Creating a collaborative agrifood tech investment landscape in Australia: Opportunities and challenges in 2024
2023 was a very challenging year for the startup world. 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 startups alike. Here Sarah Nolet, Managing Partner, Tenacious Ventures and speaker at evokeAG. 2024 explores what startups 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 finally, as producers face increasing climate volatility, new solutions for profitability and resilience will be required, faster than ever.
This year’s evokeAG. in Perth, WA, will be a great opportunity to hear what local and global agri-food tech investors are thinking amidst these contrasting dynamics. I’m excited to join a plenary panel discussion on creating a collaborative investment landscape along with Adam Anders (Anterra), Ryan Rakestraw (Temasek), Suresh Sundararajan (Nupo Ventures and Olam), and Robyn O’Brien (Sirona Ventures). 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 startups will require more than just equity to scale. Grants, debt, and project finance, for example, will all become increasingly relevant for startups 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 that these different models are designed to work well together.
Australia is on the global investor menu, but 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. Anecdotally, we’ve seen this in our portfolio, having co-invested with circular economy fund, Closed Loop, in Earthodic and agtech specialist, AgFunder, in Azaneo.
This influx of international investors means startups have more options for funding and investors have a broader pool of co-investors, including those with specialist expertise. But startups need more than capital.
There’s a popular saying in the startup world that, “the battle between every startup and incumbent comes down to whether the startup 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 startups 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, like in generic venture capital, materialise via initial public offerings (IPOs), 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 (M&A) may be a more likely pathway to returns. As funds openly embrace this strategy, how will co-investment dynamics and founder expectations evolve? M&A is 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 startup world, founders commonly come from a technical (i.e. 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.
See you at evokeAG. 2024
Now that 2023 is in our rearview mirror, 2024 presents a unique opportunity to press Australia’s natural advantages as a world-class source of climate adaptive agrifood tech solutions.
I can’t wait to share the stage evokeAG. 2024 with Adam, Ryan, Suresh, and Robyn O’Brien (Sirona Ventures). I hope to see you there!
For more information about evokeAG. 2024, and to purchase tickets visit evokeag.com/2024. Following a sell-out event in 2023 we are encouraging delegates to secure their tickets, flights and accommodation now.