Ag tech investing has entered an era of unprecedented progress. In 2011, ag tech startups received $600 million dollars in funding. Just ten years later in 2021, investors poured $7.8 billion into the industry—a record high.
But what is driving this ag tech investment growth? There are many factors, but we will focus on a few of the most important:
1. Mounting global concern about climate change
2. Increase in consumer demand for sustainably produced food
3. An industry-wide push to reduce food waste and shorten supply chains
4. Shifting patterns of consumption with a rise in animal protein consumption in emerging economies
Although all of these are long-running concerns, addressing them has proved a complex and difficult task. However, recent scientific and technological advances are rapidly changing this.
According to AgFunder’s 2021 Farm Tech Investment Report, ag biotechnology startups received the most funding at $1.6 billion. Next, startups working in novel farming systems were a close second at $1.5 billion. Finally, farm management software and Internet of Things (IoT) startups received $886 million to become the third-highest funded class of startups. We’ll focus on the top two areas to provide an in-depth view of the funding landscape.
Climate change’s effects are already being felt in agriculture. Crops must withstand rising temperatures, more frequent extreme weather events, and unpredictable weather patterns. At the same time, demand for food continues to rise—leaving the agricultural industry with the problem of feeding an ever-increasing global population using dwindling resources.
This has led to an industry-wide emphasis on creating sustainable crop input products and genetic engineering crops for improved productivity. Companies like Benson Hill are growing more resilient and productive plants; others are developing novel crop inputs like GreenLight Biosciences’ RNA-based pesticides and Sound Agriculture’s microbial fertilizer. GreenLight, one of the top two ag biotech startups, received $102 million in their latest funding round.
Finally, groundbreaking gene-editing tools like the CRISPR-Cas9 can make precise, fast changes to plants’ DNA sequences, which lets scientists enhance desirable traits or remove negative ones. This is a new but quickly developing field in ag tech that is receiving increasing interest from investors; recently, Benson Hill received $150 million to expand its operations.
An average trip to the grocery store is much more complicated now than it was in 1970. Although people still consider price and taste as they shop, they also factor in where food was produced, how it was produced, and whether it includes common allergens like gluten. Additionally, they are more likely to include plant-based foods, including meat alternatives and plant milk, on their grocery lists—US sales of meat and dairy alternatives grew 6.2 percent in 2020 alone.
Ag tech is keeping pace with this shift in consumer demand. Companies which focused on alternative proteins like Impossible Foods’ plant-based meat substitute; cultivated meat; and vat-grown microbial proteins received $3.1 billion in funding in 2020.
In the meantime, startup Ukko raised $40 million to fund the development of a “celiac-friendly” strain of wheat. Unlike most gene-edited crops whose benefits are mostly seen in the growing and harvesting stages, this development directly benefits consumers.
As concerns around climate change and food insecurity mount, agriculture and ag tech must continually evolve in response. This is reflected by investors’ increasing interest in technologies linked to sustainability, efficiency, and productivity.