Agtech funding reaches near-record level despite fears of economic downturn

Despite growing concerns about a potential recession, agtech startups still raised a near-record amount of VC money in the first three months of this year, per a new report from Pitchbook.

Founding farmers

In Q1 2022, VCs worldwide invested $3.3 billion in agtech firms across 222 deals—that’s more than double the $1.5 billion invested in the sector in Q1 2021 and just 9% less than the Q3 2021 record of $3.7 billion. In comparison, overall VC funding grew by just 3% over that timeframe, per Crunchbase figures.

“I think it’s important to caveat that, in Q1, we saw most of the volatility begin mid-quarter,” Alex Frederick, senior analyst of emerging technology at Pitchbook and one of the authors of the report, told us. “At that time, I think most of the deals were already locked in place.”

From here, Frederick expects things to calm down a bit. Although there are “very elevated levels of dry powder or capital available that needs to be put to work in the next three to five years,” he said he expects funds to rein things in over the next few months, making smaller deals and being less willing to pay elevated prices for startups.

“I was expecting to see a funding dip because we’re seeing a funding dip in other verticals,” he added, but noted that from here “investors largely are going to take [the] more conservative approach.”

Despite this potential belt-tightening, Frederick said crises like the war in Ukraine, which has sent the price of nitrogen fertilizer and many other foods surging, will create some opportunities for agtech startups to innovate.

Companies like Kula Bio and Pivot Bio, for example, are working on novel ways to reduce reliance on or conserve usage of synthetic nitrogen fertilizers. Kula Bio, which makes synthetic nitrogen fertilizer substitutes, raised a $50 million Series A funding in January. For its part, Pivot raised a $430 million Series D in July 2021. Pitchbook’s report argues that its environmentally-friendly product could appeal to farmers, albeit at the cost of less precision.

Other notable Q1 deals included California indoor growing operation Plenty, which raised $400 million in Series E funding back in January, and Israeli beekeeping operation Beewise, which raised over $80 million in Series C funding in March.

Big picture: The majority of agtech funding in Q1 went to the agrifinance and e-commerce industry, which raised ~$922 million across 36 deals, as small legacy farm outfits looked to find ways to better monetize their crops.