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Agriculture venture capital firm AgFunder has released the results of its 2020 food and farm tech investing report, pointing to a bumper year for agriculture capital raising, amid and despite the global social, health and economic disruptions of covid-19. Startups raised $26.1 billion across 2707 deals in 2020, a 15.5% year-over-year increase, which we expect to increase to more than $30 billion as new 2020 deals come to light. This would represent 34.5% growth over 2019.

According to AgFunder, much of the increase was a result of “significant growth” in late stage deals, where investors doubled down on existing portfolio companies, made up of the so-called “first-wave” of agtech innovations. But early-stage deals also grew, as the second wave of agtech firms gained greater recognition by a wider community of venture capital investors. In all, 2787 unique venture capital investors committed capital to agtech firms in 2020.

For the first time ever, upstream agtech firms–companies “closer” to the farm, including agriculture biotech, farm management, robotics and equipment, midstream technology, bioenergy and biomaterials, and agribusiness marketplace startups–attracted more investment with $15.8 billion going to this segment, compared to $14.3 billion in capital committed to downstream, which includes physical and online restaurants and retail.

The single-largest deal–$1.6 billion for refrigerator and cold chain logistics company Lineage Logistics–accounted for a large share of the $5.3 billion in capital raised for midstream technology. But, per AgFunder, the number of deals closed was still 30 percent higher than in 2019.

While the median deal size for growth and late-stage funding rounds increased by 29 percent and 17 percent (respectively) from 2019 levels, early-stage agrifoodtech investing, particularly in upstream companies, showed 10 percent more capital invested, 15 percent more deals closed, and a 10 percent increase in median deal size at seed stage and Series A rounds.

Geographically, AgFunder found, 2020 showed a return of investment dollars to U.S.-based firms, with 37 percent of deal activity and 51 percent of capital committed ($15.45 billion) to U.S. companies. China was second in both categories with $5.6 billion, due to a number of large downstream-sector deals, but total deal count decreased 21 percent from 2019 (Asia as a whole closed 7 percent more deals year-on-year).

“The return of capital to the U.S. could be a slight flight to safety in the wake of the pandemic, as well as investors doubling down on previous and now more mature bets in their portfolios, with U.S. companies like Lineage Logistics, Impossible Foods, and Nuro raising $500 million-plus rounds,” AgFunder’s researchers wrote. “Those deals did not skew the analysis as there was also a 30% year-over-year increase in the number of deals in the US.”

Year to date, 2021 suggests that robust investor interest is continuing apace, with a number of salient trends emerging. Special Purpose Acquisition Companies (SPACs), which have become a popular vehicle for early-stage companies to go public through a specialized acquisition, will also likely find targets in agrifoodtech, AgFunder writes.

“SPACs create both a more dynamic exit environment and the possibility of building new high-growth food companies. This will drive early-stage investment, create incentives for innovation and entrepreneurship, and further accelerate the demise of the incumbent food companies.”

Additionally, AgFunder expects animal farming to shift toward regenerative agriculture practices, carbon neutrality–particularly in dairy–and premium price offerings in plant-based products, which the company expects to become more price-competitive and mainstream in 2021.

In emerging markets, animal protein production will remain dominant (though consumed in significantly smaller quantities than in developed markets), due to pricing trends and traditional farming practices.

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