Covid and 'peak cow' created a boom for food and agriculture tech in 2020

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Food and agriculture tech investor Arama Kukutai standing in a vertical farm built by Plenty in South San Francisco.Courtesy: Finistere Ventures

Food and agriculture start-ups attracted a record $22.3 billion in venture funding last year — that’s twice as much as these segments raised in 2019, according to a comprehensive new study from Finistere Ventures and Pitchbook.

The Covid pandemic spurred investment in these industries rather than slowing it, according to Arama Kukutai, a partner at Finistere Ventures, which has exclusively invested in food and agriculture since its founding in 2005.

With people stuck at home due to health and travel restrictions, demand spiked for food e-commerce, like meal kits and deliveries.

“2020 was the first year since 1994 in which the restaurant share of food consumption dropped versus in-home,” the Finistere study said.

Responding to these shifting trends, food tech funding flowed into related services.

Food tech companies raised around $17.3 billion across 631 deals for the year. Sixty-eight percent of that went to e-commerce and delivery businesses. Meal kits along raised $6.2 billion, and e-commerce companies raised $5.3 billion within the food tech category. The largest deal last year was an $800 million round of funding for the Chinese group-buying app for groceries, Xingsheng Youxuan.

The world also saw how a crisis could disrupt the normal production, processing and distribution of food. Farmers had to dump milk and produce that couldn’t be shipped or stored, and conversely brick and mortar groceries had empty shelves after shoppers hoarded supplies.

Kukutai said that drove interest in growing food in controlled environments, like vertical farms, where yields are predictable. These indoor farms are often built closer to the urban centers where much of the produce they grow will be consumed.

Agtech companies raised around $5 billion across 416 deals in 2020. The top ten largest deals in agriculture tech included four rounds for indoor farming businesses, ranging from a $140 million round for Plenty to a $203 million round for Revol Greens.

Venture capitalists haven’t always been attracted to “agrifood.” Funds historically saw these businesses as capital-intensive and unlikely to generate big returns, although were rare exceptions like Trinity Ventures’ investment