Interest in Israel’s food and agritech startups is growing, with more than $800 million invested from 2013 to 2018 and the number of companies mushrooming to more than 700. Many are developing technologies to aid sustainability and create healthier food.
“The business opportunity for venture investors is already much clearer and we are on the threshold of a period in which we will see more and more impressive acquisitions in the sector, as we have seen in the past year,” says Nitza Kardish, VP at The Trendlines Group, listed by Agfunder as the most active Israeli investor in the field.
Kardish says the group invests in solutions that address challenges in the food chain, introduce automation processes via robotics and artificial intelligence, protein substitutes and sustainable solutions to improve crop yields.
Trendlines’ investments include Phytolon, which produces natural food colorants from yeast; MiRobot which makes automated milking systems; Hargol FoodTech which produces protein from grasshoppers; and Agroscout, which develops autonomous crop protection systems.
“The business opportunity for venture investors is already much clearer and we are on the threshold of a period in which we will see more and more impressive acquisitions in the sector, as we have seen in the past year,” she says.
Israeli tech companies raised $6.8 billion in 2018, of which 23% was invested in impact-related startups in sectors that align with the UN Sustainable Development Goals and are positioned to generate social and environmental impact. The share of investment in Israeli companies specifically focused on impact doubled from $130 million in 2016 to $260 million in 2018, according to a report by Social Finance Israel, but there is no reliable data on specific impact investment, says Shmuel Rausnitz, a researcher at Start-Up Nation Central, a non-profit that tracks Israel’s innovation ecosystem.
“There’s a lot of money going to early stage which is fantastic because that’s how you create the early dealflow but there needs to be a follow-up to make it really big,” says Gideon Soesman, co-founder and managing partner of GreenSoil Investments in Raanana, currently Israel’s largest fund in the sector with $40 million under management. “To make a really viable ecosystem there also needs to be more money supporting these companies at the next stages.”
GreenSoil’s portfolio includes CropX, which deploys soil-sensing technology to farmers that combine with weather data to cut water use and increase yield. Other notable Israeli companies to emerge recently include Taranis and SeeTree, which both use sensing techniques originally developed for the military to provide early warning of crop disease, weeds, insects and other threats.
On May 27, Finistere Ventures launched a $100 million partnership with local crowdfunding leader OurCrowd, local Pepsi licensee Tempo beverages, and Chinese-owned dairy producer Tnuva to bid to create the country’s second foodtech incubator. It will be the best-funded consortium in the country’s food or agtech sector.
The new investment is “a great addition and a welcome one,” says Soesman. “When we started in 2012, there were only maybe 80 companies. It’s growing, but we have a long way to go.”
OurCrowd’s $1 billion portfolio includes Beyond Meat, the vegetarian burger producer now trading above a $4 billion valuation after a recent IPO. In March, OurCrowd launched Israel’s first dedicated social impact investment fund with a target of $30 million. Tnuva and Tempo have strong roots within Israel’s kibbutz agricultural community and global innovation projects with partners including Heineken, Pepsico and SodaStream, the Israeli home-carbonated drink company acquired by Pepsico in 2018 for $3.2 billion, that develops healthier flavorings and campaigns against disposable plastics.
Finistere’s existing $150 million global agrifood fund is backed by Bayer, Nutrien, PepsiCo and Unigrains.
Frutarom, another Israeli flavor innovator, was acquired by International Flavors & Fragrances Inc. in 2018 for $6.4 billion. The Sodastream and Frutarom deals, combined with Israel’s expertise in applying tech solutions to food and agriculture, have convinced the government-backed Israel Innovation Authority to set up a foodtech incubator in the northern town of Kiryat Shmona. Israel plans to provide solutions as experts predict the world will be unable to feed a global population projected to reach 9.6 billion by 2050.
On May 15, Mars Inc. announced a partnership with Jerusalem Venture Partners to establish an R&D project with Israeli academic institutions and start-ups to pursue innovative tech solutions for global food, agriculture and nutrition challenges. It did not say how much would be invested in the program.
“After building global companies and solutions in cybersecurity, AI and big data, Israel has set its sights on food as the next frontier,” says Erel Margalit, JVP founder and executive chairman. “As food and nutrition needs change around the world, we need to create more nutritious, accessible and sustainable food solutions.”
“A large food company can use its scale, influence and resources for good,” says Ofra Strauss, chairperson of Strauss Group, in its annual sustainability report. The food manufacturer was creator of the country’s first foodtech incubator.
“The social impact we’re trying to make is by focusing on the area where we are. Within that area we are entirely focused on profitability and creating value for our shareholders,” Soesman says.