The agrifoodtech sector, once a darling of venture capital investment, is facing a significant downturn. According to the latest Global AgriFoodTech Investment Report 2024 released by AgFunder, investment in agrifoodtech startups has plummeted to its lowest in six years, marking a nearly 50% decline from the previous year.
The report, which offers a comprehensive analysis of investment trends in the agrifoodtech industry, indicates that the sector raised a total of $15.6 billion globally in 2023. This stark downturn is not just a reflection of the agrifoodtech space but also mirrors a broader 35% year-over-year drop across venture capital markets, as reported by Crunchbase, AgFunder’s main data partner.
A closer look at the numbers reveals a shift in investor sentiment. Generalist investors, who were once key players in driving billion-dollar-plus valuations in sub-sectors such as alternative protein and vertical farming, are now retreating from the agrifoodtech landscape. The sector’s share of global venture capital has consequently shrunk, from 7.6% in 2021 and 6.7% in 2022 to a mere 5.5% in 2023.
The repercussions of this investment slowdown are felt globally, with Asia and the United States bearing the brunt of the decline. Asia, which has not rebounded to its pre-Covid investment levels, managed to raise only $3.8 billion. Meanwhile, the United States, traditionally a powerhouse in the field, saw its share of agrifoodtech funding dip to just 30% of the global total, a significant drop from the usual 40% or more.
Despite the gloomy outlook, the report does highlight some areas of resilience within the sector. Notably, investment in upstream startups—those operating directly in farming or food production—has surged, accounting for 62% of the total dollar investment in 2023. This increase is significant, up from 51% in 2022 and 30% in 2021, suggesting that investors are recognizing the critical role these startups play in addressing urgent global challenges like climate change, metabolic illness, food insecurity, and systemic inequalities in the agrifood ecosystem.
Another silver lining is the growth in the Bioenergy & Biomaterials category, which saw a 20% increase in investment to $3 billion across 177 deals in 2023. This uptick is attributed to the escalating demand for sustainable alternatives in energy, packaging, and materials as the world grapples with the effects of climate change. A standout in this category was the $830 million mega-round secured by Footprint, a US-based company specializing in molded fiber products that emulate the properties of plastic.
Additionally, the Farm Robotics, Mechanization & Equipment category continued to attract investors, marking a 9% increase in investment to $769 million. Asia led the charge, with Indonesia’s eFishery raising a mega $200 million Series D, propelling it to unicorn status. Although the Americas saw a dip in funding, it experienced a higher number of deals than Asia.
The data, however, cannot be sugarcoated. The year 2024 is anticipated to be challenging for agrifoodtech, with more startups likely to shutter, an increase in layoffs, and a continued chorus of skeptics on platforms like LinkedIn predicting the demise of sectors they once hailed as revolutionary. Yet, Costa Yiannoulis of Synthesis Capital offers a glimmer of hope, suggesting that the investments made in 2024 could yield solid returns as the market corrects from its previous highs and the quality of surviving businesses improves.
As the industry navigates this tumultuous period, it is clear that the agrifoodtech sector is undergoing a significant recalibration. While the decline is widespread, affecting nearly all categories, the resilience in specific areas such as Bioenergy & Biomaterials and Farm Robotics underscores the enduring potential of agrifoodtech to innovate and adapt in the face of adversity. As the sector continues to evolve, stakeholders will be closely watching to see how these trends unfold and what new opportunities emerge from this period of consolidation and reflection.