AgFunder and Start–Up Nation Central have released the Israel AgriFood Tech Investing Report 2014-2018. The report reveals $759 million of venture capital investments into Israel’s AgriFood tech sector over five years — an ecosystem that includes nearly 700 startup companies.
Compared to a global tally of $17 billion invested in AgriFood tech in 2018, the scale of these investments may seem modest for a nation with an emergent reputation as a prospective world leader in the agrifood tech innovation space. But considering Israel’s population of less than nine million, and its geographic size that is not much bigger than New Jersey, the report shows this small Mediterranean nation to be punching well above its weight.
In 2017 alone, Israelis raised more investment for upstream technologies ($187m) than China, and nearly as much as India over five years— two countries with populations of more than 150 times the size of Israel’s. Over the five-year period, $548 million of investment went to upstream startups.
“In Israeli terms, this is really high,” says Ohad Zuckerman, an Israeli investor and a managing partner at Copia Agro & Food. Speaking to AgFunder News on the sidelines of the World AgriTech Innovation Summit in San Francisco, Zuckerman outlined how startups in Israel had often done well by keeping investor expectations grounded and not asking for too much funding before proving their concept and locking down intellectual property.
“My advice to companies I meet is ‘you need to be more modest and you need to keep your money’,” he said, describing how he always warns companies against getting carried away by international hype and sky-high valuations in the US.
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Zuckerman said Israeli companies had also tended to flourish when they focused on solving specific problems rather than developing generic technologies. Any company in precision agriculture, he cautioned, may need to be patient as the local investor environment “isn’t ready.” Further, he wants to see companies that are able to integrate data holistically enough to drive efficient decisions; something the industry is sorely lacking in his opinion.
Israel’s growing population and arid climate have also geared up the innovation pressure on local farming communities — many of which are still part of socially-conscious Kibbutzim. Meanwhile, wider regional geopolitical tensions mean that government support of food security via access to world-class science, research, military grade data, imaging and aerial tech capabilities is unlikely to waver in the years to come.
Investment to startups operating closer to the consumer grew over 80% between 2017 and 2018 which coincided with some significant exits downstream too.
The sector’s only Series D round over those five years was the downstream technology company Tapingo, which raised a $30 million deal in 2016 for its mobile ordering platform for groceries and food pickup. Their specific targeting of university campuses and their nearby food retailers drew investment from VCs Viola and Khosla, and the CVC arm of Qualcomm; at the D stage, newcomers included global PE firm TPG and Chinese VC Fosun. Tapingo went on to be acquired by Grubub in 2018 for $150m.
According to the report, Israeli startups are also starting to lead the way in Innovative Food, particularly cultured meat and novel ingredients, a category that raised $32 million across 17 investments.
Academic Strength and Government Support
Also commenting on the report, Benjamin Belldegrun, a managing partner at Pontifax AgTech, tells AgFunderNews that much of Israel’s success has been driven by a bustling AgriFood tech ecosystem with ready access to hands-on government support: the Israel Innovation Authority has provided backing to a broad spread of investors including The Kitchen FoodTech Hub and the Trendlines Group.
“Israel has been a dominant force in biotech and high tech and is now a significant presence in food and agtech, “ he says, putting this all down to “university-led technological advancements, agronomic necessity, governmental support through capital infusion and growing strategic corporate representation.”
Trendlines, founded in 2007, has been the most active investor investing across 19 deals. Israel Cleantech Ventures, which manages over $200m in three funds, was also very active, investing in Groundwork BioAg, Vayyar, Prospera, and Weissbeerger among others. The report highlights signs of bigger institutional players in Israel awakening to opportunities in the space. Viola Ventures, a high-tech investor across industries with $1.3bn in assets, marked its first upstream investment in November 2018 when it joined Taranis’s $20m B round. Vertex Ventures (managing $900m) joined the same round, following on its participation in Taranis’s 2017 A round. JVP (managing $1.34bn) in August 2018 added InnovoPro to its portfolio when it joined its $4m A round. Aleph ($334m) started investing in 2017 in downstream AgriFood tech, and has since helped sustain both CommonSense Robotics and Bringg in two rounds each.
Even so, the country still relies on the support of foreign investors and some of AgriFood tech’s leading investors come from overseas. Foreign involvement is important as virtually all Israeli startups have international ambition – some even forgoing local deployment altogether – owing to the local market’s extremely small size.