Chinese Agri-Food Tech Companies Raised US$6 Billion In 2020, New Data Shows

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Chinese agri-food tech companies collectively bagged US$6 billion in 2020, representing a 66% increase from the year before, new statistics show. It comes as total private equity and wider venture capital funding across all industries in China dropped by more than half, signalling the bullish investment sentiment for the agri-food sector amid the growing pandemic-driven spotlight on food supply chain resilience. 

Total dollars committed to agri-food tech companies in China has grown 66% year-on-year to top US$6 billion in 2020, according to a new AgFunder report on the world’s second biggest economy. Meanwhile, the total funding across all sectors in China dropped by 50% compared to 2019 levels, signalling the relative strength and resilience of the agri-food tech industry in the wake of the pandemic-driven focus on food security. 

It reflects a wider trend of the country’s state-owned and private investors who are “pulling away from more general internet, media, and telecom investments to explore opportunities across the food supply chain,” wrote the researchers. 

The categories of the industry, which includes startups that serve the consumer, continued to dominate the agri-food investment ecosystem in China throughout 2020, driving as much as 75% of the overall funding in the industry. E-commerce was particularly strong, with online grocery and delivery startups alone raising US$3.6 billion of the total US$6 billion

“However, there are increasingly strong signals which suggest that more and more investment is heading upstream,” said the analysts, citing the halving in the number of deals bagged by e-grocery companies and the 10% decline in share of deal numbers by the overall downstream category. 

E-grocery companies in China bagged US$3.6 billion in 2020. (Image Source: Pinduoduo)

More investors appear to now be pouring greater sums into upstream agri-food technologies, such as farming, food production, biotech and mid-chain logistics

This trend in China aligns with the movement seen in the global agri-food sector, with the annual global AgFunder report released earlier in March detailing how upstream ventures began surpassing downstream companies in both funding deals and dollars from mid-2020 onwards, marking the first time in seven years that ventures closer to the farm outpaced the other consumer-end of the supply chain. 

There are increasingly strong signals which suggest that more and more investment is heading upstream.

AgFunder

Globally, agri-food tech companies secured US$30.5 billion after growing 34.5% year-on-year, the highest-ever on record, according to figures in the March AgFunder report

Chinese companies in the upstream category bagged US$1.4 billion in funding over 2020, taking up nearly a quarter of the overall share of investment compared to its previous share of less than a fifth in 2019. The investment was primarily driven by large ag-tech rounds, including the US$174 million Series C extension that drone startup XAG secured. 

AgFunder analysts further noted an accelerated trend in funding for alternative protein companies in China, as the Covid-19 pandemic shifts consumers towards health-related foods and meat and dairy replacement products that are marketed as more nutritious options. Collectively, startups in the Chinese alternative protein ecosystem raised US$127 million in 2020

Plant-based meatballs developed by Beijing-based alternative protein startup Zhenmeat. (Source: Zhenmeat)

“China’s market for protein alternatives is absolutely massive. We are witnessing a rapid expansion across the supply chain. The timing is optimal for protein investment in China,” commented Michael Zuo, partner at Matrix Partners China. 

In February, a separate report released by Beijing and Singapore-based Asymmetrics Research said that the Chinese alternative protein space will be one to watch, owing to the rise of flexitarianism and plant-based eating amongst mainstream consumers in the country, a trend driven by pandemic-related concerns over food safety and health. 

China’s market for protein alternatives is absolutely massive. We are witnessing a rapid expansion across the supply chain.

Michael Zuo, Partner, Matrix Partners China

The agri-food biotech category is also poised for growth in the year ahead, said the latest AgFunder research, pointing out that it has become increasingly expensive to produce traditionally environmentally damaging ingredients and products due to tighter Chinese governmental regulations in recent years – opening up new opportunities for startups developing bio-based replacements. 

“We expect to see more talent coming to the biotech sector, whether in ag biotechnology, cellular agriculture, animal and human nutrition, ingredients, or biodegradable materials,” said Matilda Ho, founder and managing director of Bits x Bites, China’s pioneering food tech VC investing in early-stage agri-food tech startups that has been backed by the likes of Temasek and Monde Nissin

“Everywhere you look, forces are pushing China’s agrifood ecosystem forward, pulling in new startups, and drawing cross-sector investors.”


Lead image courtesy of Starfield.


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