AgFunder has just released the ASEAN Agrifoodtech Investment Report 2020, its first-ever analysis of agtech and foodtech startup funding in Southeast Asia.
The report can be downloaded here.
[Disclosure: AgFunder is the parent company of AFN.]
A total of $423 million was invested into Southeast Asian agrifoodtech startups in 2019, across 99 deals. Reflecting the fact that the region’s ecosystem is yet to reach the maturity of markets such as North America, Europe, and China, the majority of dealmaking activity took place at seed stage.
There were 63 agrifoodtech seed fundings in the region last year, raising a total of $39 million. By contrast, startups raised $95 million at Series A across 20 deals. Series B and Series C saw just two deals apiece, and there was one investment at Series D.
Middle class growth attracts investors
ASEAN (the Association of Southeast Asian Nations) is one of the fastest growing regions in the world, and plays host to a rapidly expanding middle class that demands more choice when it comes to food.
For many of those consumers, that means products and technologies that offer convenience or the satisfaction of a ‘premium’ brand; or that can fulfil their desires to be more health-conscious or environmentally friendly.
This is reflected in our venture investment data for 2019, which demonstrates a preference for downstream, close-to-consumer segments among investors.
The largest investment category in 2019 in terms of both investment volume and the number of deals done was In-Store Retail & Restaurant Tech, which secured $115 million across 23 deals. However, $100 million of that was tied up in a single deal – the Series D round of retail tech provider Trax.
When that significant outlier is taken out of the picture, the largest category by investment value was Online Restaurants & Mealkits, which attracted $86 million across 13 deals.
As the data attests, more investment is gradually beginning to flow towards upstream categories that likewise aim to serve the appetites of middle class consumers. Demand for non-animal derived proteins will require more funding for startups developing cultured, fermented, or plant-based meat substitutes.
Innovative Food startups, including Singapore’s Shiok Meats, raised a relatively modest $9.5 million in ASEAN last year. But it was the third most active category with regards to the number of transactions completed, notching up 12 deals.
Serving the smallholder
Despite rapid growth of the region’s urbanized middle classes, Southeast Asia’s agriculture sector is still dominated by low-income smallholders, often in remote rural areas and with restricted access to modern agricultural innovations. Some of the most significant upstream and miscellaneous investments last year reflected this fact.
These deals typically involved startups that seek to better connect farmers with customers and suppliers, or provide smallholders with microloans and other financial services.
There are more apps for farmers than ever before, but Southeast Asia’s smallholders aren’t biting. Find out why here.
Many of these companies fall into the Midstream Technologies category, which raised a total of $43 million across 10 deals in ASEAN last year, or are classified as miscellaneous (two deals in this bracket raised $11 million between them.)
Further development of the region’s agriculture industry needs to take the needs and aspirations of these smallholder farmers into account. This presents a wealth of opportunity for entrepreneurs working in areas such as farm inputs, crop protection and yield improvement, and fintech.
Geographic concentration
Two ASEAN member states stood out at the front of the pack when it came to securing investment for agrifoodtech ventures last year.
Between them, Singapore and Indonesia raised over five times the funding of all the other ASEAN countries put together, which shows how investment activity is heavily concentrated in these two markets.
Singapore accounted for $177 million in total funding across 37 deals, though $100 million of that went to Trax. Disregarding that outlier deal for a moment, Indonesian startups actually banked more funding than their counterparts in the city-state, with $165 million across 26 deals.
With market liberalization continuing apace since it began to open up its economy 10 years ago, Myanmar is seeing a steady increase in VC investment. Given that much of the nation’s economic activity is still centered on rural communities, agrifood and related ventures are attracting plenty of investor interest. Myanmar saw $10 million invested across five deals last year.
