Late stage investment drop in Europe isn’t necessarily bad news

Data Snapshot is a regular AFN feature in which we analyze agrifoodtech market investment data provided by our parent company, AgFunder.

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2020 saw European agrifoodtech secure its lowest amount of late-stage investment in seven years – but that might not be as disappointing as it first seems.

Deal volume ($) and deal count (#) by series, Europe 2020

European agrifoodtech ventures fundraising at Series D and later banked a total of $476 million in 2020, the most recent year for which AgFunder has published complete data.

That’s less than a third of what they pulled in at the same stage a year earlier, according to AgFunder’s ‘Europe 2021 Agrifoodtech Investment Report.’

Projected deal volume ($) by stage, Europe 2012-2020

2020 was, of course, the year in which Covid-19 became a pandemic and caused economic chaos around the globe. However, this is unlikely to singularly explain the seemingly prodigious year-on-year drop in late-stage funding; after all, Europe actually recorded an increase in early-stage (seed and Series A) investment over the same period.

While late-stage investment was at its lowest ebb since 2013, early-stage deals comprised 86% of round counts in 2020 and saw more than twice the dollars invested in 2019. Series A funding by itself were nearly triple 2019 levels, in large part because of UK-based dark kitchen startup Karma Kitchen‘s $316 million raise.

So what happened? There are a few possible explanations:

• The size of many of 2020’s late-stage rounds were undisclosed, making total commitments appear lower. German food and beverage delivery company Flaschenpost, for example, raised an unknown amount for its May Series D round; it was acquired by Dr Oetker for $1.1 billion six months later.
• Companies that raised large late-stage rounds in 2019 did not raise again in 2020 – in some cases because they had an exit, or were expected to have one. Germany mealkit firm Marley Spoon IPO’d in April after raising $30 million the previous year, while the UK’s Deliveroo was preparing for its own IPO which took place in March 2021.
• Europe set about seeding its next generation of agrifoodtech startups in earnest. As mentioned above, early-stage investment on the continent substantially increased in 2020. Historical data appears to support this thesis, suggesting that 2020 may have been the start of a new investment cycle in European agrifoodtech. The last big drop in late-stage funding, in 2016, followed a late-stage spike in 2015. This pattern may have been repeated in 2020 – but we’ll have to wait for AgFunder’s full-year 2021 data — due out later this month — to confirm that.