset, and this is perhaps especially true within foodtech. Over the last few years we’ve seen deals within food delivery have a massive impact on the overall numbers, and 2019 was no exception with Deliveroo’s Series G round of $575M standing for a whopping 25% of the total amount invested in the European foodtech sector.
• This summary focuses on the investment landscape in Europe pre-COVID-19, simply because that’s the data available at this point in time. It is still largely unknown how the investment landscape is being affected, making it more difficult than ever to make predictions about the future based on historical trends. This is something we’ll come back to in later posts.

TL;DR

• Food is an important European investment area. It’s the 6th largest industry in terms of capital invested and accounts for 5% of the total amount of capital invested in Europe in 2019. With a global perspective, Europe accounts for 17% of the total foodtech investments and is the home to 20% of the foodtech unicorns.
• Downstream companies still captures the majority of the invested capital, with 50% going to the three downstream categories Restaurant Marketplaces, eGrocers and Cloud Retail Infrastructure. However, focusing on early stage deals (Seed + Series A), upstream companies now captures 60% of the capital and 55% of the rounds with the most notable categories being Ag Biotechnology, Novel Farming Systems and Innovative Foods.
• Geographically, UK, France & Germany dominates the investment landscape with two thirds of invested capital and half of all deals looking at the time period 2017-2019.
• However, looking at the share of capital invested in food versus share of capital invested across all sectors, the countries that sticks out with a high relative proportion of the capital invested in food are Spain, Finland, Netherlands and Norway.
• There’s a movement towards high-impact investments in the general European investor and startup landscape, with 12% of all capital going to what Atomico defines as purpose-driven startups in 2019. It’s reasonable to assume that foodtech is no exception to this trend, with purpose-driven funds like Atlantic Food Labs, Astanor Ventures, Purple Orange and many others as well as startups like Infarm and Ÿnsect raising rounds >$100M.

Food Is an Important European Investment Area

According to the Atomico report, food was Europe’s 6th largest industry in terms of capital invested 2019 with a total investment volume of $2.3B, roughly on par with notable areas like transportation, marketing and travel.

Out of all capital invested in Europe, 5% went to food in 2019, a number which is consistent also if we look at the data for the cumulative amount of invested capital between 2015 and 2019.

According to AgFunder, the invested capital in foodtech in Europe accounts for 17% of the global amount of invested capital, and according to FiveSeasons European foodtech unicorns accounts for 20% of the global number of foodtech unicorns.

Atomico also notes that food was one of three sectors demonstrating the highest increase in invested capital in 2019 compared to 2018, alongside security and energy.

2019 was a record year in with a 70% increase in capital invested in European food startups compared to the average volume for 2015–2018. Having said that, it’s important to remember that a big portion of the 2019 increase showed in the graph below was due to the Deliveroo round of $575M, that alongside another delivery company investment round, Spanish Glovo’s $186M Series D round, accounted for over 30% of the total amount of capital invested. Looking at the per-year breakdown between 2015 and 2019 we can see that the volume of invested capital fluctuates pretty dramatically between the years, mainly driven by these larger delivery company rounds, making it dangerous to draw the conclusion that there is an increase in capital benefiting the overall startup ecosystem.

Downstream Still Captures Majority of the Invested Capital, but Early-Stage Shift to Upstream Deals

In 2019, just as in previous years, the majority of the capital in Europe was invested in so called downstream companies, with 50% of the total invested capital going into the three downstream categories Restaurant Marketplaces, eGrocers and Cloud Retail Infrastructure.

Data from the AgFunder report.

Whilst downstream accounts for close to 60% of the invested capital, it’s representing 44% of the rounds — indicating larger and more late stage deals.

However, looking at the early investment stages it’s interesting to note that of all capital invested in downstream companies only 12% went into Seed or Series A rounds, whilst that figure was significantly higher, 33%, for upstream companies.

In total, 60% of the capital invested in Seed and Series A rounds and 55% of number of rounds went into upstream companies during 2019.

Similarly, Five Seasons is looking at the three value chain categories Primary Production, Transformation and Distribution & Consumption. In the figure below we can see that the earlier categories Primary Production and Transformation are starting at much lower investment volumes than Distribution & Consumption, but on the other hand has seen significantly more aggressive growth in the last five years.

UK, France & Germany Dominates the European Investment Landscape with Two Thirds of Invested Capital and Half of All Deals

Looking at the distribution of both capital and number of deals made it is clear that there are three dominating countries within foodtech investments; UK, France & Germany; accounting for 67% of capital and 47% of the deals between 2017 and 2019 (with even higher figures for 2013 to 2016).

Countries that showed an uptick, albeit marginal, in both amount of invested capital and number of deals in 2017–2019 compared to 2013–2016 were Netherlands, Switzerland, Finland, Denmark and Norway.

Data from the Five Seasons’ report

However, putting the investment levels in foodtech in proportion to overall distribution of capital invested in Europe across all sectors, we can see that the UK and Germany is attracting just as high shares within foodtech as they are across all sectors. Countries that are receiving a higher share of invested capital in food versus all sectors are France, Spain, Finland, Netherlands, Norway, and Denmark, with Spain, Finland, Netherlands and Norway being the ones with the heaviest allocation of food investments in relation to overall investments.

There’s a Movement Towards High-Impact Investments in the European Investor Landscape

One of the focus areas of the Atomico report in 2019 was Purpose, where they amongst other interesting findings noted that 80% of VCs say they assess the potential long-term societal and/or environmental impact of an investment.

In 2019, Europe saw a massve increase in invested capital in what Atomico defines as purpose-driven European tech companies. Investments in such companies accounted for 12% of the total capital invested in 2019, compared to around 5% in the previous years.

In absolute terms, the amount of capital invested in purpose-driven tech companies amounted to $4.4B, more than twice as much as any of the previous four years.

It is reasonable to assume that food is no exception to this trend, and there are already multiple impact-driven investors in the European foodtech landscape such as ourselves at Trellis Road as well as Atlantic Food Labs, Astanor Ventures, Purple Orange and many others. When Atomico listed the 2019 Top10 European deals in purpose-companies across all industries two foodtech companies, Infarm and Ÿnsect, made the cut, alongside five companies focused on healthcare and three focused on energy solutions.

In the Atomico report, Ÿnsect’s CEO Antoine Hubert commented:

“Ÿnsect is a mission-driven company from Day 1. It is right in our DNA, as we came from an activist non-profit association. We see more and more projects and entrepreneurs looking to have an impact, to have a purpose, with great ideas showing that profits and impacts can be compatible. Amazing companies like Olio, NorthVolt, OpenClassRooms or Doctolib demonstrate that Impact Unicorns won’t be a myth! Europe could become the best place for ‘tech for good’ companies, which will have tremendous positive economical and social impacts in Europe and beyond, as ‘tech for good’ generally addresses humankind’s most important needs, which means the largest markets.”

- Antoine Hubert, CEO Ÿnsect

Atomico also looked at regional differences in share of purpose-driven companies versus total share of companies, a few locations stands out. On a country level, Sweden has the highest difference in relative share of purpose-driven European tech companies versus all companies, followed by it’s Nordic neighbour Finland. Sweden has recently seen new impact-driven VC funds such as Norrsken’s €100M impact-fund as well as recently announced Pale Blue Dot’s climate-fund with a first close of just over €50M. In the food sector there are purpose-driven players like Kale United focusing on plant-based companies and Martas Explorers, focused on environmentally, financially and socially sustainable companies in the food sector.

Focusing on the bottom part of the ranking we find Spain and Germany, two countries both attracting high shares of the investments in foodtech.

Looking at an even more granular regional level, the cities with the highest % of purpose-driven tech companies are London, Stockholm, Paris, Amsterdam and Berlin. However, it’s interesting to note that the large cities London, Paris and Berlin all have a significantly lower share of purpose-driven tech companies compared to their share of all European tech companies, whereas smaller cities like Stockholm, Espoo and Delft sticks out with a much higher share of purpose-driven tech companies than share of all tech companies. Amsterdam, the city with the 4th largest share of purpose-driven tech companies are roughly on par with their overall share of tech companies.

For those of us interested in the combination of impact and foodtech it might also be worth noting that Stockholm and Amsterdam are also home to two of the world’s three highest ranked agricultural universities. This in combination with high share of purpose-driven startups indicates that they are good places to keep an eye on for investors focused on early-stage high-impact foodtech startups, especially in the upstream categories.

Will We See More Foodtech Startups Focused on Meaningful Impact and Can Europe Become a Great Home for Those Startups?

We obviously believe so, and these and many other questions about the global and especially European high-impact foodtech lanscape will be covered in future posts as well as in our newsletter that you can sign up for here.

With COVID-19 drawing attention to the vulnerability of the existing food system; climate and environmental effects becoming increasingly evident in society; consumers being more mindful than ever about what they put on their plate — we’re convinced that the rise of high-impact foodtech and agtech companies is just getting started. Stay tuned.