According to a new report from food, agriculture, and climate-tech venture capital firm AgFunder, in collaboration with global ecosystem partner Temasek, funding to food tech and agtech (agrifood tech) startups reached $29.6 billion in 2022, a 44% year-over-year (YoY) drop. This decline in funding can be attributed to the end of the pandemic-induced boom in venture capital investment and increasing concerns about inflation, food insecurity, and labor shortages.
Despite this decline in funding, the report highlights that the sector posted gains in climate tech categories such as indoor agriculture, bioenergy & biomaterials, and precision agriculture. In addition, four categories related to climate tech and efficiency experienced increased funding, with Bioenergy & Biomaterials funding increasing to $2.3bn, up 15% from 2021. “This suggests that investors are increasingly interested in startups that offer solutions to climate change and environmental challenges,” commented the report.
Notably, cheap money and overestimated tech valuations drove 2021’s record-breaking $51.7 billion in agrifood tech funding. However, the current macro challenges, such as food insecurity, inflation, and labor shortages, drive more interest in agrifood tech as a solution, particularly in its climate-tech-related categories.
While the decline in funding to food delivery startups in China contributed to a massive $5.5 billion drop in investment in China agrifood tech in 2022 versus 2021, the decline in the number of deals closed was less pronounced than the dollar drop, with some 2,797 deals closed in 2022, down 22% from the 3,445 recorded in 2021. The biggest deal in 2022 was a $768 million Series E for Turkey’s rapid food delivery giant Getir. The second was a $500 million late-stage deal for now-publicly listed carbon capture company LanzaTech.
Despite the overall decline in funding, a few other key insights from the report are worth noting. For instance, farm tech investment declined 6% year-over-year, with startups raising $10.2bn across 848 deals. Additionally, funding to African agrifood tech startups increased 22% to over $600m, indicating a positive trend. On the other hand, funding declined more than 35% to the following categories: meal delivery, grocery, alternative protein, cloud retail, and midstream technologies.
Download the latest report here.