agtech, foodtech: a new eldorado for investors? · •impact of big ag’s appetite around 2012,...

Agtech, Foodtech: a new Eldorado for investors?Unigrains Breakfast Meetings

7 November 2017

Why are investments in Agtech and Foodtech start-ups booming?

A STILL LARGELY UNCHARTED SECTOR / VC PUSH LOGIC: AN OPPORTUNITY TO TRANSFER TECHNOLOGY

PULL Logic: many well-understood challenges

Triggers: acquisitions of remarkable startups

Biotech, healthcare IT

2050

9 bnMiddle classes

Environment, Ethics,Regulation

Consumer expectations

2013

$930m

2012

$425m

Unigrains Breakfast Meetings - Agtech, Foodtech: a new Eldorado for investors? 2

Agtech and Foodtech have in common a strong momentum, but with specific themes and issues

Agtech

Software, sensors, decision tools

Robotics, agricult-ural equipment

Crop inputs (biologicals,

seeds, fertilizers, etc.)

Animal health, nutrition and

genetics

Indoor farming

Ag marketplaces and Fintech

Foodtech

Innovative foods

Food safety & preservation

Digitised industry (3.0

factory & logistics, trace-

ability, POS)

Personalised nutrition, quant-

ified self

Internet of food (food

delivery, etc.)

Innovative packaging

Cross-disciplinary issues

Logistics-traceability, food waste, etc.

Summary

Very large community of investors (> 500) in AgriFoodtech:

• Fewer than 20 specialist investors, who have raised around $1.5bn

• The big US venture capital names have contributed strongly to the recent boom

• Booming of corporate venture, notably in the food industry

Very dynamic investments in 2017, with the “internet of food” continuing to crush all other categories.

• The internet of food segment (mainly food delivery) has received more than $12bn in investments since 2014

• Investments in Agtechs topped $1bn for the first time in 2017, driven by megadeals (indoor farming, plant microbiota)

• In Foodtech, the biggest investments were in startups offering alternatives to animal protein (~ $1bn since 2014)

Value creation models have yet to be defined

• Startups are valued on average twice the capital invested (post money)

• In Agtech, where the “big Ag” play a major role, few strategic acquisitions since 2013. In Food delivery, successful IPO in the past five years

• Value proposition: a wide variety of positions, from breakthrough innovation to redesign of business models and agile growth


Agrifoodtech investments: the stakeholdersVenture capital is blossoming, but there are few specialised investors

Investment momentumAgtech investments are increasing but are still far from being on the same scale as the Food delivery segment

Focus on three dynamic investment segmentsIndoor farming, biologicals, alternatives to conventional animal protein

What value creation?The long road of Agrifoodtech startups


AgrifoodTechs attract venture capital investors from all backgrounds

FoodTech

AgTech

Cleantech & impact funds

Generalist funds

AgriFoodtech funds

IT funds

Biotech-pharma funds

Consumer funds

> 500 investors


A small number of specialist investors

The approximately 20 dedicated funds in the world raised around $1.5bn.

Less than 10 specialist investors raised more than $50m, most of them American

Small specialist teams in Israel, Europe, India, and especially the US.

2011 … 2013 2014 2015 2016 2017

$92m

$30m $114m

$125m

$108m

$125m$95m

$180m

€38m

$105m$90m

$30m

* Note: with the exception of Avrio, “precursor” funds created before 2010 (Finistère 2006, Cultivian Sandbox 2008, Aquagrofund 2008) made a significant part of their investments in IB/life science/cleantech.

+ €86m


Agrifoodtech specialists are struggling to raise funds

Only funds sponsored (Anterra, CapAgro) or supported by a family office (Middleland, S2G) carry out quick fundraisers

• For others, raising funds can be a lengthy process (more than 2 years) and the targets are seldom met (Finistere, Pontifax, BioEnterprise Cap.). Exception: Cultivian Sandbox

• Many small-sized funds (< $50m)

Strategic LPs account for a significant proportion of investments in reference funds

• Cultivian Sandbox

• Finistère

The difficulty of convincing financial investors

• Non-identified asset categories, limited track record, concerns (deal flow, development times, exit opportunities)

• Pontifax is the only specialist fund to have exclusively financial LPs

Specialist funds have limited capacity to position themselves in the biggest deals (US)


FIRST TAKE-OFF, THE LABEL OF BIG ONES 2017: A SECOND TAKE-OFF?

A segment highly dependent on non-specialist funds

Rationales specific to the United States (Californian ecosystem, mega funds, etc.)

Big Californian VCs

GAFAM et alia

The rise in megafunds that invest directly

A trend that has kicked off, notably in the protein segment

Specialist VCs are concerned by soaring valuations• A pre-IPO logic?

Focus on

2016, 2017

2017

Vision Fund


IN AGTECH AND FOODTECH INCREASINGLY ACTIVE CVC

The big comeback of corporate venture capital (CVC) funds

CVC investments in AgTech

A tool for corporate M&A strategy

CVC Agtech

CVC Foodtech

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VC FUNDS ACTIVE IN FRANCEA RICH ECOSYSTEM FOR THE CREATION OF YOUNG STARTUPS

Focus on the Agrifoodtech ecosystem in France

Startups benefit from a complete ecosystem of incubators/accelerators and funds

Agtech ecosystem

Foodtech ecosystem

Clusters, etc.

Funds Sectors Portfolio extract

AgriFoodtech

Nutrition, healthcare

Cleantech

Generalist

Generalist

Ind. Biotech

AgriFoodtech

+ IT funds positioned in the Internet of food

+

Acceleration Incubation

+ Full-line players


Agtech and Foodtech investments: very imprecise barometers

Difficulties inherent in the assessment of private investments, particularly in venture capital

• Amounts not disclosed, low visibility in angel/seed, venture or PE

Inclusion of startups developing cross-disciplinary technology platforms?

Foodtech: the big confusion

• The internet of food (delivery, e-grocery, etc.) is crushing the category

• Food or foodtech? Culinary innovation, “better for you”: innovative?

• The most innovative companies are drowned in a flood of new branded startups and ecommerce

Synthetic biology and microorganism design

Imaging: satellites, drones, image analysis

Ver

y si

gn

ific

ant

amo

un

ts

Midstream tech: 4.0 factory/logistics, data/trace-ability


0

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9 000

10 000

2012 2013 2014 2015 2016 2017

CB Insight Agtech Pitchbook-Finistere Agtech

AgFunder pre2017 AgFunder post2017

INVESTMENTS IN AGRIFOODTECH ($m) HIGHLY VARIABLE SCOPES

Similar words cover a wide variety of barometers

Take-off of Agtech in 2013-2014

• Impact of Big Ag’s appetite around 2012, notably Climate Corp. deal.

AgFunder: a very broad meaning and the “Internet of Food” effect

• Around 50% of investments in food delivery, e-grocery (reviewed in 2017)

• Impact of platforms deals (biotech, drones, logistics, etc.)

• Very peripheral segments (IB)

CB Insight Agtech (2016): focus on digital agriculture

Finistère-Pitchbook: refocusing on Agtech

• But with platform deal effects (biotech, drones & satellites)

Agtech

Ag&Foodtech

2016 2017


0

200

400

600

800

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1 200

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2014 2015 2016 2017p

Agtech venture investments ($m)

Indoor farming

Animal nutrition, health and genetics

New inputs for vegetal production(biologicals, seeds, etc.)

Ag marketplaces(est. since 2017)

Digital Ag(software&decision tools,sensors/drones/robotics, etc.)

Moderate investments in light of R&D spending by industry majors

Unigrains estimate: Agtech investments will pass the billion dollar mark in 2017

Source: Unigrains based on AgFunder, Pitchbook, internal sources. Note: cross-disciplinary startups (drones, synthetic biology) with a limited number of Ag applications are excluded

$6-7bnR&D of “big Ags”* in

Crop Science

$1bn

BENCHMARK

* Bayer, Monsanto, Dow, DuPont, Syngenta, BASF

In each segment, the 10 biggest deals account for over two thirds of investments

> 60% category


In Agtech, as elsewhere, strong momentum driven by mega deals

Digital agriculture is stable at around $300m since 2014 (post Climate Corp.), but agricultural market-places are booming

• “Me too” startups in drones and agricultural software are running out of steam

• Recent boom in agricultural market places (megadeals, Maihuolang in China $150m, Farmers Business Network $40m).

• When will digital agriculture and big data in agriculture deliver on their promises? Patience is running short. Simplification, disintermediation: is that the best digital can offer?

Strong momentum impelled mainly by mega deals in 2016 and 2017:

• Biologicals: massive bets on companies in plant and soil microbiota (Indigo, AgBiome, Inocucor, etc.)

• Indoor farming (excluding cannabis): stable at around $70m per year, the Plenty mega deal ($200m, 2017)

• Animal nutrition: a few companies support the whole sector (Calysta, Agrivida, Protix & Ynsect)

Importance of VC/financial situation(asset arbitrage and megadeals, inflation of investment tickets)


Foodtech - startups in the “internet of food” and proteins attract more than 90% of venture capital

Internet of food

> $12bn since

2014*

* Based on AgFunder, restaurant marketplaces section (incl. booking/delivery platforms and meal kits + eGrocery, excl. coupon sites, marketing platforms, recipe websites, etc.)

Universeof the “brand”

Alternatives to animal proteins

Top 10: close to $1bn since 2014

Innovative food

Pre- and probiotics

Alt. to sugar

Natural ingredients (colours, flavours, etc.)

All-in-one

Targeted diet

Other

4,9

8,3

6,9

4,4

0

2

4

6

8

10

2014 2015 2016 S1 2017bn

• Explosion of branded food startups meeting societal expectations.

• Culinary innovation & basic processes

• New fruits/vegetables/seeds, fermented food and beverages, “xyz-free”, etc.

• New “venture” funds seeking to get majors acquire brands ($10-20m)


Foodtech – in the other segments, investments remain moderate

• Several investments of more than $10m in 2016 and 2017

• A new impetus with quantified self and microbiota

• New business models (employers, mutual health insurance companies).

Personalised nutrition

Top 5: more than $100m in 2016-2017

• A fragmented, complex market.

• Significant investments for pathogen diagnosis (B2B) and food scanners (B2C).

• Food preservation: difficult to find a market.

Health security & food preservation

Top 10: approx. $300m since their creation

• Highly cross-disciplinary technology platforms: retailtech, 3.0 logistics (robotisation, last mile, etc.).

• Foodtech: restaurant digitisation, blockchain and traceability.

Digitised sector

Big generalist investments


What are the key drivers of investments in AgriFoodtech?

The promise of microbiota

• Food delivery: attracted twice more capital than all the other Ag and Food segments combined since 2014.

• Agricultural market places: ramp-up in 2017.

• Extension of digital disintermediation in the agriculture and food sectors.

• Alternatives to animal proteins: the first segment of food innovation, highly diversified (plants, mushrooms/seaweed, cellular agriculture).

• New proteins for animal feed: first segment in farming (insects, synthetic protein).

• Plant health: craze for startups positioned in plant and soil microbiota.

• Human nutrition: next-generation probiotics-prebiotics, personalised nutrition / microbiota diagnosis.

• Animal health: alternatives to antibiotics?

The protein challenge

The new intermediaries


Urban and vertical agriculture – an overview of developments

A huge diversity of formats, with widely varying degrees of technological development (automation, data-informed guidance, etc.)

The most common crops: leafy vegetables/herbs/sprouts, tomatoes, strawberries.

Technology developers at the service of vertical farm designers

Business model

Integration

ExposureCulture medium

Rooftop

Indoors

Ground

Facade

Outdoors Indoors, nat. light

Indoors, LED Indoors, LED

Hydroponics Aeroponics

Aquaponics

Community Sales to Foodservice sector

Retail sales Wholesale

LED data analysiscomputer vision


Funds raised ($m) Investors (not exhaustive)

226($200m, 2017, B)

130($40m, 2017, D)

83($4m, 2017, late)

70($30m, 2016, C)

> 30

27($22m, 2017, A)

17($10m, 2016, A)

13($9m, 2017, A)

12($7m, 2017, B)

11($12m, 2017, B)

Urban & vertical agriculture – startups among the best funded in Agtech

Henri SeydouxJ-A GranjonThibaud Elzière

Mike Durland

Focus on France

Top 10

> $600m raised

• Involvement of investors from the Middle East

• Plenty: biggest fundraising by an Agtech startup. The story of a disruption?

• Limited visibility on fundraising by Asiancompanies (notably Japanese), which are leaders by past standards.


Urban & vertical agricultureRisks, opportunities: what are investors betting on?

Local production

• Logistical gains, freshness, locavore movement.

A production freed from the environment

• Degraded lands, climate hazards

Economy of inputs

• Water (>90%), fertilizer efficiency, fewer crop protection products.

Prospect of lower costs

• Progress on LED, infrastructure, data use, shorter crop cycles

The opportunity to grow new varieties

• Organoleptic criteria > agronomic criteria

Production costs

• Capex (up to $30m in some projects)

• Electricity, ventilation, heating consumption

Consumer acceptability

• Natural vs plant factory?

Technical problems to be solved

• Disease management

• Effect of LEDs on product lifecycles

• …

Business model: investment financing

Provided costs continue to decrease (e.g. photovoltaics), vertical farming could revolutionise F&V supplies to cities, over and above a few products with high added value. For the more disruptive models, technological challenges nevertheless remain high. Geographical rationales (Middle East, Asia)?


Bioinputs - overview of developments

BIOFERTILIZERS*

BIOSTIMULANTS

BIOCONTROL

Microorganisms for N fixation, P&K mobilisation, etc. Biochemicals

- Subst. Semiochemical

- Plant extracts

- Antibodies & other biopeptides, ARNi, etc.

Microorganisms

Microorganisms, algae extracts, etc.: resistance to abiotic stress, stimulation of defences, etc.

Number of technological developments based on bioprospecting plant and soil microbiota (progress made in sequencing)

Many startups have raised large sums by positioning themselves in the gray area of biostimulants, with bacterial consortiums that employ only partially understood action methods

* Excludes organic fertiliser or specialty startups (MidWestern BioAg, Anuvia Plant Nutrients, WisERG), which achieved very substantial fundraising.


Notable startups

Bioinputs - the promise of plant and soil microbiome


324 ($156m, 2017, D)

> 54 ($35m, 2015, B)

54 ($30m, 2017, C)

46($18m, 2016, D)

39($29m, 2017, B)

32($22m, 2016, B)

31 ($12m, 2016, C)

18($12m, 2017, B)

17($16m, 2016, A)

Focus on France

Top 10

> $600m raised

• An attractive segment enticing very big non-specialist asset managers.

• > 85% of funds for companies based on plant and soil microbiota.

• No European player has raised massive funds for plant microbiota. Some emerging players:


BiointrantsRisks, opportunities: what are investors betting on?

Review of risks and opportunities

Biopesticide development costs

• $10-20m (reported) vs $250-300m, to be put into perspective

Regulation

• Restriction on agrochemical products?

• Marketing facilitated in some cases (especially in the US).

Technological promises

• Plant & soil microbiota: only the surface has been scratched

• Advances in genomics, HD screening, fermentation techniques, formulation, etc.

Promising segments

• High value-added crops, technological dead-ends in agrochemicals

Products better accepted by consumers?

Technical difficulties

• Product stabilisation

• Little-understood action mechanisms

• More random efficiency

Costs (/ benefits) still high for arable crops

Biopesticide development costs are underestimated

• Cost of experimenting in the field

• Cost of failure

Reputational risk when high-profile, highly-valued startups fail.

A segment driven by a strong need for innovation and by the potential involved in decoding theplant and soil microbiota. But there are many technological challenges and a lag between thevaluation of startups and their immediate ability to offer products at the right price/efficiencyratio. Specialty crops are still the most profitable segment.


FOCUS ON THE PLANT OPTION FOCUS ON CELLULAR AGRICULTURE

Alternatives to conventional animal proteins

Diversity of raw materials, approaches and products

• Culinary vs technological innovation

High technological challenges

• Need for progress in processes.

• Fractionation, isolate qualities, protein texturing, fermentation of plant matrices, nutritional quality, allergenicity, etc.

Startups’ dilemma: B2B vs B2C

Food production through biotechnology

Startups engaged in all segments

Highly involved playersB2B B2B => B2C

Resolute focus on plants Imitation of animal products

Casein, ovalbumin, gelatin, etc.

Steak, leather



372($150m, 2017, E)

313($75m, 2017, E)

96(F2017)

53($40m, 2016, B)

51($7m, 2017)

44($30m, 2016, B)

35($18m, 2016)

27($20m, 2017, A)

22($17m, 2017, A)

17($15m, 2016, A)

Alternatives to conventional animal proteins - the best-financed startups in foodtech (e.g. delivery)

Bill Gates

Bill Gates

Bill Gates

David FriedbergAli/Hadi Partovi…

Focus on France

Top 10

> $1bn raised• A huge fad in California

• A handful of key investors

• B2C players in the lead, buoyed by powerful marketing.

• A lot of startups in Europe, but lower fundraising.


FINANCIAL APPROACH: EXPRESSED VALUE

STRATEGIC APPROACH: HOW IS VALUE CREATED?

How much value do Agrifoodtech startups create?

It’s early days yet to tell

What signals should one look out for in the meantime?• Failures

• Startup financing dynamics

• Overview of the first strategic acquisitions (over 75% of exits in venture capital) and IPOs (over 5-15% of exits)

50% value generated after 8 years*

AgriFoodTech takeoff

* Faster Internet & mobile standards

Differentiating scientific or technological innovation

New business models

Being agile in new high-growth markets


A look back at some emblematic failures

IPO staged too early. Developmenttimes vs stock market times

No market

(Main cause of startup failures – 42%)

Inadequate technology/market (cost/benefit)

Technological failure (agronomic use of agricultural data)

> $80m

> $120m

> $56m

Order

Delivery

Wrong business model: scaling-up problem

Preparation


Financial approach - how is the capital invested valued?

Agrifoodtech startups are valued on average at twice the capital invested*

A less attractive segment than other venture capital segments (internet, SaaS among others)

• Specialised Agrifoodtech funds face difficulties in raising funds from financial investors.

• Comparable with Cleantechs?

0

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0 50 100 150 200 250En

terp

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Capital invested ($m)

Valuation on capital invested in AgriFoodtech

3:12:1 Return on capital invested,

global, all VC sectors

Source: Unigrains based on EY figures

Source: Unigrains according to Venture Pulse

* This ratio gives no indication of the final financial performance of investments, which depends on the exits alone.


ACQUISITIONS OF AGRIFOODTECH STARTUPS SINCE 2012

ACQUISITIONS PICKED UP IN 2017

Financial approach – overview of the main acquisitions of Agrifoodtech startups

From 2012 to 2017: a long dry period

• Granular and Blue River T. (2017): two very welcome exits for Agrifoodtech.

Three segments: digital agriculture, biocontrol, internet of food

• But no acquisitions by majors in the internet of food.

The most remarkable exits are made by a handful of giants

• Looking for technology platforms.

• Spend amounts that raise questions and fumble following the acquisition.

• A fragile model for VC funds.

Original acquisition rationales: Farmer's Edge

Target Buyer Date (age)Value ($m)

2012 (6) 932

2012 (17) 425

2017 (6) 305

2017 (8) 300

2012 (19) 250

2017 (5) 200

2015 (7) 134

2016 (11) 120-150

2012 (9) > 100


Financial approach – IPO: a difficult path, used mainly by Food delivery startups

Several IPOs in Food delivery since 2014

• Successful experiences: good IPO valuations, strong trajectories.

• The failure of Blue Apron (IPO lower thanlast private round, drop in share price) set off alarm bells.

IPOs are still a difficult path, little used by Agtechs

• Cost, transparency requirements, fluctuations, etc.

• Difficult paths for recent Agtech IPOs: Marrone Bio, Arcadia.

Alternative to IPO: increasingly huge amounts of last-stage venture funding

• Capital available. But when will profitability kick in?

• Candidates for IPO: Indigo, Plenty?

• From the last private round to the IPO: is this still a lucrative positioning?

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IPO Agritech notable players – market prices*

Marrone Bio Arcadia Biociences Calyxt

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IPO Food delivery notable players - market prices*

JustEat Grubhub Takeaway Blue Apron Delivery Hero


Strategic approach: startups create value on the basis of three major rationales:


Transferring S&T* innovations that

make a difference

Implementing new business models

Being agile in new high-growth

markets

* Scientific and technological

Agricultural software

Plant protein

Clean label ingredients

Vertical farming

Human, animal, plant microbiota

Pathogen detection

Agricultural robotics

Cellular agriculture

Vertical farming

Food delivery

Agricultural marketplaces

Agtech insurance

... with very different implications for existing players: Anticipate - Co-develop - Test - Be inspired - Reposition the company, etc.

AgriFoodtech: a new Eldorado?

A wave of investments driven by sensitive agricultural and food issues and the promise of new technologies.

A long-term perspective: Agrifoodtech companies take time to develop...

• Digital agronomy, robotics, plant-animal-human microbiota, pathogen detection: big scientific and technological challenges

• Need for adequate, reasonable funding and experienced entrepreneurs

... and adoption strategies are just as important as technology

• By farmers: incentive and risk-sharing in a low price environment?

• By consumers: acceptability (genetically edited crops, plant factories)? Motivation (personalised nutrition)?

Agile development, original solutions:

• Targeted markets: better to aim straight than to aim big

• Adoption: do insurance and mutual health insurance companies act as a lever?


agtech, foodtech: a new eldorado for investors? · •impact of big ag’s appetite around 2012,...

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