by Louisa Burwwod-Taylor, AgFunderNews

There’s no denying the second half of 2022 was terrible for venture capital, and agrifoodtech was no exception.

Funding to foodtech and agtech (agrifoodtech) startups reached $29.6 billion in 2022, down 44% year-over-year (YoY), according to a new report from food, agriculture, and climate-tech venture capital firm AgFunder, in collaboration with global ecosystem partner Temasek.

But the sector posted gains in climate tech categories such as indoor agriculture, bioenergy & biomaterials and precision agriculture.

Cheap money and increasingly outlandish tech valuations drove 2021’s record-breaking $51.7 billion in agrifoodtech funding. Then, in the wake of war, inflation, and continued supply chain disruptions, the market came crashing down in
2022.

A glance at the above chart shows just how wild the ride has been over the past two years. But many of the world’s current macro challenges – from soaring inflation to food insecurity to labor shortages – are driving more interest in agrifoodtech as a solution, particularly in its climate-tech-related categories.

Agrifoodtech as climate tech

In a new feature for this year’s report, a survey of agrifoodtech VC investors revealed that while they don’t expect valuations to improve much in 2023, they were buoyed that the sector is also increasingly recognized in the climate tech conversation and it showed in the data.

Four categories related to climate tech and efficiency experienced an increase in funding:

Bioenergy & Biomaterials funding increased to $2.3bn, up 15% from 2021. This highlights the growing momentum for novel alternatives to plastics and animal-based materials as well as clean energy sources.

Ag Biotech funding increased to $2.7bn versus $2.5bn in 2021 and was almost flat by number of deals, down just six to 216 (meaning it was not outlier driven).

Novel Farming Systems funding increased 21% YoY to $2.85bn with the number of deals remaining flat year-over-year with significant deals across both insect and crop-based systems.

Farm Management Software, Sensing & IoT funding increased $430m to $1.7 billion, albeit with a decline in deal activity, hinting at some large deals.

Downstream, consumer-facing categories did not fare so well. Funding to eGrocery declined 73% year-over-year to $5.1 billion, Cloud Retail Infrastructure dropped 68% to $1.5 billion, and Innovative Food, which includes alternative protein, raised $3. billion, nearly 40% less than in 2021.

To read the entire report click here.