Economic Update

Published 09 Mar 2023

− Emerging markets see increasing share of global agri-tech deals despite investment slump

− Improved supply chains enable smallholder farmers to increase market reach

− Artificial intelligence and digital solutions help farmers optimise resource use

− Financial support and digital networks essential to building climate resilience

Even as global funding levels drop, agri-tech start-ups remain a key driver of investment in emerging markets as they work to make farming greener, more productive and more climate resilient.

Global investment in agri-tech start-ups totalled $10.6bn in 2022, down 13% from 2021 – a record funding year for global start-ups – but ahead of the 2020 figure of $7bn. This matched a general downwards trend in venture capital activity, as investors became more cautious amid global headwinds and deepening fears of recession.

However, a focus on food security in the face of a growing global population and climate change-driven natural disasters is likely to sustain expansion in the agri-tech space. Significantly, venture capital investment levels in agri-tech and food technology have grown approximately 20-fold in the last ten years.

Similarly, the number of agri-tech deals in emerging markets has increased in recent years. For example, the proportion of such deals in the Middle East rose from 1% in 2021 to 4% as of mid-2022, while Africa saw a rise from less than 1% to around 6% over the same period.

In one standout example, Abu Dhabi-based agri-tech firm Pure Harvest Smart Farms became the second-most-funded start-up in the Middle East and North Africa in 2022, with a total of $272m in funding at the close of the year. Pure Harvest operates three greenhouses in the UAE, with additional projects in development in Kuwait and Saudi Arabia as the company eyes further expansion.

In 2022, 23 African agri-tech firms attracted $133m in investment, a figure up 39.7% from 2021. By comparison, the segment saw $50,000 in funding as recently as 2015. Two companies accounted for over 80% of these funds: Kenya’s Apollo Agriculture and Nigeria’s ThriveAgric.

With the scale of climate change-driven natural disasters increasing and the population of many emerging markets set to expand significantly, agri-tech start-ups are working to provide food security for the future by revitalising supply chains, tapping into artificial intelligence (AI) and machine learning, and providing resources to farmers to help them respond effectively to disasters such as drought or flooding.

Boosting connectivity

Improving the productivity and resilience of agriculture in emerging markets often means engaging with smallholder farmers.

Agriculture accounts for nearly a quarter of sub-Saharan Africa’s GDP, while smallholder farmers account for more than 60% of the population. Similarly, more than half of the population in some rural areas of Latin America and the Caribbean engage in agricultural production, and South-east Asia is home to some 100m smallholder farmers.

Start-ups have deployed digital networks and data-driven mobile applications to connect with small-scale agricultural producers around the world. On a global scale, the majority of agri-tech start-ups that received funding in 2022 specialise in AI, digitalisation and internet of things.

A number of agri-tech firms are using these digital advances to improve supply chains, connecting farmers to both essential supplies and end consumers.

Brazil’s Seedz operates a digital platform where agri-businesses can purchase raw materials, with rebate and loyalty programmes to improve their financial reach. After acquiring a farm management and planning software company in 2022, the firm secured $16.5m in a Series A round led by Brazilian investment company Alexia Ventures.

Agriculture management company Eratani offers end-to-end support to farmers in Indonesia – where 29% of the workforce is employed in agriculture – providing both supplies and financing, and helping produce reach end users through a three-part platform. Aiming to work with over 50,000 farmers by 2024, in December 2022 the company secured $3.8m in an oversubscribed seed round.

Optimising resources

Emerging technologies – especially AI – have proven essential to farmers looking to optimise the use of precious resources such as water, fertiliser and seeds.

Founded in 2017, Kenya’s Apollo Agriculture is behind the Agrix app, which uses soil and weather data to provide personalised seed and fertiliser recommendations to more than 170,000 farmers – nearly half of whom are women. In February the company received a $9.5m loan from the US International Development Finance Corporation to continue its expansion on the continent.

Organised by the Netherlands-based environmental consultancy firm FutureWater, the ThirdEye project has helped farmers in Kenya and Mozambique deploy drones to monitor their fields. Beyond helping to detect signs of climate stress early on, the flying sensors allow farmers to make informed decisions that optimise resources such as water or fertiliser.

In the last quarter of 2022 a number of Latin American firms leveraging data to improve irrigation practices saw increased early-stage funding.

Argentina’s irrigation management firm Kilimo combines satellite, field and meteorological data in a platform that famers can use to boost crop yields while increasing water efficiency by up to 70%. In a funding round at the end of last year the company received an undisclosed amount from regional investment fund Kamay Ventures. The firm estimates that its platform saved users up to 50bn litres of water last year.

Meanwhile, in December Chile-based irrigation georeferencing firm WiseConn closed a Series B round led by US private equity and venture capital firm Morningside Group, with plans to use the funds to expand into Australia, Brazil and Europe in 2023. The company uses cloud-based technologies to help farmers manage water use in Mexico, Peru, Colombia, Central America and the US.

Building resilience

Emerging markets are set to be disproportionally affected by climate change-fuelled disasters such as droughts and flooding. While predictive machine learning technologies are being employed to help farmers address risk – as well as mitigate the damage incurred by disasters – financial support can help farmers recover from disasters without having to sacrifice productivity.

In Africa, digital platforms targeting farmers have benefited from the expansion of mobile payments and other technologies that are boosting financial inclusion.

Mali’s OKO sells micro-insurance to smallholder farmers, serving some 18,500 in the start-up’s home country, Uganda and Côte d’Ivoire. Its business model is backed by data from satellites and sensors tracking weather patterns, allowing the company to deploy financial assistance automatically to farmers affected by flooding or drought.

Another African start-up, Nigeria’s ThriveAgric, provides data-driven solutions and credit to its network of 500,000 smallholder farmers, and is responsible for approximately 5% of the grain grown in the country. Last month the company was named the West Africa winner of the annual Agriculture Youth Technology Challenge, securing an additional $1m in funding.