The agrifoodtech sector has faced a tumultuous year in 2023, with a series of challenges that have left startups scrambling to adapt. High interest rates, persistent inflation, and a tightening fundraising environment have taken their toll, leading to strategic pivots, workforce reductions, and in some cases, business closures. These difficulties have been particularly pronounced in industries ranging from indoor agriculture to alternative proteins, which have seen a shift in investor sentiment.
Investors, who were once eager to pour money into these sectors, are now retreating, a phenomenon AgFunder refers to as the exit of ‘tourist capital.’ This has led to more grounded valuations and a critical reassessment of business models, signaling the end of an era where growth was pursued at any cost. The current sentiment suggests that the market may have over-corrected, swinging from excessive enthusiasm to undue pessimism.
Yoni Glickman of PeakBridge’s seed fund FoodSparks cautions against reveling in the missteps of these startups, emphasizing the importance of learning from these experiences. The broader perspective, he argues, is that success in this sector is vital not just for individual companies but for the well-being of the planet and humanity as a whole.
One of the more sobering stories of the year comes from Beyond Meat, a once-celebrated pioneer in the plant-based protein space. The company anticipated a modest uptick in growth in the third quarter that failed to materialize. With declining sales, negative gross margins, and a debt of $1.1 billion stemming from a 2021 convertible note offering, the company faces a daunting financial hurdle. Analysts now describe Beyond Meat as being in “survival mode,” a stark contrast to its prior status as an industry innovator.
Despite these setbacks, not all news in the alternative protein sector is negative. Rebellyous Foods, a Seattle-based producer of plant-based chicken products, has seen strong demand from over 200 school districts and is looking forward to profitable production in the coming year.
The indoor agriculture industry has also faced its share of adversity. Companies like AppHarvest and AeroFarms have encountered significant hurdles, prompting a shift in investor focus towards models with proven unit economics. Michael Wainscott, CEO of Revol Greens, highlighted the importance of recognizing the complexities of plant growth and the efficiency of existing agricultural systems.
However, the sector also saw positive developments, such as the announcement of a ‘GigaFarm’ in Dubai by ReFarm, a consortium in the United Arab Emirates, showcasing continued innovation and investment in the space.
Regenerative agriculture has become a buzzword in the industry, but action has lagged behind the conversation. A report by FAIRR revealed that only a handful of large agrifood corporations have committed funds to encourage farmers to adopt regenerative practices. The lack of immediate economic incentives and quantifiable data on the impact of these practices on crop yields has been a significant barrier.
Nevertheless, efforts are underway to change this. Land Core, with support from a Foundation for Food & Agriculture Research grant, is developing a model to quantify the benefits of soil health practices. This could pave the way for insurers and lenders to offer incentives to farmers, fostering a more sustainable agricultural landscape.
As we look to 2024, the agrifoodtech sector is poised to continue its evolution. Key areas to watch include the development of designer probiotics and technologies aimed at reducing livestock methane emissions. The landscape is undoubtedly shifting, with a new emphasis on profitability and sustainability that may ultimately lead to a more resilient and forward-thinking industry.