Investor Outlook: A Silver Lining For AgTech After Covid-19

Two expert investors on our World Agri-Tech Advisory Board share their take on the Covid-19 fallout and opportunities for agri-foodtech investors and innovators.

As the world begins to pick up the pieces after Covid-19, there’s a palpable desire not to return to “business as usual”. The pandemic has permanently changed the global business landscape, accelerating digital transformation and unlocking tantalising opportunities for innovators and investors to ride a wave of new technology adoption through recovery and into growth.

Different investor mindsets are emerging, focused on a green recovery, a digital economy, and new confidence in solutions that promise food security, bolstered by the support of governments and consumers alarmed by the fragility of our current systems.

Andy Ziolkowski, Managing Director of Cultivian Sandbox and Co-Founder/Managing Partner at Cultivian Ventures says: “The ​landscape for VC investing in agtech has definitely changed with the pandemic. We are still actively looking for and investing in start-ups, but are scrutinising reserves, cash runway and achievable milestones more carefully.”

As investors reposition themselves post-Covid-19, which technologies have their attention?  

The pandemic lockdowns around the world resulted in countless reports of abandoned harvests and wasted milk, a domino effect that ripped through the entire value chain, bringing food production and entire countries to a halt as retailers struggled to fill their shelves. Systemic challenges with labour shortages and complex food distribution channels are being exacerbated by the need for remote and distance working, threatening to add costly time and layers of process to an already stressed system.

So, which technologies and start-ups will be most in demand to scale quickly and fill this need gap?

Andy Ziolkowski says: “Given the disruptions in food supply due to the pandemic, we have been looking at areas including indoor farming, logistics, food safety and traceability. Software businesses in both agtech and foodtech are more attractive. In general, it seems these businesses are less disrupted by social distancing and changes in their business operations.”

Robert Berendes, Executive Partner at Flagship Pioneering, agrees: “The global agricultural industry has generally shown robustness against the macroeconomic disruption of the Covid-19 crisis. After the initial market shock waves, many investors are seeking investment opportunities in the life sciences industries, including agriculture, with a focus on differentiating technologies that will be successful both during the crisis and in the recovery period thereafter.”

Digitally enabled, agile start-ups are poised for growth 

Robert Berendes notes “The Covid-19 crisis provides a great lens on the continued growth and value creation opportunities associated with early-stage businesses that transform the agricultural value chain by being digitally enabled, less asset intense, fast-growing and, in particular, by providing systemic solutions that span multiple steps of the chain.” He goes on to note that “if these types of start-ups are also well financed, with a clear strategy and implementation plan, they should be able to benefit from the Covid-19 crisis.”

Andy Ziolkowski says Cultivian has also honed in on the digital opportunity: “We are very excited about several software start-ups, including FarmlandFinder and Leaf Agriculture. Leaf provides API integration solutions between disparate farm equipment and software products. FarmlandFinder is an online platform company providing tools to facilitate the sale and purchase of farmland.”

Robert Berendes’ top picks for companies that will scale more rapidly during and beyond this crisis? “Indigo, with its systemic solution encompassing the plant microbiome, novel agronomic practices combined with digitally enabled marketplaces for (specialty) crop harvests, and carbon credit trading that significantly increases the value of crops and thus farmer profits. And CiBO, with its farmland management tool that creates unprecedented transparency about the value of farmland from the parcel detail up to the national level.”

In the era of social distancing, how can investors maintain the high value of their networking?   

For most of us, opportunities to travel for meetings, site visits and larger events are likely to be limited for the next half year. As we pivot the Rethink agri-food portfolio onto virtual platforms tailored to optimise networking value for our delegates, how are investors adapting the way they network, to discover, build rapport and reach deal-decisions with potential investments?

Robert Berendes is “personally convinced that in-person networking and collaboration will continue to play a key role in ag and foodtech investing in the future. Given that the current travel limitations might still be around for many months, organising virtual networking events that are truly engaging and productive should contribute to keeping the necessary dialogues going.”

Andy Ziolkowski agrees: “Without an ability to spend face-to-face time with entrepreneurs and management teams it is definitely more challenging to make decisions and conduct due diligence to evaluate companies. We are using conference systems for day-to-day operations and getting better at it – we recently hired a CEO for one of our portfolio companies, post-Covid-19, without ever meeting in person. It was a first, but probably won’t be the last time we do this!”

Rounding up, Andy Ziolkowski summarises the opportunity in a nutshell. “Digital networking events, if properly run, serve as a useful way to stay in touch with peers and other stakeholders. Key thought leaders and companies can convey information effectively. Not quite the same as having a 1-1 over a beer, but it will help us stay informed: sharing deal opportunities, general information, and gossip.”

Virtual summits coming up across the Rethink agri-food portfolio: