Source: blog by John Campbell, Ocean Park as it appeared on GlobalAgInvesting.com
The agricultural landscape has never looked more unpredictable, and deep changes may be on the way.
John_Campbell_ATN19GazetteFarmers have adopted new technology for generations, but the speed, depth, and breadth of research and products hitting the market today is truly head-spinning. Dubbed “agtech”, the application of new breeding techniques, soil microbiome enhancements, and evermore precise field and climate data applications makes feeding a growing population on improved diets quite attainable. But this unfolds against the backdrop of a society with changing values on food production.
During the past five years, the U.S. agtech sector has shown rapid expansion, both in terms of the number and diversity of companies, and it continues to provide a growing source of investment for venture capital, private equity, and strategic players. With a future poised to bring more M&A activity in the sector, as well as capital infusion to the production side, agtech is on a path of true disruption. As you read the brief analysis below, see if you do not find yourself getting excited about the disruptive possibilities too!
For the purposes of this discussion, agtech will be classified into four segments:
• Plant Health and Nutrition – includes novel plant biologicals, breeding techniques, soil amendments, bio-stimulants, and bio-pesticides.
• Animal Health and Nutrition – includes animal disease vaccines and medicines, new animal feeds, genetic makeup, and livestock management.
• Equipment and Data – includes aerial monitoring, precision agriculture, agricultural equipment linked by the internet, big data, and data analysis services.
• Food Technology – includes cultured meat, novel ingredients, plant-based proteins, food safety, new production methods, and agricultural marketplace.
Top 5 AgTech Trends to Watch
1. The Rise of Problem Solvers: The agtech industry will continue to grow as companies try to solve problems of sustainability, pesticide and herbicide resistance, antibiotic replacements, farm level productivity, and the challenging economics of traditional agricultural methods.
2. An Increasingly Diverse Landscape. Since 2014, 282 agtech companies have raised $5.5 billion of private capital across 481 transactions in the U.S. and Canada. Plant Health and Nutrition has attracted the most investment, with 159 deals raising $2.2 billion, or 40 percent of all capital raised.
3. Robust Capital Raising Activity. Agtech funding experienced substantial growth between 2014 – 2018, increasing from $828 million raised in 2014 to $1.4 billion in 2018, which represents a 13 percent CAGR. The average agtech capital raise has nearly doubled in size from $7.7 million in 2014 to $13.1 million in 2018, with activity growing most significantly in Food Technology and Plant Health and Nutrition.
<b?4. smaller=”” deal=”” sizes.<=”” b=””> For the five-year period, the average M&A deal size was $11.5 million, with 61 percent of all capital raises smaller than $5 million and 27 percent larger than $10 million. Since 2014, 86 agtech companies have closed 128 transactions larger than $10 million. Plant Health and Nutrition had the most transactions (44 total) with deal sizes greater than $10 million. Excluding the three largest transactions in each segment, the average deal size is $8.4 million.
5. Fragmented Investor Base. Since 2014, 219 institutional investors, including venture capital firms and family offices, have bet on agtech with transactions larger than $10 million in size. Of note, more than 65 percent of those investors have participated in only one-off transactions. The 10 most active venture capital firms have made 112 agtech investments.
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