According to the United Nations’ Food and Agriculture Organization (FAO), around 25% of the planet’s 7.8 billion population is currently suffering from malnutrition, and nearly 1 billion are severely hungry. In the next few decades, the world population set to surge to a whopping 9.7 billion people by 2050. If some people are famine with current food production level, the demand for food by 2050 will likely outpace food production if the current rate of output remains the same.
Given the current levels of population and likely trends, it is imperative to anticipate future needs. It is time to shift the conversation from the problems to the solutions. Today’s agriculture operations work far different than decades ago. Primarily because of the advancements in technologies including sophisticated sensors, machines, robots that allows precision agriculture and make businesses more profitable, environmentally friendly and more efficient. Innovation in terms of technology adoption, farming methods are more important in modern agriculture than ever before.
Agriculture sector investment lags behind other sectors.
While investment in agriculture innovation and more sustainable farming practices has climbed to nearly US$7 billion in the last few years, it still lags substantially behind other sectors. From the figure below, it is surprising to observe that global venture capital funding investment into the agriculture sector in 2019 is just 0.7% of the total US$ 947 Billion in 2019. Global VC firms focus more on other industries. The Top 5 industries with highest investment value in 2019 are Internet (26%), Healthcare (11%), Financial (11%), Mobile & Telco (10%) and Energy & Utilities (7%).
FoodTech is overhyped, and upstream FarmTech is gaining more traction nowadays.
The pace of innovation in the agriculture and food industry has not kept up with that of other sectors, as highlighted by AgFunder’s annual reports. AgriTech can split into two parts: “FarmTech” refers to technologies that target farmers or planters, “AgriFood Tech” by contract targets manufacturers, retailers, restaurants and consumers. AgFunder co-invested with many prominent venture capital firms globally, and the statistics show that FarmTech is getting more traction from investors over the last few years. FoodTech has always been the significant investment portion, with CAGR of 136% from 2012 to 2019, while FarmTech CAGR is 23% from 2012 to 2019. AgFunder surveys identified that investors feel e-Grocery concepts, online restaurants and meal kits are overhyped. Investors general preference is now for upstream technology (or FarmTech), over downstream technologies (or FoodTech).
Large corporations are venturing into AgriTech segments in recent years.
The agriculture and food industry is highly inefficient. Often faced challenges such as climate change and global warming, changing consumer demands, limited natural resources, food waste, ageing farmers, food security and sustainability. That is why technology innovation is sorely needed to disrupt this space, from the upstream farmers and mid-stream logistics providers to the downstream consumer food businesses.
Many large corporations who were never involved in the agriculture and food industry are now venturing into this segment. These corporations are generally investing in both upstream and downstream segments. Some examples as below:
- PETRONAS invests in AgriTech startup in first Venture Capital foray in Malaysia (June 2020)
- Yamaha investment fund ploughs $11 million into AgriTech startup (June 2020)
- Facebook is investing $5.7 billion in India’s mobile network operator in the Indian agrifood ecosystem (June 2020)
- Omnivore, Accel and Mayfield invested $5.5 million in Clover, a Greenhouse AgriTech startup in Series A round.
- Amazon in talks to invest in AgriTech startup Ninjacart (June 2019)
- IKEA, David Chang and the ruler of Dubai invest $40 million in AeroFarms (November 2017)
- Google pumped $15 million into farming-focused technology startup (May 2015)
- Intel Capital invests $62 million in AgriTech (November 2014)
AgriTech innovations deserve more attention and significantly more funding, especially upstream FarmTech segment. The United States has been the largest market in FarmTech segment investment, accounting for 61% of total FarmTech funding, around USD 2.77 Billion. Asia is contributing >60% of global food production. Still, investment in Asia’s FarmTech only accounted for 9% of total FarmTech funding, which is around USD 0.45 Billion only. It is time to put the focus back to Asia FarmTech investment.
In conclusion, there is enormous potential in the Asia market. In the next decade, the number of mouths to feed in Asia will increase rapidly. By 2030, there could be 250 million more people in the region — the equivalent of the population of Indonesia, the fourth most populous country in the world. According to The Asia Food Challenge Report, Asia will double its total spend on food to more than US$8 trillion by 2030, presenting a massive opportunity for corporations and investors.
Written by Ee Wei Yuan, Principal Consultant at 27 Advisory
Having more than 27 years in business, 27 Group is able to provide you with access to investors for competitive funding needs while providing better ways to operate your business through financial and corporate advisory. We are the only 100% Malaysian owned consulting firm that is fast, flexible and focused with unique expertise that blends of local socio-economic policy setting, engineering built assets globally and detailed in financial analysis.
We do project development integration to improve project returns and are committed to providing a sustainable environment for a better tomorrow. Our delivery model blends values important to humanity into business strategy through socio-economic transformation modules and we are passionate about building opportunities for the next generation to achieve their highest potential.
#rebuildinghumanity is 27 Group’s vision to collectively rebuild our nation through assets we build (eg. infrastructure, real estate, hospitals) and natural capital (gas resources, plantations, human talent) using innovative and sustainable methodologies.
Speak and rebuild with us if you need fresh ideas or more efficient financing or project implementation to improve your KPIs: ivan@27advisory.com.my
