This article was originally published on the evokeAG website here.
2023 was a very challenging year for the startup world.Across the board, the number of deals, speed of investment, valuations, andtotals invested all saw a downturn. U ncertaintyran high. Conservatism pervaded. It was tough for investors and startups alike.
But despite the doom and gloom in the venture headlines,there are several tailwinds for innovation specifically in agriculture.Technology will be required to increase productivity while reducingagriculture’s emissions footprint – to help producers do more with less.Agriculture also has a unique role to play in the climate transition, asnature-based solutions can remove carbon from the atmosphere. And finally, asproducers face increasing climate volatility, new solutions for profitabilityand resilience will be required, faster than ever.
This year’s evokeAG.in Perth, WA, will be a great opportunity to hear what local and globalagri-food tech investors are thinking amidst these contrasting dynamics. I’mexcited to join a plenary panel discussion on creating a collaborativeinvestment landscape along with Adam Anders (Anterra), Ryan Rakestraw(Temasek), Suresh Sundararajan (Nupo Ventures and Olam), and Robyn O'Brien(Sirona Ventures)Here are some of the key areas I hope we’ll discuss.
While traditional venture capital has focused on bits andbytes, you cannot eat software. Software does not eradicate weeds or processfood waste. We need agtech solutions along the value chain that transform atomsand molecules.
However, doing so can be capital intensive, so startups willrequire more than just equity to scale. Grants, debt, and project finance, forexample, will all become increasingly relevant for startups and investorsalike. To unlock this potential, founders will need to have a solid grasp offinancial planning and risk management. Because it will take a mix of thesecapital sources, we also need capital providers to ensure that these differentmodels are designed to work well together.
While Australia used to be a “too far” and “too hard”investment destination for most venture capitalists, things have changed. We’reon the map. In 2023, the percentage of Australian venture deals that includedat least one international investor hit record highs across all funding rounds.Anecdotally, we’ve seen this in our portfolio, having co-invested with circular economy fund, ClosedLoop, in Earthodic and agtech specialist, AgFunder, in Azaneo.
This influx of international investors means startups havemore options for funding and investors have a broader pool of co-investors,including those with specialist expertise. But startups need more than capital.
There’s a popular saying in the startup world that, “thebattle between every startup and incumbent comes down to whether the startupgets distribution before the incumbent gets innovation.” In agrifoodespecially, the advantages of incumbency are significant, from distribution andbrand reputation to processing infrastructure and logistics networks. Likewise,agtech startups offer agility, novel business models, and access to uniquetalent to incumbents.
Yet, corporate involvement in early-stage agrifoodinnovation in Australia has lagged behind other countries. We need to be askingwhy this is true, and how we might be able to catalyse and incentivise moremuch-needed engagement from agrifood corporates.
While many agtech venture funds in the past decade havepromised their investors that returns will, like in generic venture capital, materialisevia initial public offerings (IPOs), these have largely eluded the agtechsector. In 2023, IPO markets remained largely closed, and even some of the mostwell-funded agtech companies encountered pressure and challenges to justifytheir lofty valuations and deliver returns.
Fortunately, many agrifood tech investors are recognising thatearly exits via mergers and acquisitions (M&A) may be a more likely pathwayto returns. As funds openly embrace this strategy, how will co-investmentdynamics and founder expectations evolve? M&A is complex and full ofnuances, and many agtech founders in Australia are first-time founders, so wemust work out how to upskill and prepare founders for success.
In the broader startup world, founders commonly come from atechnical (i.e. software development) or consulting background. In agrifoodtech, given the breadth of technologies and application areas, we’re seeingfounders with all kinds of non-traditional backgrounds. Our portfolio at TenaciousVentures features forensic chemists, entomologists, chefs, andfarmers as founders.
Bringing new perspectives and skillsets into agrifood techis critical given the complexity of the challenges we face. We must overcomebiases and challenge established thinking to attract and develop more of thistalent and unlock the power of their diverse skill sets and tangentialexperiences.
Now that 2023 is in our rearview mirror, 2024 presents aunique opportunity to press Australia’s natural advantages as a world-classsource of climate adaptive agrifood tech solutions.
I can’t wait to share the stage next month at evokeAG. with Adam, Ryan , Suresh, and Robyn O'Brien(Sirona Ventures). I hope to see you there!
For more information about evokeAG. 2024, andto purchase tickets visit evokeag.com/2024.