Unicorns in AgriTech: Today’s VC Trends
As the world population – which currently nears 7.8 billion – continues to grow, the demand for sustainable and scalable food production is at an all-time high. Plus, with the ever-prevalent challenge of looming climate change comes additional pressure on the agriculture industry to keep up. Over the last few years, it’s no surprise that many AgTech companies have been rising to the occasion and creating new technologies and systems to support farmers by optimizing agricultural processes.
Investors worldwide are coming to the AgTech scene, with many placing an emphasis on AgriFoodTech in particular – startups who focus on optimizing the farm-to-fork supply chain. The AgFunder’s AgriFoodTech 2020 Investment Report, reported its 2019 findings:
- $423m invested total
- 99 total deals
- +33% YoY investment growth
- 41% YoY deal growth
- 167 unique investors
- $100m as the biggest deal
The report highlights some a particular outlier – Singapore-based Trax that uses ‘computer vision’ tech and robotics to help retailers – with a $100m series D round. While AgTech adjacent in its functionality towards the later part of the food supply chain, Trax’ success indicates that the VC unicorn trend shows prevalence in the industry as well.
Top investments at a glance: vertical farming and pesticides
The increased traditional VC dollars to enter the AgTech market have led large groups like Softbank to invest their $200m VisionFund directly into a Silicon-based futuristic vertical indoor farm – Plenty – back in 2017. Today, Plenty exemplifies Silicon Valley tech, sustainability, efficiency and innovation. A subset of Plenty’s indoor farm, Tigris, “grows produce hydroponically — without soil — with LED lights year-round.” The 2020 article describes how engineers at Plenty don’t need to consider seasons, climatic disasters, or risks that come from pests as they focus on locally-grown plants.
The Tigris grow, for example, has test-grown “nearly 700 varieties of plants within the last year.” Additionally, the farm relies on automation to create the capacity to “grow 1 million plants at a time in a facility around the size of a basketball court and process 200 plants per minute.” The VC traction at companies like Plenty points to the increased popularity and high returns of sustainable farming – as well as their positive impacts on the ever-growing food supply via automation and proactive farm risk-management.
The microbials segment has been another breeding ground (pun intended) for VC investments. A 2017 report indicated that the sector received over $860 million across 35 deals – which made it the largest subset of AgTech investment that year. Emerging as a unicorn was Gingko Bioworks with over $400m raised to date.
Sustainable farming and a move away from harmful pesticides is the significant motivator here. Due to the majority of nitrogen fertilizer being made by big chemical producers, its effects – when farmers spray or inject it into the soil – have led to environmental damage. And while nitrogen fertilizer might boost crop yields, it is reported to be the cause of some 3% of the world’s carbon emissions that result from its production and “run-off [that] pollutes waterways and kills fish.”
Together with Bayer, Gingko Bioworks aims to produce nitrogen fertilizer via the crops themselves. By essentially turning the crops into their own “mini- fertilizer manufacturers,” Ginkgo/Bayer aim to bring together plants like peanuts and soybeans that naturally produce nitrogen to empower other crops. The AgTech unicorn aims to make this happen by “designing a nitrogen-producing microbiome in the lab and coating seeds with the synthetic cells.”
Today, Gingko continues to grow, and in late June 2020, Gingko announced three spin-outs as well as strategic investments:
- Motif FoodWorks, an internal spin-out developing food products
- Joyn Bio, a joint venture with Bayer focused on agricultural products
- Synlogic, where it has made a strategic investment in the pharmaceutical space
In particular, in 2019, Motif FoodWorks received a $90m Series A – which was the largest investment to date in food tech history. Motif is a key player in the synthetic biology market, and uses “microbes to provide next-generation alternative proteins and other ingredients to food companies”.
The rise in popularity of the alternative protein space has led to a significant flow of VC funds – a telling sign for investors to look towards farmland as higher agricultural demands lead to potentially increased returns over time.
Boston-based Indigo Agriculture is another standout in AgTech with a current valuation in the $2B-5B range. Since its inception, Indigo has been on a mission to improve sustainability and profits for farmers. Indigo’s value stems from their efficacy in microbe development; specifically, Indigo’s plant microbes improve seasonal yields for corn, soybeans, wheat, rice and cotton.
In 2018, Indigo debuted its Indigo Marketplace – a digital hub that connects buyers with their expanding network of customers. Generally, Indigo customers have been regarded to produce higher crop quality, as evidenced by Indigo’s recent partnership with Anheuser-Busch promising 2.2 million bushels of rice grown with ‘specific environmental attributes’. This unique partnership – effectively establishing a value chain between farmer, producer, and consumer – is the first of its kind between an AgTech unicorn and an enterprise food manufacturer.
Indigo also joined a coalition headlined by the World bank promising democratization of agricultural data in hopes of advancing food security internationally. Indigo Atlas – a solution that extracts analytical insights from a variety of on-farm and climate data sources - is recognized as the largest data well in the coalition.
Indigo Agriculture is arguably the greatest representation of an AgTech unicorn building production technologies converging with the valuations normally seen from big data unicorns in Silicon Valley.
AgTech and farmland investing
Today, the portfolio of investment opportunities in AgTech is more diversified than ever – with a particular focus in both agricultural product development and technique refinement. There’s been a reformation with AgTech’s relationship to mainstream Silicon Valley technologies like predictive analytics and robotics. Companies like FarmBot (open-source farming,) aWhere (AI weather intelligence that helps farms adapt to climate change,) and Phytech (a tool that connects growers with their desired plants,) are great examples of repurposed, big-data ventures finding success in applying mainstream tech to the agriculture sector.
Realistically, the AgTech space should continue to see practical applications of mainstream technologies continue to crossover into large-scale farming endeavors. There’s still a great deal of space for AgTech growth in evolving sectors such as ClimateTech and cell-based food production (with companies like Memphis Meats beginning to break ground with consumers).
By investing in farmland, not only are you investing in an industry that is seeing a boom in technological and scientific advancement, but you are also becoming part of a movement towards a more sustainable and climate change-conscious future of farming. With FarmTogether, you’re able to join a community of like-minded forward thinkers who will set the stage for agricultural best practices for years to come.
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Disclaimer: FarmTogether is not a registered broker-dealer, investment adviser or investment manager. FarmTogether does not provide tax, legal or investment advice. This material has been prepared for informational and educational purposes only. You should consult your own tax, legal and investment advisors before engaging in any transaction.