We are very excited today to release our AgTech Investing Report for 2015, compiled from CrunchBase data, SEC filings, and interactions with hundreds of entrepreneurs and investors throughout the year. The report shows investment in food and agriculture technology startups reached a massive $4.6 billion in 2015, nearly doubling 2014 levels ($2.36bn).
This surpassed our mid-year projections that the sector would reach $4.1 billion for the year as an additional $2.4 billion across 241 deals was recorded in the second half of 2015. This 94 percent year over year growth for 2015 is greater than the 44 percent growth seen in the general VC market in 2015, according to the Venture Pulse Report.
Some of the categories that drove growth during the year were food e-commerce, precision agriculture (in particular drones & robotics), and irrigation & water technology.
For us, this level of investment is confirmation that agtech has become a key sector of interest not just for venture capital investors, but also for impact investors, individuals, family offices, institutions, and strategic players. Some high-profile investors include the Bill & Melinda Gates Foundation, which invested across biological inputs and alternative proteins, Google, actress Demi Moore, actor Jared Leto, Stanford University, and the University of Texas Investment Management Company. The corporate venture arms of big agribusiness also stepped up their participation in 2015 with Monsanto and Syngenta leading the way.
It’s also encouraging to see so many entrepreneurs, with a variety of backgrounds, turning their attention towards agtech. The sheer variety of technologies hitting the space — we recorded 503 individual companies raised capital during the year — highlights how far innovation has come, but also how much further it could go. Plus we are of course only recording the technologies that raised funding; there is plenty more going on aside from this.
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Our miscellaneous category captured a range of companies that did not fit into our existing categories — ranging from an organism engineering company to a biotechnology company focusing on aquaculture to an online marketplace buying and selling agricultural machinery. And as entrepreneurs continue to attack problems throughout the value chain and niches become bonafide subsectors, we expect that the number of categories will only grow in the years to come.
We compiled the 2015 AgTech Investing Report using press releases, public funding announcements, direct sources, and data from CrunchBase to provide an overview of major industry trends, and report on all agtech deal and investor activity in 2015. You can access the full report here, but below are some of our highlights:
Drones & robotics startups raised some of the year’s largest deals
It’s unsurprising that drones & robotics have captured a lot of attention in the media and investment industry; they’re the stuff of Sci-Fi dreams, and there is huge potential for them to take over or enhance various operations on the farm.
Investment into drones & robotics startups increased 237 percent on 2014 volumes to $389 million in 2015 with 42 of them raising funding. Drones led the pack with startups coming from across the globe as DJI, China’s leading drone company, raised $75 million at Series B and the subsector’s largest deal. The company raised this funding in the same year that it released its first drone specifically for agriculture.
Many drone companies matured beyond Series A stage during the year with the subsector’s second largest deal a $64 million Series C from California’s 3D Robotics. Ehang wasn’t far behind raising $42 million at Series B.
The Association for Unmanned Vehicle Systems International predicts that 80 percent of drones will be used for agriculture in the near future though some industry experts have questioned the efficacy of drones in agriculture.
Among the robotics startups, which attracted far less capital but are no less cool, Blue River Technologies, a Californian startup using computer vision and machine learning to weed crops, raised the largest round. Its $17 million in Series B attracted investment from a mix of agtech venture capital firms and high-profile Silicon Valley VCs.
Startups researching the potential for biological products to increase agriculture yields dug in raising $120m
Twenty startups in the biologicals space raised $120 million across 20 deals during 2015. The growth in the number of biological solutions for farmers coincides with increasing emphasis among entrepreneurs, farmers and consumers globally on improving soil health; pursuing sustainable farming practices; and reducing the use of chemical inputs.
It also reflects improving sentiment around the efficacy of biological solutions for agriculture.
Some of the investors attracted to this subsector of agtech were the Bill & Melinda Gates Foundation, The University of Texas Investment Management Company, and Sequoia Capital. The corporate venturing arms of chemicals-focused agribusiness giants Monsanto and Syngenta, were also noticeably in the investment pack, reflecting a growing interest in the biological space.
We believe that this segment could be on course for even more investment in 2016 as it sits in front of a growing consumer trend for non-GMO, non-chemical, and organic agriculture.
There is a growing number of entrepreneurs globally launching agtech startups
While the United States is still home to the majority of agtech startups — capturing $2.4 billion and 58 percent of deals for the year — its share of the total was much lower than in 2014 when US companies raised 90 percent of global investment. Israel has long been seen as the second home for agtech startups and confirmed its status in 2015 as $550 million was raised on its shores. But innovations from emerging markets like India and China gathered pace with the urgent need for agriculture development in those markets.
And onto 2016…
Considering growth in agtech investment surpassed the overall venture capital market, there have been questions raised about whether a bubble is forming around agtech, and arguments that valuations are becoming “frothy”. This is certainly the case in food e-commerce, which we believe is overheated against a backdrop of questionable unit economics and increasing competition. And there could be arguments that some of the software companies serving the agriculture market have yet to be adopted at a scale that can support their valuations.
But for so much of the agriculture market — which represents about 10 percent of global GDP and only received about 3.5 percent of total VC funding — there is still a wide funding gap that other sectors are not experiencing. By comparison, healthcare accounts for about 12 percent of GDP and received about 12 percent of venture funding in 2015. The size of deals in agtech is also still relatively small with very few scoring over $50 million in a round, and agtech dedicated funds are still relatively few and small in size.
Particularly underinvested but increasingly vital part of the agtech value chain include water technologies, aquaculture, and food safety & traceability technologies, and could do with more investment in 2016.