Illustrative AgTech Insights: AgTech Investment on the Decline and What that Means
Landscape dynamics in the world of agtech investment.
One of my biases has been writing to convey a point.
I have long acknowledged that people, on average, learn better through a well-constructed image—after all, the saying is, “A picture is worth a thousand words.” however, I have poorly acknowledged this with action.
I even highlight it in 22 Mental Hacks for Agribusiness Leaders, with #19 being the following:
Quantify & Visualize What You Can If you can quantify it, do so. That means you can measure it, can manage it and can improve it. Otherwise it’s abstract.
Additionally, people do better with images and pictures - if you can visualize it, do so.
Moving forward, I will be doing a regular series (no set cadence, though) where I will be highlighting images, graphics, and charts that I think convey a useful insight and story surrounding the world of agribusiness and agtech.
This week, I am pulling on the thread of AgTech Investment on the Decline: What does it mean? brought to life through a series of images and data sets.
The next three Illustrative AgTech Insights will include the following:
AgTech Knowledge Gaps in Farmer-Trusted Advisors
Bigger is Faster when it comes to AgTech Adoption— Age is Irrelevant
Spend of Agribusinesses on IT Infrastructure and Systems
1. AgTech Investment on the Decline: What does it mean?
AgFunder News releases their excellent Global AgriFoodTech Investment Report every year.
In the 2023 report, we can see that investment from 2021 to 2022 in the entire agrifood value chain declined by almost 50%:
Source: AgFunder News
Pitchbook is finding the 2022 downward trend to be the reality for 2023 as well. From their recent Q2 2023 Agtech Investment Report:
According to PitchBook, six months into 2023 (report counts until June 30 2023) the investment numbers are tracking at about one-third of 2022.
It’s essential to break this out, though— the bulk of this decline is alternative protein, CEA and even further downstream (eg: grocery) with the likes of FarmTech (the area Upstream covers) having the most minor decline year-over-year, again from AgFunder News:
As an aside, this also ignores that some of the largest agribusinesses, like John Deere, are increasing their R&D spend— in Deere’s instance, by 15% in 2023. That equates to almost $300 million in incremental dollars.
It is noteworthy to look at stages though, too. Early stage, meaning Seed and Series A declined the least, with growth and late stage rounds (Series B and beyond) decreasing the most in 2022:
Source: AgFunder News
Late-stage companies are expected to produce profitable unit economics, while the early-stage companies are still “selling a vision.” Vision is easier to convey than quantifiable KPIs within a business.
Getting to stable, profitable unit economics has proven difficult for many Agtech companies that are Series B and beyond.
The IPO window is opening. However, it seems unlikely that any of the late-stage agtech companies, like Farmers Business Network, Indigo Ag, or Taranis, for example, have anywhere near the businesses to consider an IPO.