Editor’s Note: Matthew B. Crisp is president, CEO and co-founder of Benson Hill Biosystems, the ag solutions company that is improving plant genetics to increase crop productivity through photosynthesis. Benson Hill raised a $7.3 million Series A last August from a group of venture capital funds, including Mercury Fund, Middleland Capital, Prelude Ventures, Prolog Ventures, Alexandria Venture Investments, Cultivation Capital, and TechAccel.
Before joining Benson Hill in June 2012, Crisp was the founding president of the agricultural biotechnology division at leading synthetic biology company Intrexon Corporation. He has since co-founded Edison Agrosciences.
Crisp previously worked as a venture capitalist when he was managing director at Third Security, a venture capital firm. In this role he worked closely with several private and public companies in the life science and technology sectors.
With this VC and startup experience in hand, AgFunderNews asked Crisp to share some of his key takeaways and observations about the fundraising process in agtech.
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Entrepreneurs and venture capitalists alike must raise money. It can be painful and it keeps us from what we really want to do — build value. After a multi-year endeavor — some would say saga — to raise our recent Series A, we at Benson Hill Biosystems are getting a chance to focus on the far more rewarding work of advancing the business. We learned a great deal from our journey and reflect here about the uniqueness of fundraising in agtech.
It’s still smaller than you think
Despite a significant rise in funding over the past couple years — AgFunder’s upcoming report is set to point to around $4 billion in 2015 — agtech still accounts for only a tiny fraction of the venture capital investment universe. Many of our first meetings included questions like “have the strategics bought into this? What do Ron and Andy think?” (agtech VC veterans Ron Meeusen and Andy Ziolkowski from Cultivian Ventures). Those on the road will know what I’m talking about. This narrow range of viewpoints can often be over-weighted because of the relative immaturity of the agtech investing space and the perceived few exit options. If your deal is worth a second look and you don’t have an answer, know that investors will source these perspectives themselves. Our space can be scarily small sometimes.
To informatively address questions like the ones above, it’s important to know who the influencers are and approach them sooner rather than later. While there’s only a small group of active pure-play agtech funds and strategic investors in the industry, it is a highly engaged group that’s often willing to discuss your company and technology even before you’re raising capital. Embrace those opportunities and share your perspectives. Shaping that engagement may help down the line.
The dynamic of such a concentrated industry can present a delicate walk for a startup, especially for one that doesn’t have early strategic endorsement or clear comparables. While the potential impact of this environment on innovation in agtech is a discussion for another time, it is the landscape in which we operate today. Having awareness and proactively soliciting feedback without asking for funding can mean the difference between spinning your wheels and traction when you are actually ready to pitch.
Get feedback. Real feedback
The circuit of agtech conferences can be a good forum at which to solicit such opinions. In the last couple years, these gatherings have grown substantially and are starting to resemble a quarterly or semi-annual reunion of sorts. Don’t be shy about pursuing meetings that will help you polish your pitch for prime time. Just be clear about your stage and status. Investors tend to appreciate meeting in 10-20 minute blocks because it forces you to get to the point and cover ground fast. Go with a plan and focus on discussions where you have an agenda, and don’t go just to get a bunch of meetings for the sake of it.
In such a close-knit community, chances are that you will be talking to many of the same people for your later rounds of financing. If there was genuine interest from the investor, entrepreneurs should do their best to understand the pros and cons in the eyes of the partner. Is there a gap in your management team? Is there not enough sales traction? Too much regulatory risk? Maybe there is an issue with portfolio balance or a mismatch in the life-cycles of the startup and of the fund. Some of these are addressable, and some are not. But knowing them will allow you to understand better who is worth re-approaching or keeping apprised of your progress after a round is closed.
Listen and adapt, because it just might make you better
If you successfully get some answers, be prepared to digest them. It’s easy for entrepreneurs to say “well they just didn’t get it” and “my business is just too hard for them to understand.” You asked for the feedback and received it — which, by the way, happens more in agtech than other industries — so be introspective for a moment and try to really understand the concerns. No one wants to hear their baby is ugly, but if you don’t listen carefully it may hold you back.
I wish we had learned this lesson earlier in the process. We were convinced that investors would want to see plant data and plow millions of dollars towards product development. We learned during the fundraising process that the prospective investors who we believed would add the most value were, in fact, most excited about the platform technology. They pushed us to think about the bigger picture sooner rather than later. So we were adapting our plans and projections right up until the round closed, and afterward. It not only helped get our round across the finish line, but it has put us in a position to get to market sooner. The saying that great investors add value is a saying for a reason.
Don’t burn bridges
Understanding the landscape of agtech highlights another important point — don’t burn bridges. At Benson Hill, we had dozens of ‘no’ responses. We could check a lot of boxes for investors, but we were in a less popular and borderline undefined category. Some of the firms who passed on us — sometimes multiple times — were hugely supportive of our getting the Series A closed. When an investor passes for the third time in two years, then picks up the phone to call another investor as a way to provide support, they’re not doing it because they had some extra time; they are doing it because they respect the role his or her firm plays in the space and they want to see more agtech success stories. That’s a classy move. Fortunately, in Benson Hill’s case, it happened multiple times and highlights a valuable difference between agtech investing and the broader venture investment universe.
The could-be agtech investor
There are a lot of investors from the tech and traditional life sciences space who are looking at agtech deals and do genuinely like the idea of investing in agriculture, but are nowhere near actually doing a deal. I was in this position once on the other side of the table when I was a VC and was looking at a very compelling investment opportunity in agtech. As investors, we couldn’t find a fault in the company, but ultimately there was no way to pull the trigger — we just didn’t know what we didn’t know.
At Benson Hill we spoke with several groups that had never done an agtech deal. After months of dead ends from what seemed like promising initial discussions and meetings, we started getting more candid. In retrospect, I believe it saved us a good deal of time and distraction coming down the homestretch. If a firm has never done a deal in agtech, acknowledge this and ask a partner — emphasis on partner here — what they are looking for. It is likely to be either very specific or very vague. If you can’t get them to articulate an answer, or if you hear something like “we’ll know the right deal when we see it,” you are wasting your time.
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