What a start to the year! Today AgFunder releases its Midyear AgTech Investing Report (Free Download) and 2015 has already lived up to expectations. Nearly surpassing investment volumes captured during the whole of 2014, the first half of 2015 brought in $2.06 billion of capital across 228 deals.
We were even able to revise up our Q1 volumes to $1.08 billion from the $1.04 billion we reported in April and believe it’s very likely we will be increasing Q2 volumes later in the year from $971 million.
The continual growth of the sector highlights the increasing attention agriculture technology companies are gathering in the investment community. A few subsectors outshone others, but diversity was still the name of the game as companies across food e-commerce, water, drones, bioenergy, soil technology, cannabis and more attracted venture capital.
The midyear report also proves that start-up companies are successfully maturing from seed stage as Series A volumes beat their 2014 total.
This Midyear AgTech Investing Report drew from press releases, public funding announcements, direct sources, and CrunchBase to provide an overview of major industry trends, and contains information on all AgTech deals and investors in 2015. Here are some of the highlights:
Precision agriculture technologies attracted venture capital giants and some of the year’s larger deals
Precision agriculture technologies, such as drones and satellite imagery, raised $400 million during the first half of the year surpassing last year’s $276 million total. Big name VCs are increasingly attracted to the sub-sector’s familiar software and big data solutions.
Satellite imagery companies raised a large chunk of that ($147 million) including Planet Labs’ large $118 million Series C round which brought in commitments from supranational agency International Finance Corp, Founders Fund, First Round Capital, Innovation Endeavors, AME Cloud Ventures, Industry Ventures, Felicis Ventures and more.
Other satellite imagery companies that raised capital were Orbital Insight, Intelescope Solutions, Intermap Technologies and OmniEarth.
The average deal size for drone and robotics companies was $10.58 million but some deals in the subsector reached much higher volumes. Chinese drone maker DJI raised $75 million, 3D Robotics attracted $64 million and Pulse AeroSpace brought in $23 million.
Farmers Business Network was a big winner in farm management and big data attracting $15 million in Series B funding from some big name VCs: Google Ventures, a new investor, led the round including prior investors Kleiner Perkins Caufield & Byers and DBL, an impact investment firm.
Food e-commerce served up the year’s largest subsector in volume and deal sizes
A big reason for the whopping $551 million raised by food e-commerce companies was the gathering maturity of the subsector. First generation companies from the US such as Blue Apron and Munchery are now later stage raising $135 million in Series D and $85 million in Series C funding respectively.
There is also a growing number of “me-too” players dining out on the sector’s hype and not just in the US. Indian grocery delivery startup Pepper Tap is growing quickly after raising $1.2 million of seed funding in March to then bring in a further $10 million in April. Other international food e-commerce fundings including China’s Fruitday, which raised $70 million in Series C funding, and MatHem, a Swedish company, which raised $25 million.
Historic California drought pushed water technology volumes up, but will it last?
California is currently experiencing its fourth consecutive year of drought and the state’s 27 million acres of farmland are feeling the pressure. As the state government and its population battle to save as much water as they can, Silicon Valley, and tech hubs elsewhere in the world, have been working on a range of water technologies aimed at improving water efficiency.
This has pulled $525 million into the subsector during the first half of the year with support from USDA and Farm Credit System-sponsored Advantage Capital Agribusiness Partners (ACAP). ACAP was the first asset manager to receive a Rural Business Investment Company licence from the USDA as part of an initiative to channel more funds into rural start-ups and it invested $5 million into Hortau, a Californian precision irrigation management company, in June.
The sector also provided investor collective Farm2050 with its first agtech deal after Innovation Endeavours led a $9 million Series A into smart irrigation company CropX alongside other big name agtech VCs Finistere Ventures and GreenSoil Investments.
But the vast majority of the investment volume went to Israeli drip irrigation provider Netafim which brought in $500 million in debt financing in Q1. The world’s largest drip irrigation service provider, Netafim is promising to take its drip irrigation technology across the developing world from China and India to Brazil and Africa.
Moving into the mainstream?
While growth slowed a little in Q2 compared to Q1 (this happened last year too), the first half of 2015 has pushed agtech into the mainstream of venture capital investing. Of course, the ag or sustainability-focused venture capitalists made strong appearances, but increasing numbers of generalist technology VC firms are supporting the sector such as Sequoia Capital, Innovation Endeavours, Accel Partners, Qualcomm Ventures, DFJ, and even the World Bank’s International Finance Corp made an appearance.
This increasing pool of investors also coincides with a movement in median funding sizes to align more closely with those in the tech VC market — Series A fundings came in at a median of $4.3M, $11M for Series B, and $20M for Series C.
The remainder of 2015
Current investment puts us on pace to exceed $4B of investment for 2015, compared to $2.36B for all of last year. We’ve already seen a few notable fundings in July from players like Plated ($35m), Zesty ($17m), and Granular ($18.7m), suggesting that VCs are still showing an appetite for Series B (or large Series A) raises in food e-commerce, precision ag and soil & crop technology. We’ve heard rumors of several large foodtech deals and we’re expecting a broader spectrum of new startups as different areas of the value chain are identified for overhaul.
We know that large food and ag players are watching the space closely, although it may still be too early for large exits. We have seen a few smaller exits, mostly in the precision agriculture space, and we expect those to continue as the sector finds some consolidation.
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