Here we are wrapping up another year and it’s been a bit of doom and gloom in the Agri-FoodTech news cycles lately, hasn’t it?
We’ve had endless war, tech markets in free-fall with near-daily lay-off announcements, global economic recessions, and high company valuations suffering the gut-check of cash-flow reality. It’s been a turbulent year, to put it mildly.
So what Agri-FoodTech innovations survived, and even thrived, despite the challenges of 2022? And what didn’t?
The Winners
On-Farm AI and Ag Robots
If we consider an ag conference a litmus test of anything, the October FIRA USA conference in Fresno, California, the first-ever ag robotics-specific conference in the U.S., is an excellent predictor of a growing ag robotics and farm A.I. sector.
It’s taken a few years of fits and starts, but on-farm automation technology is maturing to the point of being helpful. Actual robotic solutions at work in farmers’ fields equals a path to profitability. And with on-farm labor even more expensive (and hard to come by) than ever, effective robotic solutions are coming when farmers desperately need new ways to plant, weed, manage and harvest their crops.
Investors have taken note. FarmWise and Verdant Robotics are two ag robotic companies that have recently secured significant funding rounds and are scaling for commercialization.
Gene Editing is Coming Out of the Shadows
Gene editing in agriculture has had to overcome an extra hurdle of consumer and regulatory acceptance. But slowly but surely, those fences are eroding. Chalk it up to years of education, but consumers don’t seem to have the gut-check dislike they did of gene-editing that met the first forays into GMO foods.
In March, the Food and Drug Administration (FDA) approved the first gene-edited beef, paving the way for a new CRISPR-created ‘slick-coated’ gene (better for withstanding hot temperatures) in beef cattle.
There’s also been plenty of behind-the-scenes moves in gene editing in food production. Companies like ELO, Pairwise, and Zeakal have successfully focused on gene-edited seeds and crops that promise healthier, tastier, and more climate-friendly ingredients and commodities.
This past summer, Tropic Biosciences raised $35 million to develop gene-edited, climate-resilient tropical crops. Think rice, bananas, and coffee. And in October, Inari announced a successful $124 million round to support their work designing seeds for a more sustainable future.
Biologicals Go Big Ag
With input prices reaching record highs, farmers began giving a second look to biological inputs, a class of products that, not so long ago, were met with a high dose of suspicion.
But steady market share gains and solid science put biofertilizer companies like Anuvia Plant Nutrients and DPH Biologicals in a perfect position to replace farmers’ high fertilizer costs with their soil-friendly alternatives. According to a September McKinsey Report, more than 30% of large farmers (5,000 plus acres) either use biofertilizers or plan to start in the next year. The reason why? Lower costs per acre. (Other Agtech sectors should remember this lesson. When it comes to farmers, money talks).
Other companies, like Pattern Ag, are coming at soil-based innovation from a data-first perspective. Pattern Ag provides predictive soil analytics helping farmers make better-informed decisions about their soil biology. E.g., which biological or biofertilizer would best serve their specific soil health, pests, or disease needs?). In August, Pattern Ag announced a $35 million raise.
ClimateTech Emerges
As an offshoot from AgriFoodTech and CleanTech, 2022 saw the emergence of a new “tech” sector – ClimateTech.
ClimateTech startups have emissions reduction solutions as their primary goal. They are often rooted in agriculture or food production, though not always. For instance, CarboCulture builds reactors that turn agricultural waste into biochar, generating usable heat and carbon credits for agricultural and food-production companies. But ClimateTech crisscrosses all over the board, dipping its toes into any industry that needs a new approach to emissions reduction.
A fund I’ve been watching in this area is ACCELR8, an impact fund investing specifically to “accelerate the reduction and sequestration of greenhouse gases.” Their portfolio includes everything from a company growing mealworms for pet food and more carbon-friendly aluminum production and the first-ever carbon-negative portland cement.
The Losers
Alternative Protein
Alternative protein took a beating in 2022, with over-valued companies getting a harsh dose of market reality and an overwhelming amount of new players all competing for what remains, in fact, a still relatively small food-eating market share. The Covid-blip of skyrocketing sales for the big alt-meat players like Impossible Food fell about as fast as they rose as consumers returned to everyday food purchasing patterns.
There were some bright spots, however. Upside Foods became the first cultivated meat company to receive GRAS (generally recognized as safe) status from the FDA, opening up the U.S. market to its first cultivated meat products.
And according to many, the long-term outlook is still bright for alt-protein. The apparent food security and supply chain emissions solutions alt-protein bring to the dinner table can’t be denied. Those companies that survive the market shake-up will be well-posed for success, though it might take a few more years to get there.
Indoor Farms
Indoor agriculture, or controlled environment agriculture (CEA), was another shiny Agtech star of the past few years that received a solid bruising in 2022. In just the last few weeks, the mega-funded Kentucky-based AppHarvest made ominous predictions of cash-flow shortage. Then vertical farm startup InFarm announced they would be laying 50% of their workforce and consolidating their facilities.
On the other hand, Freight Farms, a company selling automated indoor farms self-contained in freight containers, just announced a successful $17.5 million raise to expand its operations. So perhaps the key to success in indoor farming isn’t trying to build a tech-enabled indoor farming mega-business but creating and dispersing the technology and tools to enable indoor agriculture to flourish in farmers’ hands.
Stay Tuned for 2023!
Now that we’ve enjoyed the luxury of a hindsight recap, what will the future bring? Well, that’s always the big question. So stay tuned for January’s blog post as I dive into 2023 industry predictions.
In the meantime, if you want to chat about industry trends or your startup’s executive hiring needs, send me a note. My email is always open.
Contact C.S. Partners, or feel free to email me directly at s.leich@cs-partners.net.
Cheers!
Simon Leich, CEO
CS Partners
