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In Europe, the Covid crisis aligned with the start of a new agrifood investment cycle

June 3, 2021

This time last year, the world—much less venture capital—was grappling with an extraordinary amount of economic uncertainty, brought on by an unprecedented global health crisis. By now we know that the agrifood sector not only rebounded from the pandemic’s early disruptions, it outpaced expectations.

In Europe, however, the pace of recovery was more measured. European agrifoodtech investing in 2020 ended the year slightly down from 2019, according to AgFunder’s latest Europe investment report, published in partnership with F&A Next. Agrifoodtech ventures raised $3.3 billion in 2020, down from $3.9 billion in 2019. AgFunder expects the total to end up closer to $3.8 billion once all 2020 deals come to light. Still, that represents a 2.6% decrease from 2019.

Globally, meanwhile, total dollars committed to agrifoodtech ventures is estimated at $30.5 billion for 2020, a 34.5% increase over 2019 investment levels.

Behind Europe’s numbers: late-stage deal activity fell in 2020, which meant that the state of the sector wasn’t buoyed by the same volume of larger rounds that the industry witnessed in 2019. Early-stage activity, meanwhile, was up, both in terms of dollars committed and number of deals closed.

“We see really interesting growth in Seed and Series A-stage companies, so the pipeline for investment is really strong. And this suggests we’re entering the second wave of innovation,” AgFunder founding partner Rob Leclerc said at the 2021 F&A Next summit, hosted in May at Wageningen University & Research in the Netherlands.

While some categories had more muted activity, especially downstream like eGrocery and In-store Retail & Restaurant Tech, investors upped their commitments to other sectors, particularly upstream companies, in keeping with a global trend. Companies working closest to the farm raked in $600 million more from investors in 2020 than the previous year, and an additional 90 startups raised rounds.

In Novel Farming Systems, for instance, ventures raised an estimated $800 million last year, compared to just $300 million in 2019. Insect farming companies did particularly well, with French companies Ynsect and InnovaFeed raising big rounds.

Leclerc observed that Europe’s leadership in Novel Farming System and other solutions that depend on physical assets and hardware sets the continent’s agrifoodtech sector apart globally. Whereas in the US, the venture capital sector favors entrepreneurs who aren’t “inventing and building things in the real world,” he said, “Europe is coming at it with maybe a cleaner slate, because investors probably didn’t get burned as badly in the cleantech era. They’re saying, ‘These are completely viable opportunities’.”

In Innovative Foods, like cellular meat and other alternative proteins, ventures raised an estimated $479.4 million, compared to $283.5 million in 2019. Netherlands-based lab-grown burger producer Mosa Meat was the big winner, raising $75 million to prepare its product for the consumer market.

Mosa Meat CEO on choosing non-GMO, differentiation & pricing the novelty factor

Restarting the cycle

Covid undoubtedly had an impact on trends and commitments in Europe’s agrifoodtech investing scene. But data show that 2020 was also the start of a new innovation cycle on the continent. There was heightened activity in early-stage investing both in terms of dollars committed and the number of deals closed, while late-stage deals and commitments dropped—from more than $1 billion in 2019 to $223 million last year.

The 2020 late-stage activity in Europe was nevertheless interesting. Swedish delivery company Mathem raised another late-stage round ($51 million), following a $97 million round in 2019. Finnish delivery company Wolt graduated to a Series D round ($108 million), following its Series C in 2019.

What is perhaps more noteworthy is who is not on Europe’s late-stage list. Germany’s Flaschenpost was acquired by Dr. Oetker for $1 billion in November, following an undisclosed Series D in May. Germany’s Marley Spoon IPO’ed in April after raising $30 million in 2019. And the UK’s Deliveroo had a quiet year after raising $575 million in 2019; it went public early this year.

Many other late-stage rounds raised undisclosed sums last year, which affected the reported investment total.

The last time Europe’s agrifoodtech industry saw this shift from late-stage activity back to early-stage was in 2015, when there was a boom in late-stage deal-making, and 2016, when late-stage deals fell and early-stage deals climbed.

This trend points to a maturing sector, rather than a slowing sector, with investors increasingly eager to cut checks for ever-more-cutting-edge technologies, particularly capital intensive, deep-tech ventures.

“You’re seeing a greater willingness and familiarity among the investor community in the food and ag environment. People are educating themselves, so they’re then willing to fund it,” said Leclerc.

The pipeline of opportunities is also now expanding and accelerating. “In the first wave of innovation, you had founders who basically had to build a full-stack solution—all the hardware and digital pieces—because there was no ecosystem to tie into,” Leclerc explained. “What we’re seeing now is a whole ecosystem of technology that you can build off of, like CRISPR in ag biotech, and this makes it much easier to build a solution that has value in the market, and build it quickly.”

Emphasis on impact

A key trend in the new wave of agrifoodtech innovations coming out of Europe, as elsewhere, is impact and sustainability. Amsterdam-based online grocer Crisp, for example, raised $9.7 million last year and an additional $36 million this year for technology that is helping shorten the food supply chain.

“In the past 50 years, food production has moved towards mass production because it was very hard to match a fragmented supply with the demand of the masses,” Crisp co-founder Eric Klassen said at F&A Next. “With the technology we’ve built, we can easily create the connection between supply and demand by combining customer data with machine learning systems. We can even we can go one step further and encourage people to eat with the seasons.”

8 startups reshaping the global food system

Such innovations are being driven by both technology makers, like Crisp, and users, like global fast-moving consumer goods companies and agribusinesses. Unilever, for instance, is ramping up technology applications for monitoring and tracking sustainability and deforestation in its supply chain. Israeli chemicals company ICL is looking to drive sustainable innovation with a forthcoming early-stage investment vehicle that will invest in new farming techniques, alternative proteins and other novel agrifood technologies.

“If we’re going to get to a healthier fairer and more sustainable global food system,” said Hanneke Faber, president of global foods and refreshment at Unilever, “we need to help change what people eat and how we produce it.”

The carbon question: Making global carbon markets work for farmers

Download the 2021 AgFunder European AgriFoodTech Investment Report in full here

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