We care about food. The world cares about food more than ever before. Investors should take note.
Rising demand, diverse new patterns of consumption, environmental and eco-sustainability concerns, both in terms of production as well as the footprint certain practices leave on our fragile ecosystem, have consumers, producers and every relevant vertical industry investing heavily in Agrifood tech ventures.
The Agrifood industry and adjacent fields are changing forever. Current digitization trends and associated disruptive practices create a unique time to be investing in food and agriculture technologies. The areas of interest to investors include food safety, transparency and traceability, functional food and all technological intersections in the broader sector.
Essentially, agrifood technologies split into two branches. “Agritech”, which includes solutions that target farmers and “Foodtech”, which refers to manufacturers, retailers, restaurants and consumers. Jointly, the two have an enormous impact on the supply chain, from seed and farm level all the way to the plate.
Agritech and Foodtech companies aim to disrupt what, where and how we grow. Their goal is to feed more people more efficiently. To do that, they follow the growing trends of democratization, transparency, traceability and sustainability in food production.
Surprisingly, given the amount of R&D spend in the agricultural industry, the rise in Agrifood startups is a relatively recent trend. Indicatively, the world’s largest private agricultural company, Cargill, has recently returned to tech investment alongside environmental treatment company Ecolab and Techstars, to launch a new accelerator program in Minnesota.
Agrifood technologies have been a small but growing segment of the startup universe, aiming to radically change the global food and agriculture industry. Technology plays a key role in the operation of the agrifood sector, a $7.8 trillion industry responsible for feeding the planet and employing well over 40% of the world’s population. However, the pace of innovation has not kept up with other sectors. According to the McKinsey Global Institute report, agriculture today is the least digitized of all major industries.
The industrial agrifood sector is also largely inefficient compared to other industries. That inefficiency is becoming more acute as the demands and constraints placed on the sector increase. Challenges include a growing global population, set to reach 9 billion by 2050, climate change and global warming, environmental degradation, changing consumer demands, limited natural resources, food waste, as well as consumer health issues and chronic diseases. The need for agrifood tech innovation is greater than ever.
Challenges and opportunities for disruption abound: food waste, Co2 emissions, chemical residues and run-off, drought, labour shortages, sugar consumption, opaque supply chains and distribution inefficiencies, food safety and traceability, farm efficiency and profitability, unsustainable meat production…you name it! Chances are industry experts will agree there is room to improve and dozens of new companies are actively working on it.
Investors have already noticed. In upstream technologies, the last three years have seen a slew of major fund flows. Ag Biotech, Farm Management SW, Farm Robotics & Equipment, Bioenergy & Biomaterials, Novel Farming, Agribusiness Marketplaces, Midstream, Innovative Food, to name a few, have all been flourishing. Consequently, greater capital availability will drive significant revenue growth for a select group of companies, providing the financing foundation for great and robust agrifood tech companies.
Meeting several of the 17 sustainable development goals set out by the UN in its 2030 agenda is directly dependent on the pace of technological innovation in agritech. The spike of global interest in the agritech arena will fuel more innovation and growth.
To focus on just one indicative area, food safety is a key component of an efficient agricultural supply chain. Ensuring food safety is not just a public good. It is also integral to achieving goals such as food and nutrition security, sustainable agriculture, economic growth and enhanced livelihood. Effectively, in order to be food secure, people must have access to safe food.
Stakes in food safety get higher each year; e.g. consumer food hazards bring direct civil and criminal liability charges. Moreover, potential damage to brands and companies’ reputation — from which some may never recover — is immense (an indicative example would be the case of Dole’s Springfield Shutdown).
Lastly, the need for food safety is driven by pressure from downstream retail customers, shared liability with upstream suppliers and the regulatory repercussions from government agencies that constantly tighten oversight guidelines. These “costs” increase every year.
Food safety is a sector primed for growth and disruption thanks to new regulations that are changing the playing field and increased consumer concern about the origins of food products and food manufacturing processes. Meanwhile, incidences of foodborne illnesses continue to rise, as disease-causing organisms in food are increasingly transmitted through today’s interconnected global food chain. In a regional or globalized food supply chain, one proverbial bad apple can be tomorrow’s public relations disaster.
Solutions now being built by Agrifood tech companies relate to rapid technological changes and respectively dedicated mitigation measures in the food safety field. These businesses represent great opportunities, not only for their owners and investors. When it comes to food safety, the entire human race is a stakeholder and the stakes could be higher: nothing less than our common future.
Konstantinos Mavros is Partner at Agroknow. His longstanding business experience and acumen are leveraging our underlying vision of empowering scientific data in the agrifood sector worldwide.