Food tech, once the under-funded, under-rated, decidedly un-sexy corner of the investment world has emerged on the main stage with a bang. According to the 2022 Agfunder AgriFoodTech Investment Report, venture capital investors pumped more than $50 billion into agrifood technologies in 2021, an 85 percent over 2020.
During our participation at the 2022 Future Food Tech conference, we were impressed by the new ideas emerging in product and production methods. This mirrors the behavior of consumers, many of whom are changing their personal preferences to focus on nutrition and sustainability.
In this article, we examine why this industry segment is teeming with new investment options as well as the opportunity for talent to step up and be part of this growing, secular trend.
Our takeaways on AgriFood Tech today
Sustainability + Digital & AI is the combo to draw investment dollars.
We’ve seen an evolution in the way investments in this space are assessed. On the one hand, it’s not just about the numbers anymore. It’s also about the purpose. From early to growth investors to private equity funds, we hear the term “sustainability” often, and oftentimes as a core piece of their investment thesis. On the other hand, most investors are seeking a digital and AI component to these investments, understanding the power that this gives to build moats and scale a business model. A good example of this is AI powered vertical farming – the practice of growing crops in vertically stacked layers. Vertical farming supports water and land conservation and allows for a reduction in chemicals used in food production. Further, robots and AI enable these farms to operate as autonomously, efficiently and to be as productive as possible. Look at vertical farm company Plenty, who secured $400 million in funding earlier this year with Madison Group and JS Capital as lead investors, with Softbank Vision Fund 1 and strategic partner Walmart also participating in the round.
Investment scope is broadening.
The investment scope is broader than ever before. In terms of stages, investors are going up and down their comfort zone to fund early-stage pioneer startups and do follow-ons on promising growth opportunities. In terms of business models, we see a range from brick-and-mortar stores to ag-tech, to big food companies to food tech being funded. In terms of technologies, while in the past the investment opportunities were focused on genetics, pesticides and fertilization, now additional areas such as digitization, data science, and alternative farming are drawing greater attention. Finally, we are seeing non-traditional investors getting more active in the space, such as the example of Walmart above.
Post Covid-19 issues may loom as a threat to growth.
While most of the news around agrifood tech is promising, it’s important to understand the challenges the category faces. The Covid-19 pandemic put a spotlight on the global matrix that supplies everything including food. Investors in the food-tech space will be looking hard at the supply chain challenges in the industry. What is the future of global vs. local in terms of production of food and value creation? The pandemic was a painful reminder of how global this segment has become and how current events continue to put pressure on globalization.
The Implications for Talent
What are the implications for talent of this massive capital allocation into agrifood tech?
For Funds: Seek fluency in Sustainability + Digital & AI, risk-taking mindsets, and operating experience
Funds will need to acquire or develop talent fluent in digital & AI and sustainability, as well as the traditional financial and operational experience. That means recruiting investment professionals who are not only fluent in the wider ag industry, but also understand the rapidly evolving implication of the digital & AI revolution and the sustainability demands. These teams must be able to identify and vet new teams, early in the product launch cycle, and be adept at entering unknown territories that will be created by innovation. It may also mean creating or expanding an operating support team that has the experience to help founders navigate the complex and unknown journey to scale.
For Portfolio Companies: Invest early in your team
As investors are making bigger, bolder bets on this sector, they increasingly rely on the quality of the team as a diligence component vs. the proven tech/product or market opportunity, which can oftentimes look unclear or daunting. Hence, to be differentiated, companies must make early investments to bring the right talent on board and prove investors you have what it takes to execute on your big vision. An important note is to consider your point of differentiation and build talent around your future, not your current needs.
For Individuals: Get on the AgriFood Tech bandwagon ASAP
Individuals have an opportunity to invest in their future potential growth by turning their focus to the agrifood tech industry and building the skills that are and will be in demand in this arena. The mandate to individuals is powerful: The future of our human race will depend on the growth of this sector. So, jump on the bandwagon and learn what are the complexities and opportunities facing this sector, find an area to go deep and specialize on, and make yourself a valuable asset for those building and funding the food revolution ahead.
