Deal volume in the agtech sector nearly doubled between 2014 and 2015, according to a new report.
A total of $4.6 billion was invested over 526 financing rounds last year, compared to the $2.36 billion raised in 2014, says AgFunder’s Agtech Investing survey.
Water and irrigation was the second most popular sector, behind food e-commerce. Companies in the latter space brought in more than double the financing that water and irrigation companies did, with $1.65 billion raised by food e-commerce start-ups last year. That is equivalent to 36 percent of total of agtech funding in 2015.
The second largest agtech sub-sector, water and irrigation, attracted $673 million, 12 percent of total agtech funding over 2015.
“Water is a bit of a new category for us,” AgFunder chief executive and one of the report’s authors, Rob Leclerc, told Agri Investor.
“We saw enough of a theme to break it out on its own, and that shows the general interest and important of water resources.”
The most sizeable two deals in the water and irrigation category were both for drip irrigation companies: Indian company Jain Irrigation Systems, which raised $120m, and Israeli company Netafim, which was bought by European private equity firm Permira in 2011 and had a $500 million debt financing round last year.
Bioenergy attracted $305 million through 19 transactions, biomaterials and biochemicals attracted $190 million through 23 transactions, and soil and crop technology companies attracted $168 million through 35 transactions. AgBiome, which has produced its first product to control soil-borne diseases, raised the largest soil and crop tech venture capital deal of the year in a $34.5 million raise, according to the report.
Food e-commerce, which did not include restaurant takeaway technology like JustEat, also accounted for the highest growth by volume and biggest deals on average out of any sub-sector.
Leclerc told Agri Investor: “There are new opportunities for technology to operate in other industries and spheres. As the technology sector moves from a pure digital world to an on and offline world, it has more flexibility to enter new industries. What you see here is the spilling over of tech into the nearest adjacent areas.
“These guys have an opportunity to really disrupt the grocery stores, and that is potentially a big threat to some of the big food producers. Perhaps you [won’t] even have those food producers and you’ll start connecting farmers more directly with the consumer and really disrupt the value chain.”
Leclerc also confirmed the report’s view that the sector was overheated: “We do really question the economics; grocery stores are very thin margin businesses, there is a lot of food waste and [there are] issues with food safety.”
Another fast-growing growing sub-sector was robotics, which attracted $383 million last year, an increase of 237 percent from 2014. “Drones made up the vast majority of this total with DJI’s $75 million Series B and 3D Robotics’ $50 million Series C listed in the year’s top 15 equity deals across the whole sector,” according to the report.
Looking at investor profiles Leclerc said: “You’ve got two groups, a couple of the major corporates like Monsanto Ventures and Syngenta Ventures, and then agtech-focused VCs like Cultivian Sandbox Ventures, Middleland Capital, and then like Anterra Capital in Europe.
“With big corporates, you can think of [them] as almost like an intelligence service and/or insurance product for a corporation. [With] your agtech focused VCs, there are a handful of them that have been active for 5 or 6 years, when agtech was much more narrowly defined, mostly around plant genetics.
“With more technology along the value chain you even have the Google and billionaires like Li Ka-shing backing companies like Horizon Ventures. The scene is expanding.”