Chinese Agricultural Investments Reached ¥50B in 2022. Here are the 4 Areas Leading the Way
By Hu Xiaofeng
Dao Foods was recently mentioned in an article on China’s leading foodtech and agtech media platform VCEarth (35斗 in Chinese). The article talks about key trends in the agriculture space, including new proteins, where RMB50 billion was invested in 2022, and Dao Foods is featured as a leading catalytic impact investor focusing on early-stage new protein ventures. Below is an English language translation of the original article.
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Statistics from VCEarth show that there were more than 200 investments in the agricultural sector, including venture capital, strategic investment, M&A, and IPOs, last year. Taking into account the 88 investment events that did not disclose specific values, it is conservatively estimated that China's agricultural inflow in 2022 will be around 50 billion yuan (~$7.27 billion).
It should be noted that VCEarth focuses on the large-scale agricultural industry transformation driven by policies and technologies. The agricultural companies featured in the statistics mainly cover the middle and upper reaches of the agricultural industry chain. In other words, this mainly means the supply chain links from upstream agricultural inputs to midstream production, processing, and transportation. It covers the fields of seed medicine fertilizer, planting, animal husbandry, aquatic fishery, intelligent agricultural machinery and other fields, as well as new industries still under development, such as plant protein, cell meat projects, etc., but does not include catering and alcohol projects.
In terms of financing amount, excluding the IPO event, Guangdong Seed Industry Group, Modern Seed Industry Development Fund and Huanong Assets strategically invested 2.33 billion yuan in SMIC Seed Industry, which is the project with the highest annual financing amount; followed by Weichai Power’s strategic investment in Lovol Heavy Industry with 1.584 billion yuan; and finally New Ng Fung spent 1.498 billion yuan to acquire Tianxin Seed Industry.
Among the star projects that have attracted the attention of capital, Aikenong has obtained 3 rounds of financing in total, Changjin Biology, Zhongke Momentum, Yellow Swan, Demeter, Jieshang Health, Kraton Bio, Lanjiang Technology, Yingjia Hesheng, etc. All have received two consecutive rounds of financing.
The following is a detailed analysis of investment and financing data in 2022, as well as forecasts of investment and development trends in the four major industries based on investment data.
Since 2022, the focus of some VC institutions and investors has begun to shift towards agriculture. Coupled with a seemingly endless stream of media reports, the topic of agricultural venture capital has been greatly boosted, making agricultural investment and financing look hot.
In addition to attention, VCs have also brought real money to agriculture. VCEarth conservatively estimates that the total financing of VC-invested projects in 2022 will be around RMB 5 billion (~$727 million). From the perspective of investment rounds, VC investment tends to be early-stage projects, mainly concentrated in the B round and before, accounting for more than 80%.
Specific institutions and investment projects can be found here: "VC invested in agriculture, Hillhouse, Sequoia, IDG, etc. did not hesitate to participate in a 5 billion venture capital investment"
Star VC/PE worthy of attention include: Hillhouse Ventures, Sequoia Capital, and IDG Capital are the top three in terms of activity in the first echelon. Dao Foods, Moment China, Food Core Capital, and Panda Capital all participated in the investment of three and more. As for the above agricultural-related projects, Yida Capital, Wanwu Capital, and Shunwei Capital participated in investing in two agricultural-related projects.
Hillhouse Ventures started to pay close attention to agricultural carbon neutrality in 2022, and has launched a new fund of 4 billion yuan in support of carbon neutrality. It has participated in 3 projects and 4 investment and financing events in the agricultural field. The investment projects include manufacturers of synthetic biomaterials Blue Crystal Microbes, a developer of edible microbial synthetic proteins, Changjin Biology, and a provider of intelligent planting decision-making services for crops, Aikonong.
Sequoia Capital participated in a total of 4 investment and financing events in the agricultural field in 2022: the investment in the innovative synthetic biology technology research and development and application service provider Microstructure Factory, the crop precision breeding technology research and development application service provider Yayoi Biotech, and exclusively Demeter, a microalgae-based product research and development manufacturer.
In 2022, IDG Capital publicly disclosed 3 agricultural-related investment and financing projects. Together with Hillhouse Venture Capital, it led the investment in Aike Nongwai. It also actively deployed breeding projects, and exclusively invested in the cultivation of new varieties of vegetables and fruits and developers of the entire industry chain Zhongnong Meishu, and Maize Yufeng, a developer of corn breeding technology.
Industrial investment has always been the most important investment method in the agricultural field. Overall, there will be 94 investments involving industrial capital in 2022, accounting for 46.5%. From the perspective of investment amount, there are 63 cases that disclosed the specific financing amount, with a total of about 19 billion yuan. Among them, the strategic investment amount of SMIC Seed Industry was the highest, reaching 2.33 billion yuan.
From the perspective of investment rounds, CVC investments tend to be late-stage projects. There were 71 late-stage capital events such as mergers and acquisitions, strategic investments, equity investments, and transfers, accounting for 75.5% of the total investment amount.
Compared with pure financial investment, entrepreneurial projects want to obtain industry-enabling investment, and obtain technology, brand, channel, end-user and other assistance from capital. In order to create an industrial ecosystem, large enterprises often make strategic investment arrangements around the company's business, which is especially evident in leading seed companies.
New Ng Fung was the most active industrial enterprises on the market last year, with 11 investment projects and a total amount of 2.205 billion yuan. New Ng Fung is a hog breeding and processing enterprise. Its business covers the entire industrial chain of feed, raw material trade, commercial pigs, slaughtering, chilled meat processing and sales. It integrates hog breeding, sow breeding, and pork processing. Most of the companies in the industry are also focused on livestock breeding and sales, such as Qiangshan Biology, Tianxin Seed Industry, Xiangmu Seed Industry, Hengdong Tianxin, Xinbang Animal Husbandry, Tianhan Animal Husbandry, and Hunan Tianqin.
Fengle Seed Industry has acquired three seed industry companies, namely Zhangye Fengle Seed Industry, Tianyu Xinghe, and Jinling Silage. Dabeinong Group has invested in Yunnan Datian, a corn breeding enterprise, and Xianmei Seedlings, a research and development and production company for crop seeds. Longping Hi-Tech, Joyvio Group, Aonong Biology, Shennong Group, Modern Animal Husbandry and Zhaoyan New Pharmaceutical also actively participated in the financing of two or more companies.
In 2022, a total of 25 agricultural companies will be listed. Among them, Yike Food, an agricultural and animal husbandry food supply company, raised the most funds through public offerings, with 5.118 billion yuan, followed by Sanyuan Biotech, a developer of erythritol products, with 3.686 billion yuan raised.
From the perspective of enterprise coverage, the number of animal and plant nutrition and health companies is prominent, such as animal feed research and development company Bunge Technology, feed additive company Huijia Biological, plant fertilizer research and development company Hanhe Biotechnology, and Nongshim Technology (which develops pesticide preparation products), as well as sheep breeding provider Qifengshan Agriculture and Animal Husbandry, Aquatic Feed Guangdong Hai Feed.
There are also a large number of enterprises in the field of agricultural food processing and supply, including Yongshuntai, a malt production and sales company, Jiahua Group, which is engaged in deep processing of soybean protein, Hongjiu Fruit, a fruit supply chain management service platform, and Sunshine Dairy, which is engaged in the production and sales of dairy products, as well as agricultural and animal husbandry food supplier Yike Food.
Three seed breeding companies were listed on the stock market, including Luheng Technology, Qiule Seed Industry, and Jinyuan Seed Industry. In addition, a technology company, Huitongda Network, an agricultural and rural Internet platform, was successfully listed on the Hong Kong stock market, and Tianyan Weizhen, an overall solution for agricultural informatization, was listed on the New Third Board.
According to the specific business of the projects that have received funds, VCEarth has summarized the four major directions of capital focus.
1. Pay attention to the improvement of agricultural production efficiency driven by science and technology
The world-famous ChatGPT has subverted people's perception of the value of artificial intelligence. However, the application of digital technology in the field of agriculture is still relatively undeveloped. In the process of development, we will continue to refine and optimize technology to slow down or even eliminate the impact of external environmental restrictions. There is a lot of room for imagination in the future to improve agricultural production efficiency.
An optimistic signal is that new technologies such as remote sensing, geographic information systems, positioning systems, computer technology, communication technology, and artificial intelligence have already been applied in all aspects of agricultural production.
From the investment and financing data in 2022, it can be seen that capital is focusing on smart agricultural machinery, agricultural digital products and technologies, comprehensive solutions for food testing, overall solutions for agricultural informatization, digital services for the agricultural product circulation industry, smart agricultural solutions, and greenhouse automation control solutions. In the fields of agricultural satellite remote sensing data analysis services and other fields, the efficiency and quality of the whole process of agricultural production will be improved in the future.
2. Pay attention to "chip" breeding agriculture technology
As the "chip" of agriculture and the country's strategic and basic industries, the seed industry will be one of the most frequent financing areas in 2022.
The animals and plants covered by the project mainly focus on breeding pigs, rice, corn, soybeans, peanuts, vegetables and fruits. The application of intelligent breeding solutions, digital precision breeding technology, gene editing breeding, molecular breeding and other technologies is becoming more and more extensive.
With the advent of the breeding 4.0 era, breeding has begun to enter the intelligent stage of "biotechnology + information technology + artificial intelligence + big data technology" led by cutting-edge science and technology. More intelligent breeding startups are expected to emerge in the future.
3. Pay attention to the supply chain links connecting farmland and dining tables, and improve the efficiency of food processing and agricultural product circulation
The market size of the food supply chain exceeds one trillion yuan, and it plays an important role in turning non-standard agricultural products into standardized commodities. It is also an important carrier to promote the integration of primary, secondary, and tertiary industries. Neutralized projects are of particular concern.
4. Pay attention to the food revolution driven by microbial technology
In 2022, more than ten new protein and cell meat projects based on synthetic biology technology have obtained financing, and there are now funds that focus on investing in new proteins, such as Dao Foods and Lever China. Public information shows that Dao Foods invested in 6 ventures in 2022. For new protein projects, Lever China has invested in 5 related projects.
Traditional protein production methods cannot meet the future needs of human life in terms of quantity, quality and sustainability. Chinese President Xi Jinping pointed out: "We need food from forests, rivers, lakes and seas, and facility agriculture" and "to develop biotechnology and bio-industry, we need calorie and protein from animals, plants and microorganisms." Therefore, the research and development of fungal protein products, synthetic alternative protein products, and guaranteed products for animal and plant production have become important science and technology to make up for protein shortages. In the future, the importance of the microbial seed industry will not be inferior to the animal and plant seed industry.
In the long run, the above four directions could also be the main trends of future agricultural development. With the help of capital, China's agriculture is brewing a major technological change.