ABOVE: Tenacious Ventures co-founder and managing partner and speaker at EvokeAg 2024 Sarah Nolet.
For the start-up world, 2023 was a very challenging year.
Across the board, the number of deals, speed of investment, valuations and totals invested all saw a downturn.
Uncertainty ran high.
Conservatism pervaded.
It was tough for investors and start-ups alike.
Here Tenacious Ventures co-founder and managing partner and speaker at EvokeAg 2024 Sarah Nolet explores what start-ups need to scale in 2024, the paths to returns and what the influx of international investors means for agrifood tech in Australia.
Despite the doom and gloom in the venture headlines, there are several tailwinds for innovation specifically in agriculture.
Technology will be required to increase productivity while reducing agriculture’s emissions footprint – to help producers do more with less.
Agriculture also has a unique role to play in the climate transition, as nature-based solutions can remove carbon from the atmosphere.
And, as producers face increasing climate volatility, new solutions for profitability and resilience will be required faster than ever.
EvokeAg 2024 in Perth Western Australia will be a great opportunity to hear what local and global agrifood tech investors are thinking amidst these contrasting dynamics.
I’m excited to join a plenary panel discussion on creating a collaborative investment landscape.
Here are some of the key areas I hope we’ll discuss.
Expanding the capital stack
While traditional venture capital has focused on bits and bytes, you cannot eat software.
Software does not eradicate weeds or process food waste.
We need agtech solutions along the value chain that transform atoms and molecules.
However, doing so can be capital intensive, so start-ups will require more than only equity to scale.
Grants, debt and project finance for example will all become increasingly relevant for start-ups and investors alike.
To unlock this potential, founders will need to have a solid grasp of financial planning and risk management.
Because it will take a mix of these capital sources, we also need capital providers to ensure these different models are designed to work well together.
Australia on the menu
Australia is on the global investor menu, yet we’re lagging in agrifood corporate engagement.
While Australia used to be a ‘too far’ and ‘too hard’ investment destination for most venture capitalists, things have changed.
We’re on the map.
In 2023, the percentage of Australian venture deals that included at least one international investor hit record highs across all funding rounds.
This influx of international investors means start-ups have more options for funding and investors have a broader pool of co-investors, including those with specialist expertise.
But start-ups need more than capital.
There’s a popular saying in the start-up world that the battle between every start-up and incumbent comes down to whether the start-up gets distribution before the incumbent gets innovation.
In agrifood especially, the advantages of incumbency are significant, from distribution and brand reputation to processing infrastructure and logistics networks.
Likewise, agtech start-ups offer agility, novel business models and access to unique talent to incumbents.
Yet corporate involvement in early-stage agrifood innovation in Australia has lagged behind other countries.
We need to be asking why this is true and how we might be able to catalyse and incentivise more much-needed engagement from agrifood corporates.
Unlocking agrifood specific exit pathways
While many agtech venture funds in the past decade have promised their investors that returns will – as in generic venture capital – materialise via initial public offerings.
These have largely eluded the agtech sector.
In 2023, IPO markets remained largely closed and even some of the most well-funded agtech companies encountered pressure and challenges to justify their lofty valuations and deliver returns.
Fortunately, many agrifood tech investors are recognising that early exits via mergers and acquisitions may be a more likely pathway to returns.
As funds openly embrace this strategy, how will co-investment dynamics and founder expectations evolve?
Mergers and acquisitions are complex and full of nuances and many agtech founders in Australia are first-time founders, so we must work out how to upskill and prepare founders for success.
Attracting and developing non-traditional and diverse talent
In the broader start-up world, founders commonly come from a technical (software development) or consulting background.
In agrifood tech, given the breadth of technologies and application areas, we’re seeing founders with all kinds of non-traditional backgrounds.
Our portfolio at Tenacious Ventures features forensic chemists, entomologists, chefs and farmers as founders.
Bringing new perspectives and skillsets into agrifood tech is critical given the complexity of the challenges we face.
We must overcome biases and challenge established thinking to attract and develop more of this talent and unlock the power of their diverse skill sets and tangential experiences.
Now that 2023 is in our rear-view mirror, 2024 presents a unique opportunity to press Australia’s natural advantages as a world-class source of climate adaptive agrifood tech solutions.
See you at evokeAG 2024 on February 20-21.
Sarah Nolet
Tenacious Ventures