Agtech Action | Week of 03.25.23 - 03.31.23
Agtech Action is a weekly newsletter highlighting current events in the world of agtech, and some light-hearted commentary
Mammoth meatball, Italy bans cellular agriculture, and first commercially available autonomous electric tractor is launched. Insecticide from spider venom, Cargill to halt grain loadings at Russian terminal, and Americans are tipping less.
Venture capital, particularly in agtech, is pulling back, perhaps driven by larger forces. But this prompts me: is it time to think of unique ways to finance agtech? Customized financing is the theme of the agtech week. Food and agriculture has a history of innovative ways to finance the industry; I argue we harness that entrepreneurial spirit and rethink how to finance agtech. I’ll give it a shot, and want to hear from you, in this week’s newsletter.
Food and the World:
U.S. Dominance In Ag Export Race Is Softening
Iowa DNR Issues Fines for Manure Spills and Uncertified Application
Meatpackers shares jump as China resumes Brazil beef imports
Cargo Ships Leave West Coast Ports as Labor Talks Show 'Little to No' Progress
Food inflation still hot, USDA reports
‘Giant leap’ could lead to population peak to 8.5B by 2050 (0:00 mark)
Americans are tipping less (0:55 mark); 15% in the last quarter
One Of the Hottest and Driest Summers in Decades for Argentina
USDA Announces Second Round of Debt Relief to "Distressed" Borrowers
One In Seven on House Ag Panel Collected Farm Payments
The Future of Rural Electric Cooperatives
Corn and Soybean Prices Soar Higher, Even With USDA's Surprising March Prospective Plantings Report
What retail RDs do can reap some produce dollars
West coast port labor talks (0:00 mark); groups request new point person
Burger King layoffs (0:30 mark); 400+ jobs, in Michigan area
Italy Bans Cellular Agriculture To ‘Safeguard Its Farmers’
Deadline Looms, but still no Movement on U.S.-Mexico Corn Trade Dispute, Grassley says
National Grocers Association ad calls out power retail buyers
Cargill to Halt Grain Loadings at its Russian Export Terminal
What to Know Ahead of USDA’s March 31 Prospective Plantings Report
Plagued By Drought and High Input Prices, Cotton Acres Could Crumble this Year
USDA Says Farmers Will Plant More Corn and Wheat In 2023
Senators Roll Back EPA WOTUS Rule, Though Veto is Expected
Agtech in the News:
Monarch launches ‘first commercially available’ autonomous electric tractor
‘Water in the sky’ initiative grows vertical gardens
A self-driving revolution is happening off-road, too
FundCanna Lands Finance Partnership With gGRO Horticulture
Mott Corporation Has Acquired Michigan’s Digested Organics (Congratulations to Digested Organics, the winner of our Manure Challenge!)
Growers discuss why urban agriculture deserves more attention
Circular Economy & The Role Indoor Farms Have
Japan’s New Center of Excellence on Climate-Smart Agriculture
Genetic Technology Act for precision breeding passes into English law
FBN Finds as Much As 283% Price Variation Between Farmers Buying Same Ag Chem
GrubMarket Expands Fresh Produce Supply to Eastern Europe and Egypt
Cryptography’s Future Will Be Quantum-Safe. Here’s How It Will Work
Local Bounti Secures $145 Million in Financing for Growth Plans
Colorado's Importance in United States' CEA Market
AMGUARD & NewLeaf Partner for North American Biological Solutions
3 ways AI will transform grain elevators
These ‘supertrees’ grow a climate-friendly alternative to palm oil (great article on superstar Naveen Sikka and TerViva, a Yield Lab portfolio startup)
Scientists Scramble to Help Bay Scallops Survive Climate Change
How technology is tackling food waste and changing the fresh produce supply chain for the better
Fluence LED Lighting Solutions Revolutionize Cannabis Industry
Agmatix Partners with NASA Harvest to Support the Uptake of Sustainable Agricultural Practices
Fun:
Insecticide derived from spider venom
How to Run An Innovation Sprint on Your Farm
Helpful Resources:
Q1 2023: PitchBook Analyst Note: Gaining an Edge in VC Investment Selection
New Vertical, Hybrid Tillage Tools from Great Plains
Ag Retailers Prepare to Navigate 3 Emerging Risks
'Big oil' bankrolls more climate VC deals, a dilemma for founders
Q4 2022: Retail Fintech Report
H2 2022: Greater China Venture Report
Interesting Reads:
The Great Food Reset has begun
Mammoth meatball? (0:55 mark); it’s mostly lamb meat; uses woolly mammoth DNA to culture meat
Iowa Fund That Protects Farmers is Set to Go Broke
What even is a "Moat", anyway?
How Nigerians are using WhatsApp groups to fight food inflation
African online pharmacies are leapfrogging an e-commerce giant
Texas Agriculture Commissioner Supports Lawsuit Against Endangered Species Designation
Farmland Values May Peak In 2023
Pause giant AI experiments: An open letter
The most detailed life cycle analysis of food waste ever offers eye-popping revelations
Iowa Farmers’ Positive Outlook and Rising Agtech Investments
The Liberating Pleasures of Eating Meat With Your Bare Hands
Finance:
Manna Tree looks to replicate Vital Farms’ success en masse
Why LPs think SVB's failure has an upside
Ceres targets $150M agribusiness vehicle as it expands beyond farmland
Heartwood Partners Acquires NativeSeed Group
Looking for the food and ag ‘sweet spot’ for exits
Nuveen sells 11,000-acre timberland asset to Conservation Fund
Looking for the food and ag ‘sweet spot’ for exits
Milltrust Launches British Innovation Fund II and VC Platform Milltrust Ventures
SWEN Capital’s Blue Ocean Fund Exceeds Target, Closes At €170M
Mahindra Acquires 100 Percent Of M.I.T.R.A, Omnivore Exits
Precision Ag Company Braiin Going Public Via SPAC at $215M Valuation
GPs tap co-investments as debt capital dries up and fundraising lags
Schroders launches climate impact fund for the UK’s first LTAF
Saudi Industrial Investment Group to invest US$70m in Unibio
Korean AgTech Company Green Labs Bags $38.4M
Theme of the Agtech Week: Customized Financing
If you follow the venture capital world, you know that the market is very anxious right now. Investors are holding back, being extra cautious and judicious with their investment decisions and even some are pulling back activities. Diving a bit deeper, you know that agrifoodtech, in particular, is feeling the pinch from a venture capital perspective. While that may be a sign of a broader issue, namely the economy, I think it signals something fundamentally missing in agtech investing. And that is customized financing. That is the theme of the agtech week and I’ll explore how agtech could benefit from customized, and creative, financing.
A great read to learn more about venture capital and how it came to be is ‘The Power Law’ by Sebastian Mallaby. It’s a great synthesis of how a few creative, and gutsy, entrepreneurs created a new way of valuing, and financing, new ventures where traditional financial metrics did not fit. Moreover, these mavericks created a way of valuing a venture, or idea in some cases, that has no product, no revenue, no physical location, but just an idea, a powerpoint deck, an opportunity or a ‘technology’. How do you finance something like that? That is where venture capital stepped in and financed the ‘un-financiable’, in the historically financing sense, ventures. How does this fit into agtech?
Agtech, and the innovations and ventures in food and agriculture, come in many different packages. Agtech includes but is not limited to: hardware, software, facilities, hard science, products (tangible and intangible), agribusinesses, physical infrastructure, people, consulting and services, and I can go on. Couple this with the nuance of food and agriculture value chains, the unknown and non-linear regulatory path for agtech and you have a million, that is conservative, commercial paths that an agtech venture can take. This creates a difficult situation for banks, lenders and other financiers to finance agtech accordingly. When you read about the tough go that some agtech startups are having (in SPACs or CEA for example), perhaps it’s time to revisit how we finance agtech. Food and agriculture has a history of creating innovative ways for financing, see crop insurance for example. Crop insurance came about (from the government) as a way to cover a farmers crop for the year in the event that weather or uncontrollable events wiped it out (e.g. weather, low yield, not readily available inputs, etc.). This is a great way to cover farmers for unforeseen circumstances.
I don’t want to speak for all farmers and say that it is perfect, but it is an example of a unique way to finance an operation. This is made possible, and easier, because banks can understand crops, a physical product, and therefore can valuate and finance it accordingly. But how do you do that with say a new pig genetic genome that enhances flavor, texture of pork? Or a novel way to graze land that has ecological and microbial benefits? How do you valuate, and finance, ideas that you can’t see nor completely understand? Let’s give it a shot.
Venture capital is predicated on hitting a set timeframe, typically 5-10 years, with set metrics and milestones (commercially) that must be hit to receive additional capital and support. And these investments must ‘exit’, that is the investors need to cash out and ideally return a multiple before that timeframe. This model tends to facilitate and fit, in my opinion, ventures that are lean (e.g. small teams), efficient with capital (e.g. software) and can scale fast (e.g. CPGs). As we highlighted, agtech innovation does not exactly fit that mold, perhaps that is the cause of investment apprehension and lack of volume of successes.
What if we flipped that financing model on its head, instead of setting artificial time horizons, what if financing was predicated on commercial milestones (e.g # of contracts signed, customers acquired, type or size of customers acquired, key people hired, etc.) with more flexible timelines? What if the financing was rather than given on the front end (e.g. equity) but the back end (e.g. take or pay contracts, revenue or profit sharing, royalties, conditional debt or loan)? What if agtech was valuated (a key metric for exits) by non-traditional financial metrics (e.g. # of jobs created, wages generated, people or communities impacted, infrastructure developed, industries created, skills taught, etc.)? I throw these ideas hopefully to show that non-traditional innovation requires non-traditional financing. I’d love to hear your ideas on customized financing and how you would do it.
Thanks for reading and have a great weekend.
BD
Brandon Day is the Chief Operating Officer of The Yield Lab Institute, the global agtech think-tank, non-profit arm of The Yield Lab global network of venture capital funds. The views, opinions and commentary expressed are solely those of Brandon Day.