We all love our food, especially here in Southeast Asia. We care, not only how our food tastes, but also how it is distributed, sourced and even cultivated. Food has evolved from something we merely eat into a reflection of our values and identity. With issues such as food security, unsustainable farming practices and climate change, impact on crops becoming increasingly severe, solutions to address these issues become critical and with that, provides a large market opportunity to tap into.

The agri-food sector contributes more than 25 per cent of ASEAN’s GDP, denoting its potential to drive economic empowerment. Academic, private, and government-led incubation hubs have established test bed environments to help scale agri-food products toward commercialisation, while large corporations provide strategic and financial support for startups in the space.

Among ASEAN markets, Singapore has become the agri-food innovation hub, leading in regulatory frameworks, ease of doing business, and programmes and incentives to tackle food security needs. Singapore is the largest ecosystem in the region based on both the number of agri-food tech fundraises and funds raised — accounting for 38 per cent of total ASEAN funding. Indonesia comes in second with 71 fundraises and 30 per cent of total funding, followed by Vietnam with 15 fundraises and 12 per cent of total funding.

The agri-food supply chain starts upstream with the provision of inputs and production. This is where companies normally recognised as “agritech startups”, provide services and technology to improve farming efficiency, sustainability and introduce novel farming systems. The next stage is transformation, where innovations focus on new food processing techniques or enhancing ingredient functionality. Some companies opt to create entirely new types of food and beverages, with a well-known example of this being plant-based meats. 

Further downstream to distribution and consumption, solutions centre around transporting/delivering the finished food products to consumers. This can take the form of marketplaces or apps where consumers are able to discover, order and receive food, as well as technology to help businesses become more efficient in preparing and delivering food to their customers.

There is also food safety and traceability technology that covers the entire supply chain that helps sanitise food processing equipment, assess product freshness and increase their shelf-life. After consumption, then comes the question of how to handle surplus food and reduce food waste to further improve efficiency in the supply chain.

The momentum in the agri-food space has facilitated the establishment of a vast array of startups in the space across the entire supply chain. With over 270 agri-food tech startups in Southeast Asia, this ecosystem reflects the region’s dynamic and technology-driven approach to addressing food security, sustainability, and efficiency challenges (Forward Fooding, 2023). This growth is supported by a favourable mix of academic, corporate, and government initiatives, enabling these startups to access the resources needed for commercialisation and scaling. 

However, challenges remain as recent years have seen VC funding slowing; for example, vertical farming economics are challenging and often less appealing than their traditional peers. Alternative protein startups have to offer more than a great consumer ‘green’ brand to rival the traditional meat brands. In agritech, there is an increasing number of ventures, leveraging the model and riding on the success of eFishery.

Sector	Startup Count	Funding since 2013	CAGR 2019-2022	Most funded companies
Agritech	62 (22%)	US$636 million	92%	eFishery (July 2023), Series D of US$235 million
Next-gen food and drinks	70 (25%)	US$352 million	192%	nextGen (Feb 2022), Series A of US$154 million
Food delivery	65 (24%)	US$1.75 billion	81%	Line Man Wongnai (Sept 2022), Series B of US$265 million
Consumer app and service	18 (7%)	US$486 million	-71%	Trax (April 2021), Series E of US$640 million
Restaurant tech	21 (8%)	US$144 million	9%	Rotimatic (April 2018), Series C of US$30 million
Food processing	15 (5%)	US$42 million	11%	Seppure (Feb 2023), Series A of US$12 million
Food safety and traceability	4 (1%)	US$3 million	NA	DiMuto (Sep 2021), Series A of US$2.4 million
Surplus and waste management	21 (8%)	US$331 million	9%	RWDC Industries (Nov 2021), Series B of US$257 million

Source: Forward Fooding (2023)

Also Read: Can alternative proteins help build a more secure and sustainable food system?

By taking a deeper look, we have observed two promising agri-food tech verticals that present significant market potential:

Agritech

Agritech startups have gained prominence, given the need for independent sovereign food security in times of global conflict and an impending EU carbon tax. The problems this space aims to tackle can be broken down to those of farmers and consumers:

Farmers

• Lack the knowledge and support to farm efficiently, resulting in lower yields
• Utilise environmentally unsustainable practices
• Lack access to affordable inputs and profitable markets

Consumers

• Want fresher high-quality produce
• Want more consistent quality
• Want produce to be cultivated in an environmentally sustainable way

Our observations of the SEA agritech space in the past 10 months have revealed a wide variety of interesting innovations in this space to tackle the aforementioned issues:

• Crop monitoring technology: Utilise IoT/satellite/drone technology to monitor farming environment & crop health
• Produce and/or inputs marketplace: Online marketplaces to provide easier access for consumers/businesses to buy their produce or for farmers to buy their inputs
• Sustainable farming methodology and inputs: Implementation of sustainable farming practices & provision of more sustainable inputs which may also include financing
• AI/ML powered data-driven smart farming: Predictive analytics of weather patterns, supply/demand and crop yields for better resource planning and management
• Renewable energy resources: Shifts to more environmentally friendly energy sources for farming processes, such as solar or other renewables. 

That being said, some challenges still remain:

• Limited education and technology skills among smallholder farmers: Smallholder farmers frequently have. limited experience with technology, which can pose challenges in adopting new technologies and modern farming practices.
• Financing default risk: Many startups who provide financing for farmers face a significant default risk due to fraud and lack of a reliable credit scoring mechanism.
• Vulnerability to macroeconomic and environmental factors: Macroeconomic factors such as volatile price of commodities and natural disasters such as typhoons can instantly damage an agricultural business after which it is hard to recover.

Seeing is believing. In our landscaping through Southeast Asia, our team has had the opportunity to see how businesses operate on-site. One aquaculture startup implements proprietary technology to ensure efficiency in fish farming, affording farmers with higher yields hence reducing losses and wastage. Another Indonesian startup focuses on hydroponic indoor farming and implements a proprietary scheduled planting algorithm to maximise crop yields and align supply and demand to reduce wastage. 

Next-gen food and drinks

The growth of Next-gen food and drinks’ is far ahead of any other vertical, mainly driven by Singapore, acting as a catalyst for alternative protein development in recent years.

Also Read: The realities of scaling food tech in today’s resource-strapped world

The problems that these innovations aim to solve centre around changing customer need and culture, mainly:

• Demanding more healthy and novel food options (that still tastes good!)
• Accommodating dietary restrictions such as veganism or lactose intolerance 
• Demanding food that is sourced sustainably with lower carbon footprint

As such we have seen the following innovations within this space:

• Alternative food ingredients: Developing new proteins using alternative materials or fermentation methods, acting as a more sustainable food ingredient

• Alternative ready-to-eat/drink F&B: Creating new food items using alternative materials such as plant-based meat/milk or even insect-based chips

However, there are several key challenges in the agritech space that need to be addressed:

• R&D investment: New ingredients require extensive R&D, which can extend the timeline to commercialisation and demand substantial resources.
• Regulatory approvals: New food ingredients must secure approval from local regulatory authorities, such as the Food & Drug Administration, which can be a lengthy process in certain markets.
• Capital expenditures: Manufacturing and distribution often entail significant capital investment, which may impact the scalability and attractiveness of the venture.
• Product-market fit: Products must align with the taste preferences of local markets to ensure acceptance, avoiding overly novel profiles that may deter consumers.

The Radical team has been deeply engaged with next-gen food and beverage ventures across the region, recently investing in a stealth startup at the forefront of strain engineering and precision fermentation. This innovative company is also advancing downstream processes to produce high-value palm oil derivatives like high-purity oils, fatty alcohols, and fatty acids—all valorised from agricultural waste. Demand for these sustainable, high-quality alternatives is increasing (with interest across Asia, US and Europe), indicating strong potential to disrupt this industry.

Agritech and next-gen food and drinks present a myriad of great opportunities for founders to tap into, and addressing the above challenges can help establish strong differentiation.

These sectors remain relatively nascent but present significant opportunities:

• Food processing: Although capital-intensive, the upcoming EU carbon tax is likely to incentivise large corporations to adopt these solutions, positioning them to benefit from economies of scale.
• Food safety and traceability: Advancements in this area rely on increasingly complex regulatory frameworks, with initiatives like the EU’s digital food passports setting the groundwork.

In closing, agriculture, food, and climate are deeply interconnected. Smart farming practices reduce waste and leverage sustainable inputs, benefiting the environment. Certain crops aid in carbon sequestration, and transitioning to renewable energy can further lower emissions, presenting a strong climate mitigation pathway. Simultaneously, the need for soil resilience and disaster management creates critical opportunities for climate adaptation.

The Radical Fund is seeking business models that are capital-light while delivering a twin strategy of scaled commercial and climate impact. Please reach out to us for feedback or comments to share regarding the agri-food tech industry in Southeast Asia.

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