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Dealmaking during Covid-19: Upstream and eGrocery win in AgFunder’s 2020 Mid-Year Investment Review

August 18, 2020

We’re just over halfway through 2020. And while this may already feel like the longest year on record, agrifoodtech startups and investors are plugging away as if we weren’t all caught in the midst of a global pandemic. Almost.

Committed capital is keeping pace with 2019, according to AgFunder’s newly released Agrifoodtech 2020 Mid-Year Investment Review.

In total, $8.8 billion in investments were counted across 798 deals in the January-June period. When the complete data is in at the end of the year, we expect to see that about $10.5 billion in transactions closed in the first half of 2020, compared to $21.6 billion in all of 2019.

Where that capital is going is changing, however. For the first time since 2013, upstream funding outpaced downstream funding, at $4.6 billion compared to $4.1 billion. It’s possible that amid considerable near-term market uncertainty, investors feel less reticent about making long-term and earlier-stage bets on deep technologies that will fundamentally change the food system.

Boosting biotech

Ag Biotechnology, for example, is on track to beat its 2019 total, raising $862 million in H1 2020 compared to $1.1 billion last year. Technologies in this category are capital intensive and have long development timelines, but are also highly in-need – particularly new seed varieties and more environmentally friendly on-farm crop treatments.

Case in point: AgFunder portfolio company Greenlight Biosciences, which makes “sustainable chemicals.” It raised back-to-back funding rounds in May and June and topped the chart for the biggest ag biotech raise so far this year ($102 million), though that was in part fueled by the company’s announcement that it was joining the Covid-19 vaccine race.

As a potential sign of what more’s to come in the second half of this year, Bayer and Temasek co-launched Unfold, a new venture that will develop vegetable seed varieties for indoor farming ventures, in a sign of how disruptive and significant the two companies believe indoor farming will be for the future of agriculture.

Indispensable online grocery

Not surprisingly, eGrocer ventures continued their reign as the best-funded agrifoodtech category. Last year, eGrocer dealmaking was buoyed by consumer preferences. This year, the trend undoubtedly continues out of necessity, as rolling lockdown measures and health concerns worldwide keep people at home and inclined to having their food and other goods delivered. Indeed, the biggest single deal of the year so far — at $500 million — went to an eGrocer: China’s MissFresh. But the geographic footprint of the sector is expansive; eGrocer companies to have been funded in H1 2020 hail from the US (Instacart), India (BigBasket), Saudi Arabia (Nana Direct), Italy (Tannico, for wine!) and Mexico (Jüsto).

Funding for Midstream Technologies and Innovative Food — especially alt-protein startups — also accelerated significantly in H1 2020, bolstered by Covid-19’s threat to food supply chains and the animal meat industry in particular.

Downstream decline

Agrifood technologies that were having a moment last year in the “old normal” are seeing investor interest slow significantly (if not dry up altogether) in the “new normal.” US-based Toast, which offers restaurant and retail point-of-sale tech, scored $400 million in Series F funding in February – then promptly laid off 50% of its staff when global lockdowns started.

Otherwise, In-Store Retail & Restaurant Tech deals so far this year have been much smaller, and have clear pandemic-mitigating impact: China’s Bianlifeng raised $100 million for social distancing-friendly “cashierless” convenience stores and vending machines; US-based Dishcraft Robotics is automating foodservice tasks; and Israel’s Shopic offers contactless, mobile-based grocery checkout.

Such technologies, which help retailers and restaurants adjust to what could be a prolonged social-distancing trend, may very well part of the new normal.

Download the AgFunder Agrifoodtech 2020 Mid-Year Investment Review in full here.
Your feedback is welcome. Please send to [email protected].

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