In the past few years, we’ve written a series of articles on how VCs can help to positively affect the planet by supporting sustainable ag and food tech through technologies like fermentation. V-Bio’s focus on impact investment has been present since our fund’s foundation, so over the past 10 years we’ve been pleased to see a similar interest for sustainable solutions on the rise among other VCs and investors. Many funds have been motivated to back the “next big thing” in sustainability, hoping to capture the growing demand for green products among regulatory bodies and consumers.
In 2021, we were delighted to see global investments in sustainable agrifood start-ups peaking at $53 billion. Funding for the sector has since taken a dramatic downward turn. In 2022, investments fell from the $53 billion peak to $31 billion, only to be further halved to $15.6 billion in 2023. Many companies that were once lauded as game-changers have struggled to meet sky-high expectations, with some seeing their valuations plummet or already declaring bankruptcy.
As with any new and disruptive technology, the initial exuberance around sustainable agrifood has given way to a more measured and pragmatic outlook. The investing in this sector has matured, and stricter regulations have been put in place to limit deceptive greenwashing. This has exacerbated the slowdown in funding but is contributing to better focus and more impactful investments in the long term. This pattern – from promise to plummet to eventual plateau – is an archetypal example of the investment hype cycle for new technologies.
The Hype Cycle: From Innovation Trigger to Plateau of Productivity
The Gartner Hype Cycle is a model describing the common pattern of excitement, disillusionment and eventual stabilization that often accompanies maturation of new technologies. The cycle begins with the ‘Innovation Trigger’, where a breakthrough initially garners attention. This leads to the ‘Peak of Inflated Expectations’, where enthusiasm (and investment) outpaces the technology’s existing capabilities. Disappointment sets in during the ‘Trough of Disillusionment’, as early adopters begin to realize the limitations of the technology (and investors start to pull out). Some surviving companies nevertheless reach the ‘Slope of Enlightenment’, where the technology is better understood and can finally be developed into viable applications, ultimately culminating in the ‘Plateau of Productivity’.
Read this previous V-Bio article to learn more about the hype cycle in life sciences investments
Over the past decade, investments in sustainable agrifood start-ups have followed this classic trajectory. Initial hype drove massive attention for new technologies, but as the reality of scaling issues and restrictions have become apparent, the market began to recalibrate. We are now entering the ‘Slope of Enlightenment’, where these technologies (while no longer the subject of fevered speculation) are finally finding their niches and beginning to deliver on their promises in more focused ways. We’ll look at a few specific examples more closely to see how this pattern is playing out in three well-publicized areas: protein alternatives, vertical farming and autonomous farm vehicles.
The Alternative Protein Market
Impossible Foods – once lauded as “the future of food” – serves as a prime example of the hype cycle in protein alternatives. Founded in 2011, the company quickly became a poster child for sustainable innovation with its plant-based burgers designed to mimic the taste and texture of meat. The promise was not just a new food product, but a potential solution to the environmental and ethical issues associated with traditional meat production. Early investment rounds attracted significant funding from very big names and, at its peak, the company was valued at billions of dollars.
However, as competition grew and the challenges of scaling production and reducing costs became apparent, the company’s valuation declined. While Impossible Foods and its competitors like Beyond Meat still hold a significant market share, these products have not replaced meat to the extent that early advocates predicted. The initial excitement has been tempered by the reality that, despite existing demand, the tightening of consumer wallets and politicization of food has meaningfully impacted sales. Spending on healthy food is rising, but the ultra-processed nature of plant-based meat falls afoul of consumer preferences, which are trending towards less ingredients on their product labels. The result is a reduced appetite for meat alternatives packed with preservatives, as shoppers purchase other proteins instead.
Faced with this reality, Impossible Foods has reduced its headcount, slashed its operational expenses and improved its costs of goods, focusing efforts on specific markets where the demand for its products is strongest. By doing so, the company hopes to improve its margins and finally achieve positive cash flow in the coming years. While alternative proteins haven’t revolutionized the meat industry overnight, they are on their way to establishing a sizeable and viable niche. This is similar to the trend for plant-based milk alternatives, which have recently disrupted the dairy market and now look set to stay.
The Vertical Farming Conundrum
Vertical farming promised to revolutionize agriculture by growing crops in stacked layers, ostensibly using less land and water than traditional farming methods. The technology was seen as a potential solution to the challenges of urbanization, climate change and food security. Investment poured into the sector, driven by visions of a future where fresh, locally-grown produce could be available year-round in city centers.
However, the realities of high operational costs, energy consumption and logistical challenges have downgraded expectations. AeroFarms – despite being a leader in the field and securing substantial funding – has failed to deliver on promises and lost investor confidence. The company is now undergoing reorganization, trying to emerge with a more focused strategy.
Interestingly, vertical farming company Oishii raised $134 million earlier in 2024, showing that there is still some investor appetite for the sector. The key to fundraising seems to be the identification of the right market, something Oishi has done through its unique offering of strawberries and tomatoes with taste profiles that are unmatched by conventional products.
The potential of vertical farming remains but (as with the alternative protein market) it’s clear that the technology’s future lies in finding targeted, profitable applications rather than attempting to replace traditional farming methods on a global scale. Vertical farming may never replace conventional agriculture but it can complement it, offering solutions in specific markets that make economic and environmental sense.
Autonomous Agriculture
Another area where hype has given way to a more measured approach is the transition towards electric and automated agricultural equipment. Fueled by the broader push for electrification across industries, investors have been sold on the idea of farms transformed through solutions like electric, autonomous tractors, which could reduce labor costs and environmental impact.
However, the adoption of such promising technology has been slower than anticipated. Farmers (who already contend with slim profit margins) are cautious about investing in expensive new equipment, especially when the benefits are not yet fully realized. The challenges of integrating these tools and vehicles into existing farming practices, coupled with their need for supportive infrastructure, have also hampered adoption.
Yet, slowly but surely, the technology is finally finding its place. Monarch Tractors recently raised $133 million, for example, and the technology is gaining traction in specific markets where labor costs are high, qualified seasonal workers are hard to find, or where there is a strong emphasis on sustainable farming practices. Though the rollout may be going at a tractor’s pace, it is moving forward, fitting in with the broader global trend towards precision agriculture.
Learning from the Hype: Focus and Practicality
These company examples all illustrate a key lesson for investors and entrepreneurs in sustainable technologies: the importance of focus and practicality. The hype cycle reminds us that initial excitement often gives way to disillusionment, but this does not necessarily mean you’ve reached the end of the road. Instead, it is an opportunity to refine the technology, find the right markets, and build better business models.
As these industries move from the Slope of Enlightenment into the Plateau of Productivity, we’re seeing a shift from broad, ambitious goals to more focused, achievable ones. Companies are learning to operate within a niche where they can deliver real value. For investors, this is a reminder that the innovation cycle in sustainable agrifood technologies is long and capital intensive. Investors will only achieve a return when companies can identify a market segment where their products have a clear edge over conventional solutions, and their technology can be optimized and scaled to reach profitability.
Rise and Recalibration: The Path Forward
A benefit of slogging our way through the Trough of Disillusionment is that greenwashing of agrifood technologies is finally being tackled in a meaningful way. Start-ups claiming sustainability are now subjected to scrutiny, with standardization, stricter regulations and enforced ESG disclosures helping to prevent misleading marketing. This also applies to investment funds labelling themselves as green, impact oriented or ESG compliant. While this increased transparency and accountability has temporarily led to a perceived reduction in sustainable investments, it is helping to ensure that funding in the future is spent on truly transformative technologies.
The evolution of sustainable agrifood underscores the dynamic nature of innovation and the importance of understanding the investment hype cycle. As we’ve seen in many other sectors, some early expectations in the agrifood space were overly optimistic, but the recalibration of these industries is now leading to more sustainable, focused growth. As these technologies continue to mature, they will likely deliver on their more realistic promises – not in the sweeping, transformative ways initially imagined, but through targeted, practical applications that offer tangible benefits to people and the planet. Our lesson for the future is clear: innovation requires patience, focus, and a willingness to learn from past mistakes.
