Our investment in finres
Following our deep dive into the physical climate risk landscape, which covers climate risk intelligence, the need for quantification, and management of the risks that climate change poses, we are excited to announce that Illuminate co-led finres’ €4.1 million seed round alongside our friends at Speedinvest and some amazing business angels!
The Problem
Over the last few years, climate change, extreme weather conditions, and related issues have dominated news headlines. The accelerating pace of climate change and population growth have threatened food security. This has put tremendous pressure to take steps towards the development of a sustainable and resilient agri-food industry.
Demand for food globally is expected to increase by 70% by 2050, requiring at least $80 billion in annual investment and significant technological transformation. Agricultural production is highly vulnerable to the effects of climate change increasing risk for financial institutions.
Most financial systems are ill prepared to finance the shift to sustainable agriculture. Today, agricultural lenders lack the ability to accurately assess climate risk, despite it being a major driver of their credit risk (up to 40% negative impact on IRR). This means that these financial institutions struggle to deploy capital to regions where data availability is limited. In low and middle-income countries, only 8% of rural adults have borrowed from formal financial institutions.
Enter finres
finres offers AI and science-based solutions for banks to optimise agricultural investments in the face of climate change.
finres uses AI and science to precisely predict future trends in climate by using past and current climate risk data. The company helps banks, and international organisations accurately price their agricultural loan portfolio and assists farmers in ensuring their crops are protected. With the unfortunate reality of global warming, finres’ solution ensures that the agriculture sector is prepared.
The company currently works with clients across 32 countries and four continents and has supported investments of over $1.4 billion with an increase in productivity per hectare up to 50%.
We’re super excited to partner with finres on its mission to make agriculture investments more resilient and increase access to financing for farmers.
Our investment thesis
At Illuminate, we believe that a combination of fintech and AI technology will enable agricultural lending to scale to an unprecedented level and help enhance food security. We believe that finres is solving a vital problem and is well positioned to capitalise on the market opportunity.
A critical pain point in the industry
There are many obstacles that can stifle flow of capital to farmers, including limited data, high service costs, and uncertainty of repayment. Farmers struggle to get access to financing from formal institutions that lack the tools to correctly and quickly assess loan applications.
finres aims to bridge both the funding and the knowledge gap by providing:
- data that helps lenders understand the impact of climate risk on their loans (and how to mitigate it) based on simulation of climate zones, crop types, and agricultural technologies. This reduces the likelihood of non-performing loans and ultimately helps banks deploy more capital.
- actionable recommendations on adaptation and resilience to farmers including solutions and technologies that reduce crop risk.
Our reference calls with customers and industry partners were overly positive both on the opportunity and the quality of engagement with finres. Large multi-national banks were highly impressed by finres’ capabilities, level of detail and analysis, calling it a “must have” product.
Huge and growing market opportunity
Agriculture, a trillion dollar market opportunity.
The market opportunity is huge! In the US alone, farms have contributed $135 billion to the GDP in 2020, with industries dependent on farming contributing more than $1 trillion to the economy (c5% of the GDP). In emerging markets, the contribution of agriculture can be as high as 25% of the overall economy. However, financial services are not as competitive as you would expect in an industry of this size.
For instance, if we take the US market — one of the most well-serviced in terms of agriculture finance — farm debt has continued to climb over 2022, farm loan interest rates are rising sharply, and farm lending continues to increase while the number of farm-focused banks continues to drop.
We believe finres is well positioned to capitalise on this market opportunity and build a category defining agri-fintech business.
A killer team for this opportunity
Last but certainly not least, we’re huge fans of Florent and his team.
Florent has 15 years of experience in Climate and Sustainability, and has built, scaled, and sold similar solutions in his previous roles. We’ve been continuously impressed in our interactions with Florent. He has always demonstrated deep market knowledge on climate science, GTM approach, and key milestones.
Florent singlehandedly grew finres’ revenue making the company profitable in just its second year of operation, built the MVP on a shoe string budget and signed large clients including the World Bank, the United Nations, and many more all while being bootstrapped.
We can’t wait to see how this team continues to grow and define this fast moving market and look forward to working with our fellow investors Speedinvest, AFI Ventures (Ventech’s early-stage impact fund), Kima Ventures, Plug and Play Tech Center, RAISE Sherpas, Tiny VC, Better Angle, and a number of businesses angels, Anna Alex, Valentine Baudouin, Renaud Visage, and Michael Diguet.to help them on their journey.
If you’re building the next category-defining company in B2B fintech (digital asset infrastructure, enterprise tech, financial market infrastructure or sustainable finance), give me a shout at ss@illuminatefinancial.com
