Understanding where investors put their money in 2020 will help guide predictions for 2021. In this week’s Virtual Town Hall, Ingrid Fung, an Investment Director with Finistere Ventures, an early-stage AgTech investment fund in the AgTech sector, provided an overview of AgTech investing for 2020. The session also included real life experience from two companies within Finistere’s portfolio about what it took to weather COVID-19 and fundraise during such a difficult year.
AgTech Investing in 2020
Agtech investment has shown incredible growth over the last decade, going from less than 100 million invested annually to about 3.2 billion invested in the first three quarters of 2020. This growth had a lot to do with increased interest from general investors to invest in AgTech with a sustainability lens. Much like the rest of the decade, Finistere expected 2020 to be another banner year, but when COVID-19 hit, things became more unpredictable.
Instead of tanking the industry, COVID-19 accelerated investment into AgTech as investors sought to bridge their companies beyond the impact of the pandemic and consumers became increasingly aware of food supply chain challenges and risks. When discussing where investors put their money in 2020, Fung stated that 28% of capital deployed within the sector went to agriculture. Investors sought to mitigate risk from supply chain disruptions from growers, and as such, about 28% of capital in the sector went to crop protection. Other sectors of note that captures investments in 2020 included technologies that would allow climate proofing, food production and animal technologies.
So, what makes a good investment? Fung outlined the four components that investors look for:
- Proprietary technologies
- Value creation
- Market fit
- Clear communication.
Due to challenges presented by COVI-19 it has become increasingly important for startups within the sector to have clear communication and brand positioning around their technology and its value within farming. This is one of the many things Janqueline Heard of Enko Chem, Inc. and Han Chen of ZeaKal, Inc., two companies within Finistere’s portfolio, attribute to weathering COVID-19.
Weathering the COVID-19 Storm
Despite challenges presented by COVID-19, Enko Chem, Inc. was able to close a $45 million round of funding in 2020. Heard attributes a lot of the company’s success during 2020 to the fact that they were able to begin relationship building in person before COVID-19 hit. A major part of fundraising is your network and the relationships that you build during the process. Relationship building takes time, trust and a lot of face-to-face work. COVID-19 took this opportunity away from Enko Chem, Inc. While they started this process in the fall and were able to lay a solid foundation, Heard stated that Zoom and other virtual meeting platforms were a huge benefit for getting meetings on the calendar to pitch and tell the company’s story. This hard work led to major success for Enko Chem, Inc. whose lead investor for 2020 was the Bill and Melinda Gates Foundation.
While Enko Chem, Inc. had a huge year of growth in 2020, ZeaKal, Inc, had just closed on a major round of fundraising in 2019 and did not plan a raise in 2020. Instead of focusing on fundraising in 2020, Chen focused on looking at the company’s business model and communications strategies. With much of the industry in a state of uncertainty or taking hard hits, Chen knew that his investors would need some reassurance to manage their expectations for the year. The company looked at COVID-19 as a time to pull back and analyze how and what the business is doing. They focused on getting really clear around what the goal of the organization was and what they were trying to solve for. Much like with Enko Chem, Inc. there were a lot of virtual conversations with investors discussing these goals and making sure they were sharing clear, transparent communications.
Looking to the future
Moving forward, Fung highlighted some of the key factors that companies should focus on before looking for investors. Finistere focuses on companies that have a strong scientific background, but as important as that background is, there needs to be a plan and strategy in place to communicate the company’s goals and scientific benefits. It is equally important to create and implement a strong brand foundation and digital footprint so that your company is equally recognizable. Both participants emphasized that this kind of feedback is something that they look for in investors, past just the capital investment. Strong assets, feedback and an investor that will work as a partner to better the organization is important to both parties.
While AgTech and investing are the future of the agricultural and produce industries, communications, brand image and innovation are what will bring us the relationships and investors we need to take the next steps towards the future.