Asia-Pacific AgTech Sees Upstream Surge: Investment Shifts in 2023

Investment in the Asia-Pacific agrifoodtech sector is experiencing a significant shift in 2023 as downstream food delivery and restaurant startups give way to upstream innovations in agriculture. According to a recent report from AgFunder, in collaboration with the Bill & Melinda Gates Foundation, Omnivore, and AgriFutures Australia, the spotlight is now on technologies that empower farmers and primary food producers.

In 2022, the region witnessed a 58% year-over-year decline in investment for agrifoodtech startups, with a total of $6.5 billion raised, compared to the record-breaking $15.2 billion in 2021. However, the real standout was the increase in investment in startups operating upstream, which saw a 24% year-over-year growth.

This trend appears to be continuing into 2023, based on preliminary data. The shift is good news for the 450 million smallholder farmers in the region who contribute to 80% of its food production.

For the first time in years, upstream funding, which provides technologies to farmers and primary food producers, surpassed downstream investment. In 2022, upstream ventures secured $3.2 billion, while downstream food delivery startups garnered $2.7 billion.

The report highlighted the buoyant performance of the Ag Biotechnology category in the Asia-Pacific region, with $813 million in funding, nearly half of the global total for the category in 2022. Investors have shown a growing interest in this segment, which includes on-farm inputs for crop and animal agriculture.

The Innovative Food category, which encompasses alternative protein industries, saw investment increase to $527 million in 2022. This growth was achieved over fewer deals, indicating a strong demand for novel food products.

Other sectors experiencing growth include Farm Management Software, Sensing & IoT ($334 million), Farm Robotics ($252 million), and Novel Farming Systems startups ($254 million), which includes indoor farming, aquaculture, and insect farming. These sectors attracted more funding, despite fewer deals.

China, once the leader in attracting agrifoodtech investment, lost its top spot in 2022 to India. However, China made a strong comeback in the first half of 2023, raising $861 million, reaffirming its prominence in the sector.

The report delves into investment trends in specific countries within the Asia-Pacific region. India secured the top spot in 2022, attracting $2.3 billion in agrifoodtech investment, surpassing China's $1.3 billion. Other notable countries for investment in the sector include Indonesia ($716 million) and South Korea ($461 million).

Southeast Asia saw startups raise $1.7 billion in 2022. Australian agrifoodtech startups also gained traction, closing 38 deals in 2022, totaling $316 million. The momentum seems to have continued into H1 2023, with $146 million raised. Japan, while ranking at 8th position in 2022, brought in $211 million across 43 deals, indicating steady growth in the sector.

The report highlighted a steady increase in debt, early-stage, and growth-stage deals since 2018, while late-stage funding declined from 2021.

The Asia-Pacific agrifoodtech landscape is evolving, with upstream innovations taking center stage and redefining the investment landscape. While downstream food delivery and restaurant startups are no longer the star players, the region's vast network of smallholder farmers and growing food sovereignty concerns provide ample opportunities for those investing in technologies that empower agriculture and primary food production. The shift in focus is indicative of the changing dynamics within the agrifoodtech ecosystem in the Asia-Pacific region.