As new startups channel technological expertise, innovation, and entrepreneurship towards achieving global food security, Agrifood companies and technologies continue to offer investors attractive ROIs. This burgeoning potential highlights the critical role of the Agrifood sector, a fundamental industry that we rely on daily. The potential for the Agrifood market growth is currently underrated and there are plenty of exciting investment opportunities across the entire spectrum of the Agrifood sector.
The Global Agrifood Sector: A True Growth Industry
The food industry fulfills our most basic human needs, sustaining life and nourishing communities. A reliable supply of affordable food is the foundation, not just for human survival, but for every human enterprise and endeavor. We’ve lived with this very basic reality since we made the transition from hunter-gatherer societies to localized agricultural economies approximately 12,000 years ago.
Despite thousands of years of innovation, technological progress, and a number of agricultural revolutions, global food supply remains fragile. According to the United Nations, 1 in 10 people do not get enough to eat. Even prosperous Western societies were taken by surprise when events like the COVID-19 pandemic, conflict in Ukraine, and inflation caused significant supply chain disruption and rising food prices.
The massive Agrifood sector covers the entire spectrum of farming, food production and processing, distribution, and retail – and increasingly – recycling. Agrifood tech investments and Agrifood VCs are enabling revolutionary new food tech solutions that can tackle persistent global hunger and deliver food security. A well-fed world is more likely to be a stable, and prosperous world. Everybody benefits from sustainable Agrifood market growth.
The Challenging Agrifood Tech Investment Landscape
The global availability of venture capital surged dramatically, reaching a peak of $200 billion in 2021. Since then, funding has declined across most sectors, including the Agrifood sector. 2023 saw a substantial reduction in Agrifood tech investments. Agrifood VCs are still looking for profitable new concepts to back, but there is generally less money available and investment criteria are tougher.
The US saw the most pronounced decrease in investments (down from 40% to 30% of all global funding), while the EU, India, and China also experienced painful reductions in market share. Current investment patterns may offer some interesting insights into developing Agrifood tech global trends and new market diversification. Agrifood startup funding in Indonesia, Saudi Arabia, Israel, Brazil, and Singapore, as well as African investments, is relatively buoyant.
The volume of closed deals was down in 2023, and the median deal size fell again YoY, down 50% on 2021 figures. Put simply, there is less cheap money in circulation, and Agrifood VC largesse has diminished. Funding rounds are slower, more stringent, and less generous. Vital second rounds of funding are also harder to achieve. The good news is that these reductions appear to represent a market adjustment rather than a fundamental loss of investor confidence. The dynamic Agrifood sector is enormous and some areas are currently attracting increased investment capital.
- The broad spectrum of AI in Agrifood
- Bioenergies and biomaterials
- Farm robotics, mechanization, and equipment
To fully appreciate the landscape of Agrifood investments, it is essential to understand who is behind these investments and how they contribute to the sector’s dynamics and potential.
Investor Profiles: Diverse Backers of Innovation
Investors in the Agrifood sector come from a variety of backgrounds, each bringing unique resources and perspectives that drive the industry forward.
Venture capital (VC) firms are often the most visible investors, providing not only capital but also strategic guidance to startups. They are pivotal in scaling operations from early stages to more mature phases of business development.
The agrifood-focused VC funds have grown in number each year for the last 10 years Important examples of agrifood VC firms include SVG, Peakbridge, Omnivore, S2G, AgFunder, Synthesis Capital, and SP Ventures.
Corporate investors (CVC), including major Agrifood companies and conglomerates, invest in startups to foster innovation that aligns with their strategic interests. These investors are particularly valuable for their industry-specific expertise and their ability to integrate new technologies into established channels. Leading agrifood corporations like ADM, Bayer, BASF, Cargill, FMC, and Syngenta have collectively made more than 90 investments in over 65 companies. The innovative ICL Planet Startup Hub is forging strategic partnerships with founders and shortening the journey to market for some of the sector’s most promising newcomers.
Accelerators and Incubators play a crucial role in the Agrifood investment landscape. Entities like Thrive, the Kitchen Hub, EIT Food, The Yield Lab, Startup Boot Camp, and Food X support startups by offering seed investment, mentorship, and networking opportunities within a structured time frame, usually three to six months. Accelerators provide a critical platform for young companies to refine their business models, gain access to industry experts, and pitch to a broader network of potential investors at demo days.
Government initiatives also significantly impact the Agrifood sector, particularly through grants, tax incentives, and regulatory support aimed at fostering an environment conducive to growth and innovation. These programs often focus on sustainable practices and technologies, supporting projects that promise to enhance food security and environmental sustainability. Governments may also partner with local universities and research institutions to provide technical expertise and validation for emerging technologies.
With a diverse array of investors fueling the sector, the next natural question is: what are the groundbreaking technologies these investments are driving? This leads us to an exploration of emerging technologies that not only promise to revolutionize agriculture but also offer substantial returns on investment.
Emerging Agrifood Technologies that Investors Need to Evaluate
The landscape of agricultural technology is rapidly evolving, with innovations not only increasing productivity but also enhancing sustainability and food security globally. These technologies span the entire farm-to-fork process, significantly reducing carbon footprints from crop planting to consumption. Startups that can deliver novel AgTech solutions – and get products to market in a timely fashion – can expect to make a profit.
Here we explore some key technologies, their transformative impacts on the industry, and food tech trends that are attracting investor attention.
Artificial Intelligence (AI) in Agrifood
AI optimizes farming decisions, predicts crop yields, and automates processes. AI-driven algorithms analyze data from satellite images and sensors, providing recommendations for water and nutrient management that reduce waste and improve crop health.
Bioenergies and Biomaterials
These convert agricultural byproducts into renewable energy or eco-friendly materials, reducing waste and offering new revenue streams. Innovations include bioplastics from plant residues, which are biodegradable and reduce the carbon footprint compared to petroleum-based plastics.
Vertical Farming
This method involves growing crops in vertically stacked layers, using up to 70% less water than traditional farms, and operating year-round. It is especially effective in urban areas where space is limited.
Alternative Proteins
Technologies producing plant-based and lab-grown meats cater to the increasing demand for sustainable and ethical food sources, reducing the environmental impact of livestock farming by lowering land use, water consumption, and emissions.
Food Waste Reduction Technologies
Innovations like intelligent packaging, apps connecting consumers with surplus food, and processes transforming food waste into valuable products enhance food security and supply chain efficiency.
Carbon Footprint Reduction
Innovations across the farm-to-fork chain include carbon capture systems in agricultural processes, advanced composting techniques, and the development of resilient crop varieties, all aimed at reducing greenhouse gas emissions.
Farm Robotics, Mechanization, and Equipment
Addressing labor shortages and enhancing efficiency, these include drones for crop surveillance, robotic harvesters, and automated irrigation systems, which improve precision in farming and reduce operational costs.
While the array of emerging technologies promises transformative impacts on the Agrifood sector, realizing these technologies’ full potential requires navigating numerous challenges. This brings us to a critical aspect of innovation in the Agrifood space: the journey of startups from concept to market viability and the myriad hurdles they encounter along the way.
Startup Success: Identifying Opportunities and Overcoming Obstacles
Agrifood startups aren’t fundamentally different from startups in other sectors. They face a ruthlessly Darwinian corporate ecosystem that devours new businesses. The current overall failure rate for startups is 90% and Agrifood startups often face their own unique hurdles with prolonged and exhaustive R&D requirements and complex and demanding regulatory hurdles.
If it takes 7- 10 years to go from an exciting new concept to a viable product launch, you’d better be sure that today’s groundbreaking new technological solution will still be innovative and relevant a decade from now.
Agrifood startups may also need to address scalability issues, market competition and consumer trends, cybersecurity challenges, price changes to crucial raw materials, and pretty much every ordinary issue that affects new businesses.
The comparison of minnows trying to swim in an ocean full of predators is a valid one. Frequently, the key to sustained funding and short – to medium-term survival is a strategic partnership with a startup accelerator. In exchange for a small percentage of equity, startups can dramatically increase their survivability.
ICL Planet Startup Hub: A Leading Innovation Accelerator
ICL’s corporate investment arm, ICL Planet Startup Hub creates a flexible structure, as both an accelerator and incubator, where promising Agrifood startups can benefit from multi-tier funding options, and expert collaboration, access to world-class research and development facilities as well as to ICL’s international professional networks and organizations.
Via its strategic investments ICL Planet Startup Hub aims to help its startup partners achieve their full potential, significantly reducing time to market and ensuring a smooth progression from new business to SME-level Agrifood companies – and beyond. The current agrifood market size more than justifies enthusiasm for new startups and, despite challenges, the investment landscape is set to improve.
ICL Planet Hub Case Studies
Protera – Harnessing AI to Create Edible Proteins
Protera was founded in 2015 to address the emerging requirement for alternative proteins. The company uses advanced AI with a predictive algorithm MADI™ to identify new natural proteins and facilitate their design and production. Protera aims to deliver vital enzymes in high tech food products that combine affordability, sustainability, and nutritional density.
The real challenge is to create modern protein products that are appetizing enough to generate real consumer demand and brand loyalty. Protera is using its unique technologies to design plant-based products that can make a real inroad into the problems of global hunger and malnutrition.
Agrematch -Harnessing Next-Generation Data Science
Agrematch is one of the most exciting agritech startups in the Planet Hub Portfolio. The company uses a unique AI computational system that operates on the very boundaries of existing technologies. It enables the identification of compounds with a suitable compound-plant interaction for the creation of novel bioactive products.
Industrial end users who integrate the new bioactive compounds into their products can benefit from a shorter time to market, reduced R&D costs, and can design higher quality and more durable products. Agrematch’s expert knowledge of chemistry, biology, and data science has created a powerful synergy that is transforming the development of industrial products.
Arkeon – Converting CO2 into Edible Protein Ingredients
If you were looking for a technical innovation that sounded too fantastical to be true, Arkeon’s proprietary technology would be a strong contender. The Austrian Planet Hub partner is using ancient microbes to convert CO2 directly into ingredients for edible proteins. This is one of the most exciting and revolutionary concepts currently in the Agrifood market.
The greenhouse gas CO2 accounts for 0.04% of the gasses that make up the Earth’s atmosphere and is a (currently) unwelcome byproduct of many natural and industrial processes. Arkeon is demonstrating its ability to convert an unwanted pollutant into essential amino acids and functional peptides that are vital for human health. This regenerative approach to achieving food security can potentially make a major impact and contribute to an increase in the overall Agrifood market size.
ICL: Pioneering New Growth in the Agrifood Sector
In the face of climate change, extreme weather events, disruptions to supply chains, and a growing global population, there is an urgent need for innovative Agritech solutions that enhance efficiency, adaptability, and sustainability in farming and food production. Despite recent declines in capital investment overall, the significance of the Agrifood market remains undiminished — it is essential for human survival and poised for growth.
ICL is at the forefront of research and development, and in creating strategic partnerships that are enabling a new generation of Agrifood innovators. The ICL Planet Startup Hub is attracting some of the best and brightest researchers and entrepreneurs in the field of Agri-food tech. We provide these innovators with the collaboration they need to transform promising ideas into market-ready products, navigating the challenging transition from nascent startups to successful, profitable enterprises.
Are you ready to be at the forefront of Agrifood innovation? Connect with us at ICL Planet StartUp Hub to explore how you can contribute to and benefit from the next wave of Agritech and Foodtech advancements. Let’s shape the future of food security together!
Conclusion: Shaping the Future of the Agrifood Sector
As we conclude our exploration of the Agrifood sector, we see that the challenges of today—from climate change to feeding a growing global population—demand innovative solutions. The technologies discussed, such as AI and alternative proteins, are not merely advancements; they are essential tools to ensure a sustainable and secure future.
While companies like ICL are pioneering these efforts, the path forward requires a collective push. The Agrifood sector is not just an area of economic opportunity; it is a field of action critical for the survival and well-being of billions. This sector offers everyone, from investors and entrepreneurs to researchers and policymakers, a chance to make a tangible impact.
Let this be a call to action for all stakeholders in the global food system!
It’s time to harness the collective expertise, innovation, and capital available to transform challenges into opportunities. Together, we can propel the Agrifood sector towards a future where sustainability and efficiency are at the forefront.
Join the movement towards a more sustainable Agrifood future. Engage with us, invest in the sector, and contribute to developing solutions that not only promise substantial returns but also foster a resilient and equitable global food system. Your participation is crucial as we strive to meet one of the most pressing challenges of our era.