The GuidePost: Mapping The Opportunity Space For Food System Investors
Five insights and trends from Nick Schroer, Trailhead's Principal
Market Signals
$3.6 million: The median deal value in 2024 for AgTech VC deals was $3.6 million, up 36% year over year and a record high. According to Pitchbook, 2024 ended strong with $1.8 billion across 149 deals in the fourth quarter, representing an 8.9% increase quarter over quarter.
200 million tons of food waste: Inadequate cold storage leads to millions of tons of wasted food and billions of tons of carbon emissions. Globally, meat-specific food waste hit 200 million tons annually, amounting to 2.75 billion tons of CO2 emissions, according to research cited in Nat Bullard’s end-of-year Decarbonization Presentation (slide 188). We also found slides 39 and 52 interesting.
$85 billion funding gap: Between 2018 and 2024, Canadian Agtech and food tech startups garnered $1.6 billion in public and private capital, compared to $86.6 billion for the U.S.
Mapping The Opportunity Space For Food System Investors
What trends will define the next 12-18 months for regenerative agriculture, Agtech, and the overarching food system? What have been the biggest learnings of the last few years?
Nick Schroer, our Principal at Trailhead, who is responsible for investment diligence and deal execution, mapped the opportunity space with five insights and learnings. A native of Atlanta who has been active in food systems investing since 2017, he has spent his career focused at the intersection of venture capital and agriculture. Nick's passion for food stems from childhood health issues and spending time on his family's farm in central Georgia.
Insight #1: The great consolidation of farms is underway
The great consolidation in the number of farms in the U.S. is underway. The 2022 census reported a 7% decline in the number of farms in the country compared to the previous 2017 census. Yields are higher, but profits are down. We’ll continue to see consolidation as some farms won’t have a sufficient balance sheet to weather the multiyear decline in farmer income. One implication: bigger farms with larger balance sheets can invest in solutions and technologies that smaller farms could not.
Insight #2: Farms are looking to diversify revenue streams
Row-crop farmers will continue to seek opportunities for off-farm revenue. Entrepreneurial farmers can leverage their existing assets to diversify revenue streams, spread out risk, and create other on-farm benefits like greater biodiversity. Trailhead’s investment in LandTrust is a good example. Landtrust’s online marketplace connects landowners and farmers with outdoor recreators seeking recreational land access. Trailhead will continue to focus on investing in companies that enable farmers to layer in value-creation opportunities on top of their existing business.
Insight #3: AI is changing what’s possible & what can be built
Several companies are building tech that couldn’t have been built even a few years ago. Our portfolio company Crop Diagnostix is one example. Thanks to advances in AI and computational biology, costs are coming down, and new technologies are leading to breakthroughs like commercial-scale RNA sequencing. This will only continue, and companies that have figured out the commercialization (not easy) will do well.
Insight #4: Startups have been refined by the fire
It’s no secret that the venture market has struggled in the last 24-36 months. We are finally coming out of “The Great Wash,” as we’ve called it. With many investors pausing new investments or only focusing on follow-on rounds, companies had to adapt quickly. Many went through painful recaps but are now stronger, more disciplined businesses. They’ve cut headcount, reduced burn, and increased their focus. Trailhead had to be disciplined, too: our patience in capital deployment and underwriting has meant we’re emerging from The Great Wash in a prime position to capitalize on a number of positive trends: reduced competition at the company and investor levels, founders and teams operating with greater capital discipline, and advances in new technologies.
Insight #5: The over-concentration of on-farm investments in venture portfolios has led to poor outcomes
Sky-high 2021 valuations, the entrance of climate tech funds into the food systems space, incumbent investors bridging companies, and slow growth of startups have led to buoyed valuations that companies never quite grew into. Agtech funds that were over-concentrated on this part of the value chain struggled with recent write-downs and will continue to underperform; investors overpaid and companies raised too much money, leading to misaligned exit expectations. As a food systems fund, we will continue to maintain pricing discipline, and we will continue to diversify along the entire value chain—from upstream to downstream. Check out how we’ve mapped our current portfolio along the value chain in a past edition of the GuidePost.
Founder Fundamentals
How to manage change. David Shore, a professor of organizational development at Harvard, says, “Managing change is about upsetting people only at a rate that they can tolerate.” Research from Harvard identified seven reasons why change management efforts fail inside organizations:
Leaders start with an incomplete or poorly defined strategy.
Leaders follow a strategy that is too rigid and inflexible.
Leaders fail to continue communicating effectively after the initial announcement of a change.
Leaders fail to identify and address resistance.
Change initiatives that work against existing corporate culture are less likely to succeed.
Leaders set unrealistic expectations, pushing too hard, too much, too quickly.
Leaders fail to create and celebrate short-term wins.
Portfolio Updates
ICIG Ventures, the venture arm of International Chemical Investors Group (ICIG), invested in Ascribe (developer of natural crop protection solutions).
Edacious (developing a rapid testing and data insights platform to measure and map nutrient density in foods)—closed an $8.1 million seed round.
Two portfolio companies, Local Line and Edacious, are partnering to bring detailed nutrition labeling to family farms.
CamoAg has released its Automated Valuation Model (AVM), which uses machine learning technology and data integration to streamline the farmland valuation process.
Earthshot has submitted for registration the world’s first validated reforestation (ARR) project under the Verified Carbon Standard (VCS) VM0047 methodology.
Meet Us In Person
Our team is on the trail! If you're attending one of the following events (or want to attend), reach out and we'll loop you up with the team.
Pete Oberle will be at RFSI Europe in Brussels on February 27-28th, meeting with fellow investors, entrepreneurs, farmers, and policy makers to discuss the future of regenerative food on an international scale.
Mark Lewis is speaking at the USDA's Agricultural Outlook Forum on February 27-28th, informing the USDA and fellow attendees about the tech advancements and investment opportunity in regenerative agriculture.
Sarah Hovde will be in New York on March 4-5th to cohost an event with Fractal, one of our Trailhead portfolio companies, which will bring together Midwestern farmers and NYC impact investors to discuss what challenges the farmers are facing, and how capital markets play a role in providing the solutions.
The team will be at World Agri-Tech in San Francisco on March 11-12th, meeting with entrepreneurs, investors, and peers to discuss the future of food & ag.
What We’re Reading
AI & Regenerative Agriculture. AI is becoming the silent partner to the regenerative revolution, helping farmers worldwide make better, faster, and more sustainable decisions. AgFunderNews.
New Research Into Soil Fertility. Researchers find 25-year differences in soil carbon gains among cover-cropped, no-till, and perennial cropping systems. Field crops like corn, soybean, and wheat that were grown with winter cover crops sequestered carbon most rapidly, whereas soil carbon did not change in conventionally grown crops. Michigan State University.
Climate impacts of Nature-based Interventions. A new report by the investor network FAIRR, “Climate and Nature-based Interventions in Livestock,” found that nature-based interventions can deliver long-term climate and nature benefits compared to tech-based interventions. FAIRR.
11 Predictions for Venture Capital in 2025. The venture capital landscape is poised for significant transformation in 2025. Samir Kaji of Venture Unlocked made 11 predictions for the year ahead. Venture Unlocked.
Major Nature-Based Carbon Removal Projects. Microsoft backed one of the largest nature-based afforestation, reforestation, and revegetation (ARR) projects to date. Keep an eye out for an announcement from us in the next few months in this space. Axios.
Regenerative Agriculture as a Form of Stewardship. Resilience emerges from stewardship of a key underlying resource, and regenerative agriculture is “the mother of all stewardships.” Fairly Civilized Substack.
The Trailhead Jobs Board
Trailhead’s 29 portfolio companies are hiring for 29 jobs. Check out the roles on the Trailhead Job Board.