Feeding 9 billion people by 2050: The case for greater agtech investment
When I think about the challenges facing our society today, and similarly the opportunity that we as investors have to significantly impact the world we pass down to our children, ensuring the stability and sustainability of the food supply ranks near the top of that list.
Looking ahead, global populations are projected to double by the end of the century, requiring at least a 70 percent increase in food production, according to the Food and Agriculture Organization of the United Nations (FAO). Food is already $2.3 trillion industry today, employing 1 billion people globally. Beyond that, with the priceless nature of each and every life on this planet, the “value” of solving this problem defies calculation.
The case for investing in food innovation for the developing world is abundantly clear. According to the UN World Food Program, 795 million people worldwide don’t have enough to eat — nearly all of which live in developing countries, where 14.3 percent of the population is undernourished. Furthermore, 66 million primary school-age children across the developing world attend school hungry, a problem that reflects a $3.2 billion per year aid shortfall. Finally, calling this situation into stark relief, the poorest people in developing countries often spend 60–80 percent of their income on food, while Americans spend less than 10 percent.
But even in the West, where food security is less of a daily issue, at least today, growing populations and unpredictable environmental changes (like CA’s historic drought and the collapse of bee populations) are threatening our existing agricultural infrastructure. Finding solutions to these problems before our situation becomes truly desperate is crucial. Exacerbating this already significant problem, Americans waste about 141 trillion calories worth of food every day (worth $165B per year, or 40% of food produced). It could not be clearer that we can do more, both in terms of raising awareness and driving innovation.
Surprising Underinvestment
It’s obvious that technology will play a critical role in addressing our food crisis. So why is food, a multi-trillion global industry, so underinvested by VCs?
Consider comparable societal building block categories like energy and health. According to data from CB Insights, over the last five years, “food” investments have accounted for just 1.5 percent of all dollars invested by venture capital and angel investors and less than 2.5 percent of all deals completed. Energy and health, respectively, make up 18 percent and 11 percent of dollar investment, and 8 percent and 13 percent of dealflow. Looking back even further in time, the data looks nearly identical for the last decade. (See additional data below.)
One argument for this imbalance is that much of the innovation taking place in the food sector to date has been confined to a few agrochemical giants — an oligopoly — at prohibitive costs. The opportunity to change this fact is better than ever today for two primary reasons:
- Declining hardware and software costs have enabled wealth of new and affordable tools and data to improve food production; and
- Increasing consumer demand for healthier, safer food puts pressure on industry to create a more transparent and sustainable agricultural supply chain.
Today, there is no shortage of eye-catching innovation occurring throughout the food sector. From big data and connected devices being applied to agriculture, to innovations around natural antibiotic and pesticide alternatives, food storage and spoilage prevention solutions, and even more efficient distribution networks, the food industry has gone high-tech.
In the search for other explanations of the lack of investment directed toward food and agricultural technology, it’s worth considering the disconnect that exists between the distributors of the world’s capital and the regions most profoundly affected by today’s food crises. Put another way, most Western investors and entrepreneurs have never experienced the pain of this problem first hand. Unseemly as it may be to acknowledge, this reality impacts both awareness and motivation to focus on this category. But the potential impact of solving these problems is far too great to be impeded by a lack of perspective. We have to do better.
Investing for Impact, as well as Returns
While we’ve been quiet publicly on the subject, Upfront began investing actively in this area more than two years ago, and we have made a handful of (thus far undisclosed) investments to date in agtech, food-related consumer hardware, and wellness-oriented food and beverage businesses. Given the above industry dynamics, and the shocking lack of investor interest, the universe of food and agtech is becoming an ever more attractive investment opportunity. We are extremely excited to share more information about these existing investments in the near future and to continue voting with our dollars and our time in favor of this critical issue.
Regardless of which areas of innovation you think are most deserving of attention, it’s clear that the world needs investors in position to affect change to think deeply about where they can have impact with their time and dollars, in addition to simply generating returns. As we grapple with these very real challenges, here at Upfront we’re excited to continue looking for opportunities to invest in the solutions to today’s food problems, and those of the future. Not only does it make great businesses sense, but it’s the right thing to do.
(*Note on CB Insights Data: VCs and angel investors have invested $137.2 billion across more than 6,600 energy deals since Q2 2010. The Healthcare sector has seen 10,600 deals representing $85.9 billion invested. The Food sector has received $15.4 billion, across just 2,600 deals. The “Food” industry, as defined above, includes the industry sectors of Food/Beverage, Grocery, Restaurant, Agriculture, and Ag-tech sectors, across both Internet and Mobile. “Energy” includes the sectors: “Energy & Utilities” and “Green/Clean-tech.”)
