Corporate venture capital can help agrifood tech startups scale-up and expand to new markets, but can also be difficult to work with, according to agrifood entrepreneurs attending the Seeds & Chips conference in Milan last week.
While corporate investment can bring industry knowledge, technical know-how and distribution channels, some entrepreneurs are wary of taking their money, especially if their objectives do not align.
If a corporate VC has been founded to defend the parent company’s market share or to scout for new acquisition opportunities, there might be a conflict of interest with the companies they are trying to invest in, some entrepreneurs argued.
“(Corporate VC) can probably bring a lot value. They have a lot of expertise, money, etc. They basically have everything we need. But sometimes I feel like they want us to be their company,” Alvyn Severien, CEO of Algama, the microalgae-based food startup, told AgFunderNews on the sidelines of the event. “The more we discuss, they want some kind of exclusivity; they want to own us.”
Of course, there are corporate VCs who do not operate that way and aim to invest in startups like a commercial venture capital fund would, added Severein. “I think this a good attitude to have, and we are open to talk to these people.”
Another agrifood entrepreneur highlighted the different value propositions for a startup in commercial and corporate venture capital.
“Commercial VCs are very professional and understand how to create a solid business model, as well as how to guide a startup through a capital raising or an exit. However, their value beyond that can be limited. For example, they might say they have a network that can help set up a distribution infrastructure, but in reality, it will only help to a certain point. Corporate VCs, however, are not as professional and do not have the experience of deals and rounds because most of them have not been around for a long time. But on the flipside, they can bring a lot of added value to startups, for example by providing access to their distribution network or R&D capabilities.”
The different value propositions can sometimes be exploited to accelerate the growth of startups. Dan Altschuler Malek, venture partner at New Crop Capital, mentioned during a panel discussion that he enjoyed co-investing with Tyson Ventures, the venture arm of Tyson Foods, in cultured meat startup Memphis Meats. Together they can help Memphis Meats on multiple dimensions, but he also highlighted how important it was that Tyson Ventures has a good understanding of where the meat industry is going, and that it is seeing cultured meat as a complementary product to what they are currently offering.
Sami Vekkeli, CEO of Nordic Insect Economy, talked about what he is looking for in investors.
“In our case, we have a sustainability mission. Of course, we provide an opportunity; it is like any investment. But we are really focusing on the sustainability aspect. And most of our investors are really interested in that as well.”
Ultimately, it is all about sharing the same vision. Commercial VCs can more easily go along with the vision of their portfolio companies. A corporate’s primary interest is to ensure growth and a good performance of their core business, which might not align with the mission of a startup.
Entrepreneurs should look at their mission and strategic needs to determine what kind of investor would suit them.