Finistere Ventures has unveiled the latest agri-food investment numbers in its AgriFood Tech Investment Review series. Notably, the venture pioneer hails 2020 as a “tremendous year” for this sector. According to its analysis, this year has already exceeded 2019’s “record-breaking” totals.

Agri-food tech start-ups raised US$11.6 billion in funding in 2020, bringing the investment total from 2010 through Q3 of 2020 up to US$46.4 billion.

“There have been some exciting developments on two fronts within crop protection, biotech activities hitting the market and a renewal of small molecule discovery,” Ingrid Fung, investment director at Finistere Ventures, tells FoodIngredientsFirst.

“We’re starting to see the first wave of advanced biologicals start to hit the market. Two exciting companies to watch in this space are Vestaron, for its peptide-based insecticide and GreenLight Biosciences for itsRNAi-based crop protection,” she continues.

“They’ve got great platform-based technologies that have the potential to help assuage the reputation that biological (naturally derived) crop-protection products lack efficacy.”

Finistere is bullish on what the future holds in crop protection as industry refocuses on what the company calls “good science.” 

With “Transparency Triumphs” pegged by Innova Market Insights as a Top Trend for 2021, the company believes that this segment will be key to climate-proofing food security.

Indoor farming for flavor-packed produce
Fung notes that the first generation of indoor agriculture was centered around hyper-local production of produce, sometimes even at the in-home or restaurant level. 

“These plays weren’t really well suited for venture-scale growth,” she continues. “Today, the emerging leaders within indoor agriculture, such asPlenty, BrightFarms and AeroFarms, are focused on shortening the supply chain that gets produce into stores and consumer hands.”

Fung says that consumers should get ready to see an expansion of product offerings from these companies as they start to branch out beyond leafy greens. 

“Plenty, in particular, recently partnered with Driscols to grow berries indoors – this will be amazing for those of us who don’t love the taste of berries shipped across the country in winter months,” says Fung.

“Current berry varietals grown in winter months were bred and optimized for heartiness and tolerance for long-distance shipping. Unfortunately, optimization for these characteristics came at a cost of flavor and texture,” she explains.

“This is why – if you’re on the east coast of the US like me – the strawberries on our shelves during winter months are rather hard and flavorless.”

With partnerships in the indoor agriculture space like those between Driscols and Plenty beginning to build out, consumers can start to look forward to more flavorful, “near-ripe” produce in grocery stores year round, Fung envisions.

Big potential in small molecule discovery
Fung also highlights that few agri-food tech start-ups have been financed to do discovery work around traditional small molecule actives. 

“Companies like Enko Chem (a Finistere portfolio company) are taking technologies and approaches developed for pharmaceutical discovery and applying them to crop protection targets,” comments Fung.

“When executed with a lens towards sustainability metrics, such as environmental persistence and limiting off-target effects, there’s the potential to develop a whole new generation of crop protection products that are both efficacious and sustainable.”

Agri-food funding hits US$46 billion over past decade
With more than US$46 billion of venture capital flowing into agriculture and food advances over the past decade, AgriFood tech has become a focus of tremendous investor interest. 

Key findings of Finistere’s review include: 

• Agriculture tech investment totaled US$3 billion in the first three quarters of 2020 (total capital invested in 2019 was US$2.7 billion).
• Food tech investment totaled US$8.4 billion in the first three quarters of 2020 (total capital invested in 2019 was US$7 billion).
• The majority of capital invested in both sectors went to later stage deals – demonstrating increasing market maturation.
• Indoor agricultural players benefited most from COVID-19 tailwinds tied to supply chain insecurity and demand for fresh produce.
• Likewise, in food tech, start-ups in e-commerce delivery and meal kits saw sales boosted by COVID-19 concerns.

“The flow of capital is shifting as the market matures,” remarks Arama Kukutai, co-founder and partner at Finistere. 

“While more investment dollars pour into advanced crop protection technologies, indoor farming, alternative proteins, food delivery and supply chain advances, investment in mainstays like digital agriculture is consolidating as leaders start to emerge.”

Finistere is bullish on what the future holds in crop protection as industry refocuses on what the company calls “good science.”While substantial progress has been made, Kukutai flags that there is still a long way to go. 

“The investment trend we are seeing is long overdue in a massive sector that has been under-invested, and there is a lot of room for further growth. Building a sustainable agri-food ecosystem is absolutely critical, and it will take a lot of time and more capital.”

Scale-up challenges and technological differentiation
In addition to regulatory barriers, access to working capital is a major challenge for F&B start-ups. 

“We see that oftentimes post-technology development and de-risking, F&B start-ups require large capital investments to secure contracts, shelf space, and to finance manufacturing,” says Fung.

“Being cognizant of what type of capital is appropriate for the spend is key to avoiding these challenges.”

Finistere believes that technological differentiation that services a real consumer need is key to establishing a product as a staple and not a passing fad. 

“What we are seeing within the ingredients space is the blending between ingredients suppliers and consumer brands,” highlights Fung. 

“For example, companies like Beyond Meat, and Impossible Foods are alternative protein innovators that have built a strong consumer brand and presence.”

“We’re expecting the increase in this operating model to continue as we move into the new decade, with ingredients companies establishing a strong consumer brand and presence, in order to drive customer pull from their customer’s customer,” Fung concludes.