“My time is precious, should I be spending it educating generalist investors about food and agriculture?” A CEO posed that question at a breakfast our Spero Ventures team hosted for AgTech founders last month.
This CEO had gone through a number of pitch meetings where they found the investors ill-prepared to consider investment, simply because they weren’t familiar enough with the sector. Most investors don’t come from a background in food and agriculture, and there are a number of challenges unique to the space that can create apprehension — growing seasons that complicate adoption and iteration for new products, intricate and opaque supply chains, and operational complexities in the field such as limited connectivity and, well… dirt, to name a few. We contend there is also unique opportunity, as the industry has lagged behind others in adopting new technology (adoption is growing, but varies widely by geography and size of farm, among other factors¹), and there is increasing appetite for improvements in demand forecasting, optimizing water and fertilizer usage, reducing waste, and preventing food safety incidents.
Though some investors are still coming up to speed, many investors have recognized these opportunities and are already active in the space, to the tune of $16.9B invested globally in agriculture and food tech startups— from “farm to fork” — in 2018. Much of this activity was downstream closer to the fork, with $10B invested in sectors including restaurants and retail, and eGrocery².
It’s encouraging to see this activity, but there is great need for innovation upstream as well. The world population is projected to reach nearly 10 billion by 2050, and there is a large gap to close between the calories produced by the global food system today vs. what will be required in about 30 years. And we need to realize this increase while also reducing the climate impact of food production, as agriculture and related land use generate one-quarter of annual greenhouse gas emissions³. The companies that help solve these problems will create value for the world and for their enterprise.
At Spero Ventures, we continue to evolve our thesis around AgTech. At the farm, we’re particularly interested in solutions that increase the efficiency, resiliency, and sustainability of food production by leveraging technology such as data analytics to improve forecasts, AI/ML to increase crop yields, and automation to address worsening labor challenges. And in the supply chain we seek new platforms, marketplaces, and delivery channels that enable producers and consumers to reach each other more easily, transparently, and safely.
Regarding that founder’s question, we replied that educating investors about your market ecosystem is a cost of doing business, and applies to many spaces. It’s in your interest as a founder to be able to raise capital from as wide a group as possible — you have likely seen benefit from other founders who did this before you, and you’re both helping yourself and paying it forward to the next batch of founders by continuing the process.
We will be continuing this discussion of innovation and investment in food and agriculture at the Sustainable Food and Agriculture program we are hosting with One World in late July — “Hacking Food”. I hope you can join us! And if you’re an entrepreneur building a solution in food and agriculture, please reach out!
: Say, Sait M., Mustafa Sehri, Muharrem Keskin, Yunus Emre Sekerli. 2017. Adoption of Precision Agriculture Technologies in Developed and Developing Countries. Retrieved from the ResearchGate website: https://www.researchgate.net/publication/320908156_Adoption_of_Precision_Agriculture_Technologies_in_Developed_and_Developing_Countries
: AgFunder. 2019. AgFunder AgriFood Tech Investing Report — 2018. Retrieved from the AgFunder website: https://agfunder.com/research/agrifood-tech-investing-report-2018/
: Searchinger, Tim, Richard Waite, Craig Hanson, Janet Ranganathan, Patrice Dumas, and Emily Matthews. 2018. World Resources Report: Creating a Sustainable Food Future. Retrieved from the World Resources Institute website: https://www.wri.org/publication/creating-sustainable-food-future