Global Climate Behind Rise of Agtech

The Agtech sector has experienced near record funding in Q1 of 2022, as the current political, environmental and social climate inflames long-term problems to do with food security, such as higher process for fertilizer and commodities.

PitchBook analysts identified three factors pushing venture capital activity into Agtech startups forward in 2022: heightened worries for food security, data-driven productivity gains and sustainable agricultural techniques, including carbon monitoring tools and biochemicals.

Agtech companies worldwide have attracted $3.3 billion across 222 deals, marking a 15.5% increase in deal value with each quarter.

This excitement about Agtech within VCs persevered throughout Q1, despite volatile market conditions that have negatively affected major sectors and their stock prices.

Agrifinance and e-commerce sectors collected $291.8 million across 222 deals, raking in the largest stake of VC funding in Q1, as many companies and startups working in these segments look to develop novel solutions to help emerging markets.

For example, the larger part of food production is mainly conducted by smallholder farms, identified with inefficient, outdated infrastructure and markets just beginning to take force.

Utilising agribusiness marketplaces and e-commerce tools can widely raise supply and demand in emerging markets and has the ability to unleash the economic capacities of agricultural land.

Robust and persistent Agtech funding has increased deal sizes and valuations across most business stages, with the larger part of growth being seen in early-stage companies, where deal sizes charged up 59% and pre-money valuations climbed to 67% year over year.

The increase in value from pre-money to post-money in early-stage companies was 2.7 times, a 33.2% increase year over year.

Though investors are enthusiastic about early-stage startups, this excitement dampens with companies at the later stage in the sector.

Median VC deal size growth stabilised at $10.5 million for late-stage VC, after soaring 45.3% in 2021, and median pre-money valuations declined 32% to $37.3 million for late-stage VC, according to Pitchbook data.

However, VC activity in later-stage companies has historically been subject to valuation volatility, so it may be too early to know if investors are employing unexpected caution.

This surge in VC activity has exciting implications for the future of farming, as innovation pushes forward in the domain of agriculture.

Agtech is not slowing down any time soon as high-tech solutions and the use of AI ease labour shortages and boost farming and harvesting efficiency, while indoor vertical farming has yielded faster growth with very little water and no pesticides.

Water management solutions and agricultural drones are more of the top Agtech trends to look out for, as further institutional money pours in, allowing farming to be more representative of sustainability, reduced exposure to chemicals, and enhanced monitoring.

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