Israel conflict is not “the whole story” as agri-food tech funding plummets

Perhaps not surprisingly, Israel-based agri-food tech startups have closed just 17 rounds of funding since Hamas’ attack on civilians, which was followed by a protracted war in Gaza. Raising about $161 million since October 7, 2023, the total represents a 72% drop from the same period last year and about 73% fewer deals. The figures bring Israel’s share of global agri-food technology financing to just 1%, half of what it was a decade earlier.

But Amir Zaidman, business director at The kitchenIsrael’s leading food technology incubator and venture capital investor, argues that “these numbers don’t tell the whole story”, pointing to the broader slowdown in investment in food technology globally, especially in alternative proteins.

Global agri-food technology financing from October 7, 2023 to October 7, 2024 was down 9% from the previous 12 months, while the deal count was 1,132, a 44% drop.

“This affects Israeli food technology startups much more than the conflict. The Israeli food technology landscape is very “alternative protein-oriented” and as such may be more affected than other regions. I’m not saying that war has no influence – it does – but it’s not as dramatic as it might seem.”

Zaidman is right; in the first quarter of 2024, Israeli agri-food technology startups raised more funds than in the same period in 2023, before the conflict began

Israeli agri-food technology: from Covid to today

Funding over the past 10 years reached an all-time high in the first quarter of 2022, when Israeli agri-food tech startups raised nearly $515 million in three months thanks to cheap money and inflated valuations, especially in alternative proteins.

In contrast, the onset of the post-boom crisis was felt dramatically in the following quarter, when Israeli agri-food technology startups raised just $36 million in 15 deals.

A much more muted but still significant drop in funding also occurred between the third and fourth quarters of 2023, following the Hamas attack on October 7; just two deals closed in the last quarter of 2024. However, as Zaidman says, that doesn’t tell the whole story; Funding for Israeli agri-food technology startups was already in decline, dropping 78% between the second and third quarter of 2023, before the Hamas attack.

As Zaidman noted: “The immediate effect of October 7th was enormous. We are overwhelmed by the pain, frustration, and disappointment. It took us a few weeks to get our shit together. But, as always, we did it.”

The fact that around $115 million in funding – 71% of all wartime funding – was raised in the first quarter of 2024 suggests this resilience and the measures taken by Israeli companies to adopt contingency plans and promote investor confidence in your ability to do business.

It’s worth noting that a few big deals, including a $39 million Series C for tractor automation company Bluewhite, contributed to this total.

Looking ahead

Unfortunately, as the war intensified, investment figures fell further. While Zaidman argues that there are many investments that go unnoticed and unpublicized, he admits that the biggest impact of the war on investor appetite for Israeli innovation is that new investors – those who do not have any Israeli companies in their portfolio to date – they did not visit the country as they could have done previously.

“These investors are unlikely to invest in an Israeli startup these days. If all I knew about what was happening was through the media, I would be reluctant too. However, many investors who are familiar with Israel and specifically the Israeli food technology ecosystem act very differently. They will look first at the startup on its commercial and technological merits, and only to a much lesser extent, on the geopolitical situation. We see many non-Israeli investors continue to support their portfolio companies and, in some cases, invest in new companies (that fit the investor’s investment strategy).

“I think Israeli startups are very resilient and typically known as companies that can achieve more with less. Nowadays, these qualities are heightened and become more important than ever. All together I am optimistic. I believe that some of the biggest food technology companies in the world are in Israel and I believe in the resilience and ability to overcome challenges of Israeli entrepreneurs.”

The 10 main agreements raised in Israel since the conflict:

• US$39 million created put blue white, a robotics company that turns tractors into remotely managed vehicles, through a series C round in January 2024;
• US$20 million raised by Greeneye Technology, developing precise sterilization pest control systems, in April 2024 through a B round;
• US$17.5 million raised by SeeTree, a company that develops an “intelligence platform for trees”, with a series C agreement in January 2024;
• US$17 million created by Mediterranean Food Lab, a solid-state fermentation startup that produces flavoring ingredients, with round A in January 2024;
• US$14.2 million raised by FreezeM, an agricultural biotech company that makes insect farming scalable, in February 2024 through a C-stage agreement;
• US$10 million raised by Ever After Foods, a cultured meat startup with a patented bioreactor, with a series A round in June 2024;
• US$8.1 million raised by WeedOut, a biotechnology company providing innovative weed control solutions, in February 2024 through a series A round;
• US$8 million raised by Galileo Wheel, a startup that developed a tractor wheel reducing soil compaction, with round C in January 2024;
• US$7.5 million created by Chunk Foods, a company that makes clean label plant-based whole cut meat, in January 2024 through a seed round;
• US$7 million raised by Newmoo, a startup that makes plant-based cheeses and dairy alternatives, through a seed round that closed in May 2024.