As the farming industry evolves, so does the agriculture investment space. We’ve moved beyond simply investing into a crop and gaining returns from the yields. As equity crowdfunding in agriculture progresses, new investment opportunities arise. Agriculture technology (AgTech) investments have exploded over the last half decade, with more exponential growth expected within the coming years.
AgTech Addressing Agflation
Food prices in 2021 have increased to their highest level in six years, according to Nasdaq. Generally, rising crop prices improve margins for companies higher up the supply chain and hurt margins for companies lower down the chain, such as consumer-facing food companies, because of higher input costs. Protein companies, like poultry, beef and pork producers, are caught in the middle with higher animal feed costs and potentially higher meat prices. Ultimately, cost increases are passed to the consumers. When agflation is high, a greater percentage of household income tilts towards food.
The developing AgTech sector addresses food inflation with innovations that seek to lower per-unit costs on a financial and environmental basis. Just as agriculture is a diverse industry, so too is the AgTech space. These wide-ranging innovations include precision agriculture, improved irrigation technology, vertical farming, alternative proteins, farmland and timberland carbon credit programs, non-toxic and sustainable fertilizers and crop chemicals, and data analytics and intelligent software programs.
2021 AgTech Investment Capital
AgTech has seen increasing investor interest, according to Crunchbase numbers. While not approaching the funding numbers of enterprise software or FinTech, AgTech funding in the U.S. increased from about $1.8 billion in 2018 and $2.4 billion in 2019 to $5.1 billion in 2020. As of late June 2021, just over $4.3 billion has been invested in the sector. If this pace holds, the 2021 investment total will be 70% higher than last year. In addition to increasing investment dollars, the number of deals completed is also on pace to increase 25% over last year.
Of these deals, 60% were in early-stage startups (companies that have raised less than $10M in capital), 24% were in emerging stage startups (companies that have raised between $10M – $50M in capital), and 16% were in later stage startups (companies which have raised more than $50M in capital). The high percentage of early-stage deals shows a rebound from last year’s slowdown driven by COVID-19 when many venture capitalists focused on follow-on investments in their existing portfolio companies.