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Best of NAMA 2024












WHY LEADING VCS ARE RETHINKING THEIR AGRIFOOD INVESTMENTS
By Seth Olson, Senior Manager/Food Systems, GreenBiz Group

In his keynote presentation at VERGE 23, Shayle Kann, a partner at Energy Impact Partners, described climate tech investing as a wave: Either you are building a wave or you are riding one. Over the last five years, the secluded surf spot known only to agrifood specialist investors was overrun with generalist venture capitalists looking to catch the next big wave.

But then the macroeconomic tides shifted -- 85 food and beverage companies filed for bankruptcy in the U.S. in the first half of 2023 -- and venture capitalists got spooked.

Total investment in agrifood tech dropped by 44 percent from 2021 to 2022. Overall, funding for decarbonizing the food system remains embarrassingly low: Only 10 percent of venture capital in agrifood technology, around $2.3 billion, went toward climate solutions from 2019 to 2020.

Reality-based models
So how are funders showing up differently to match this new market?

As Connie Bowen, co-founder of Farmhand Ventures, put it: "Unicorn farms aren't real, and money does not grow on trees." With venture capital investors experiencing a reality check over the last two years, some -- such as Bowen -- are looking beyond pure equity investments to more innovative structures that match the realities of building successful and resilient agrifood startups.

At a VERGE 23 tutorial about agrifood innovation, Bowen and Indre Altman from S2G Ventures shared examples of how they are investing in alignment with food system realities instead of trying to copy the investment model built around technology and software-as-a-service models with minimal marginal costs.

Here are four key realities they're incorporating:

*Agtech and food tech have longer maturation timelines. Farmers only have one harvest per field per year, so they hesitate to implement changes, given the potential risks.

*The development of impactful solutions is slow, given the time between testing an iteration and seeing the outcome.

*Agtech and food tech are frequently asset-heavy, so costs remain constant even at scale and involve significant upfront capital investments.

*"Farms are like snowflakes," as Bowen put it. Innovative solutions must be contextualized to specific crops, climates, soil types and market conditions. This means they will never experience viral growth through broad application.

Bowen's Farmhand Ventures uses redeemable equity to invest in agricultural technology. Redeemable equity, which starts out as a traditional equity investment but allows the business to buy back most of its equity stake with its revenue over time, is not a common investment structure in Silicon Valley, but it is well-suited for the food system.

To read the entire article click here.


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