The future of the agriculture industry is inextricable from the issue of climate change â and many of todayâs agritech and foodtech startups are attempting to act as the needed solution.
âThe best pieces of land, the best soil around the world, are getting totally overused, and not really able to support life,â says Luc Boulet, a baker, who with French investor Alexandre Garese, opened a bakery in New York to highlight ancient grains and local suppliers engaging in regenerative farming practices.Â
But for investors, separating the wheat from the chaff can be tricky.Â
Take the enormous hype surrounding lab-grown meat for example. Even in over a decade, consumer habits havenât shifted substantially away from meat â in fact, global meat consumption is expected to rise 14% by 2030, according to OECD predictions.Â
âThe Beyond Meat IPO was really a catalyst and an accelerator,â says Rosie Wardle, cofounder and partner at Synthesis Capital and an early investor in Beyond Meat, which broke records in 2019 when its IPO rose 160% in its market debut. With that startling debut, investors flooded into foodtech and agritech â but many were unfamiliar with the regulatory burden involved. It was a âfalse dawnâ, says Garese.Â
âInvestors were using the playbooks that we see in SaaS, in fintech, in cyber, these hockey stick companies that can go from making one million in revenue to 5, to 20, to 50, to 100 million,â says Gil Horsky, senior director of venture investments at Mondelez.Â
An awakening for many has forced the current market correction and VC investments in agritech and foodtech plummeted 44% in 2022. So whatâs next? We asked four investors what they think.Â
Agriculture without reducing soil quality
For Garese, the drop in VC funding in food and agritech was necessary and isnât going away immediately. However, his sense is that agritech is a âlong play nowâ, and expects a rebound in capital inflows in the medium to long term.Â
Agritech is âa long play nowâ
His heritage seeds project is driven by a conviction that the practices of mass agriculture are short-sighted and require a rehaul of contemporary practices that degrade soil quality and fertility, and impact human health.
As Garese works toward the Grand Heritage Bakery showcase with Boulet, he has his eye on some other agritech enterprises that serve the same broad mission.Â
Technologies that make agricultural production more efficient without reducing the quality of soil â automation in harvesting, circular systems that convert biomass into hydrogen and biochemical advances in fertilisers â are some areas where Garese is excited to see advancements.Â
Of Dealroomâs 100 agritech startups to watch list, 33 are European.Â
Differentiated plant-based products
Wardle is similarly optimistic about the long term future for agritech and foodtech, despite her prediction that the industryâs âcorrectionâ is still in its early stages, and any bounceback will take time.
One foodtech startup in a good position that Wardleâs eye is on is US-based cultivated meat company Upside Foods. Well-capitalised and poised to extend its competitive advantage, it raised a $400m Series C round in April 2022.Â
Tel Aviv-headquartered Redefine Meat is another startup that Wardle is watching, because they âreally offer a differentiated product in the plant-based categoryâ. Her approach to investing is to steer clear of any startup thatâs âyet another chicken nugget product that you see on the shelves all the timeâ.
Regenerative farming techniquesÂ
Isabella Fantini, foodtech investor at REMUS Capital, is seeing a number of problems that were thought of as âimpossibleâ being finally tackled. US-based Tortuga Techâs agritech robotics and Adavivâs AI-driven crop visibility are two prime ones to watch, according to Fantini.Â
âI think investment will go towards things that are a little less shinyâ
Sheâs also paying attention to the companies that are well-placed to ease farmersâ transitions into regenerative farming techniques. âItâs a very fundamental shift to your business model,â says Fantini, adding startups offering compromises and tangible business steps toward more sustainable methods are also necessary.Â
âI think investment will go towards things that are a little less shiny,â Fantini predicted: the focus now is on realism over moonshots.
Food as medicineÂ
For Horsky, 2022âs investment decline in agri-foodtech made sense. âIn food, even if itâs an outstanding company, there are actually no shortcuts,â he says.Â
âIn food, even if itâs an outstanding company, there are actually no shortcutsâ
A theme thatâs definitely one to watch, according to Horsky, is an impact on energy security. âAfter Covid and the war in Ukraine, the topic of food security really elevated the importance of those industries,â he tells Sifted.Â
For example, to tackle food security and meat overconsumption, startups like Swedenâs Mycorena are deploying fungi as potential solutions.Â
Another is the idea of food as medicine. Horsky is keeping an eye on the rise of supplements, precision nutrition and synbio technologies.