Invest Like a Farmer: the surprising similarities between how farmers and venture capitalists think

June 16, 2021

As a venture capitalist working in agriculture, I’m constantly surprised by the similarities between how farmers and investors think.

I came to agriculture in a roundabout way. I grew up in Silicon Valley and moved to Boston to study computer science and later work in the defense industry. It was during an accidental gap year in South America, where I was pulling weeds on an organic tomato farm in Argentina, that I first saw the potential to apply my systems background to agriculture.

I realized that much of the technology that was being developed was missing the mark because the people making it — while they were accomplished technologists — didn’t understand the culture, science, or business of farming. That’s when I began to develop my own investment thesis for agtech.

Agriculture has historically been a very different world to the heavily urban-focused startup and technology ecosystem. But though the lines between these two worlds are blurring, there’s still a huge gap between the two; not just in technology application, but also in language, culture and trust. When I returned to the USA to complete my masters at MIT, I was increasingly drawn to the sector, and to finding ways to bridge the gaps between technology and agriculture.

Spending time with, and learning from, farmers is one of the best parts about working in agtech. There’s so much that the agtech world, especially investors, have in common with farmers.

Both farmers and VCs are a unique combination of generalist and specialist. They must manage projects, procure a range of services, liaise with suppliers, and also dig deep enough to make decisions that can steer a complex business to growth.

They must also be experts in managing risk and navigating uncertainty. Climate and the risks associated with it are a huge part of a farmer’s operation, and successful farmers are experts at de-risking their businesses and innovating amidst risk. Venture investors, too, are comfortable with risk, investing in an asset class where wins and losses are absolute rather than partial or marginal as with property or stocks.

And like farmers, investors must think both globally and locally at the same time. Nothing is more locally specific than the weather on which farmers are ultimately reliant, but they are often selling their products into a global export market. They must be sensitive to global commodity prices, consumer trends, and trade policies.

The other large parallel comes back to the trust factor. Both farmers and venture investors are highly reliant on their relationships and must build deep trust with those they do business with to be successful. Farmers must build relationships with agronomists, accountants, financiers, veterinarians, contractors, customers and wholesalers. For VCs, relationships with founders, co-investors, ecosystem players, and research organizations are all critical.

These similarities provide a good platform for farmers and venture capitalists looking at agtech to explore how they might work together to pursue their mutual interests. And it’s urgent that they- that we- do so, as the challenges facing agriculture are too great to rely on the playbooks and paradigms that have gotten us to where we are today. We need new business models, new technologies, new ways of thinking, and perhaps most of all, new forms of collaboration. Hopefully by finding common ground between how farmers and investors think, we can begin to build the future of ag together.

Sarah Nolet is General Partner at Tenacious Ventures, an early-stage venture capital firm specializing in agricultural technology- part of the Agthentic Group. This post was inspired by content Sarah delivered to the Wade Institute’s VC Catalyst program.