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New report: VCs bet on ag biotech & farmtech as the new stars of Asia-Pacific’s agrifoodtech ecosystem

October 26, 2023

[Disclosure: AgFunderNews’ parent company is AgFunder.]

Asia-Pacific has long been a hotbed for agrifoodtech innovation. That’s unlikely to change, despite the recent drop in agrifoodtech funding to the region.

Investment in Asia-Pacific agrifoodtech startups reached $6.5 billion in 2022, a 58% year-over-year decline on 2021’s record-breaking year, according to the new Asia-Pacific Agrifood Investment report from AgFunder in collaboration with the Bill & Melinda Gates Foundation, Omnivore and AgriFutures Australia.

While funding levels in 2023 are down on 2022, the ecosystem is still very active with a similar number of deals closing during the first half of this year compared to H1 2022.

And though the decline is in keeping with broader macro trends, it’s only part of the story for Asia-Pacific agrifoodtech investment.

A far more interesting narrative is the emergence of upstream technologies — those close to the farm or lab — as the new star of the region’s agrifoodtech sector.

Ag biotech, alt-protein & farmtech on the rise

As the world’s largest region in both geographic footprint and population, the Asia-Pacific landscape is also home to some 450 million smallholder farmers, staple crops like rice and wheat, and countless islands where marine life fuels local economies.

Asia-Pacific is also among those regions where climate change looms largest. Temperatures in Asia are warming twice as fast as the global average, causing heatwaves, torrential rains, and water scarcity. Rising sea levels threaten both land and livelihoods, and it’s estimated that they will impact nearly 1 billion people in the region by mid-century.

All of these factors along with government ambitions for food sovereignty have prompted a flurry of upstream agrifoodtech innovations in recent years as the region’s startups address issues of climate and food security.

Investment in Ag Biotechnology best illustrates this. The category, which includes on-farm inputs for crop and animal agriculture, surged from $142 million in 2021 to $813 million in 2022, making it the top upstream category for the year.

Preliminary data from 2023 suggests this momentum will continue.

Another notable category from the report is Innovative Food, an umbrella term under which alternative proteins sit. Despite a global decline in funding for the segment, in Asia-Pacific, investment actually increased year-over-year to $527 million (albeit over fewer deals.)

Similarly, Farm Management Software, Sensing & IoT ($334m), Farm Robotics ($252m) and Novel Farming Systems startups ($254m), which include indoor farming and aquaculture and insect farming, brought in more funding across fewer deals.

The rise of these categories, which haven’t historically been strengths in Asia-Pacific agrifoodtech investment, as well as growing early-stage deal activity, is promising on the whole. Debt, early- and growth-stage deals numbers have increased steadily since 2018; late-stage funding declined from 2021.

‘Pandemic tech’ days are over

For years, downstream categories like food delivery and eGrocery led agrifoodtech funding in Asia-Pacific. The record-breaking 2021, in particular, saw one mega-round after the next for such companies thanks to high investor confidence in these “pandemic-era” technologies.

But with Covid-19 downgraded from “pandemic” to “ongoing health issue,” shoppers and diners have returned to the physical realm. This coupled with global inflation has slowed demand for quick food delivery services that, in hindsight, seem designed specifically for lockdown lifestyles.

Asia-Pacific downstream startups raised $2.7 billion in 2022 versus upstream’s $3.2 billion. Upstream investment for H1 2023 has also increased, according to the report.

Top countries in 2022

India ($2.3 billion) overtook China ($1.3 billion) in 2022 as the region’s top country for agrifoodtech investment, followed by Indonesia ($716 million) and South Korea ($461 million).

India’s lead may prove short lived, however. In H1 2023, Chinese startups raised the most funding, with $861 million. India ($712 million) is next, followed by Hong Kong ($400 million) and Australia ($146 million).

Elsewhere in the region, funding to startups in Southeast Asia reached $1.7 billion in 2022. Australian agrifoodtech startups closed 38 deals in 2022, totaling $316 million and investment momentum appears to have been maintained in H1 2023, with $146 million closed. Finally, Japan ranked at #8 in 2022, bringing in $211 million across 43 deals.

Download the report in full HERE.

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