This week saw some hot VC news erupt in Australia: The Clean Energy Finance Corporation (CEFC) and Grok Ventures committed $8m each in cornerstone funding for Tenacious Ventures, Australia’s first dedicated agri-foodtech VC firm. Grok Ventures is the family office of local billionaire Mike Cannon-Brookes and CEFC mobilises investment in renewable energy, low-emission technology and energy efficiency in Australia.
Also, that’s a $16 million legal close for a fund targeting $30 million in under a year. Welcome to the party, Australia and Tenacious!
Even without its own dedicated VC, Aussie agtech has been gathering pace. Nearly 400 agri-foodtech companies have been created in Australia in the last three years. And on the back of that, a few successful recent deals are starting to create a stir. The livestock management software company AgriWebb netted a $14 million Series A and made an acquisition; the grain trading platform AgriDigital has raised $5.5 million; and crop analytics company FluroSat recently closed a deal worth $4.6 million, and also made an acquisition.
Tenacious Ventures’ founders are Matthew Pryor, who formerly launched the agrifood tech startup Observant (acquired by Jain Irrigation) — and Sarah Nolet, CEO of the advisory firm AgThentic and host of the Agtech…So what? podcast. Nolet is a rare female fund manager in this space and at the age of just 30, this close is an impressive feat.
AFN caught up with Nolet ahead of her speech at Southstart to find out more about the raise, and what to expect from a fledgling Tenacious.
AFN: Things have moved quite far and fast since you graduated from MIT in 2016. Did you always intend to launch a VC when you started getting into agtech?
Nolet: Not necessarily. My background is in systems engineering and computer science. In 2013, I was working in the defense industry, when I realised that for various reasons, I didn’t want to be in the defense industry long term. So I ended up on holiday in South America, which was meant to just be a couple of weeks. I stayed on, because I was living on this farm that really changed my way of thinking about agriculture and connected a bunch of dots for me in terms of the potential of technology.
I had spent time on our hobby farm when I was growing up, so had a bit of a sense for agriculture. I was an athlete my whole life, so I cared about healthy food. But I very much had been told by my dad: go make money, then do something good for the world! And that’s what I set out to do originally; it wasn’t until I was on this organic farm in South America, picking weeds in the tomatoes and potatoes, that I really started to question what you learn in places like Silicon Valley about, for example, organic farming.
And I started thinking about some of the technologies we’ve been using in the defense industry, like remote sensing and machine learning, and how these could be applicable in agriculture. And I started wondering: has anyone else thought about this, which I’m sure they have? That was actually around about the time of the Monsanto Climate Corp acquisition, and I noticed quickly that Silicon Valley was now paying some attention to agtech. That really sent me on this whole journey of exploration. It got me thinking hard about what’s happening in the agtech space, and how technology can be used to make farms profitable, but in a way that’s also more aligned with consumer expectations; I thought about ways technology could help farms become more resilient and more sustainable.
So it was that combination of being able to “do good and do well” that really attracted me to agriculture and agtech in particular initially.
AFN: Why didn’t Australia have a dedicated agri-foodtech VC before?
I would say that one of the big challenges has been the deal flow in this space. You literally could have found me on stage at a conference in Australia a couple of years ago, probably three years ago, saying, “Don’t raise a fund here. Don’t tell the government to put a fund here” because there just wasn’t enough deal flow, and it wasn’t a big enough ecosystem. And that’s really changed quite rapidly. There are more good companies now. The birth rate of startups has increased quite a lot thanks to accelerator programs backed by both private and public sector money. This has really driven a lot of innovation in this space and helped others who’ve maybe had an idea to learn about the startup pathways and what venture capital is like and how the ecosystem works. And so as the deal flows increased, more capital wanted to come into this space, and needed that expertise of to diligence agtech deals and understand the sector, and that’s where Matthew and I really saw an opportunity to start Tenacious.
AFN: Which tech does Australia have particular strengths in?
One advantage of Australia is that it’s big enough to be doing world-class research in many areas. But it’s also small enough that hitting critical mass can be tough If you look at the areas of agtech that any country is focusing on, Australia has startups in any one of those areas. So there’s nothing really that is happening elsewhere that we’re not doing here. What we do have here is the benefit of going a bit later, so we can learn from what other ecosystems have invested in and what’s actually creating value.
The other thing we have in Australia is really strong agricultural research, and incredibly innovative farmers. It’s the second least subsidized agriculture industry. We also have an incredibly volatile climate, that other countries will face in the future and that farmers here are learning from already, and innovating within those constraints. So overall it’s just a really amazing farming system with lots of deep agricultural knowledge that we’re now starting to leverage in agtech, which is really exciting.
AFN: What will you be looking for in portfolio companies? We see you’ve focused a bit more on the ag side of agrifood tech in the past. Will that be reflected in your portfolio?
So we are not focused on any particular technology or any particular commodity. We’re kind of full-stack supply chain. Where we would stop for sure is consumer packaged goods. Anything that’s B2C we feel like we don’t have the experience and expertise, and that’s a different investment thesis. But in terms of food tech, we’re definitely interested in processing, packaging, novel foods, personalized nutrition, being able to connect the demands of consumers- whether it’s land use transformation, or new business models- to be implemented practically upstream in the supply chain. So definitely broad in that sense.
In terms of what we’re looking for, we invest at Seed and Series A, so they’re pretty early companies. Eighty percent of our capital will be deployed to Australian-domiciled companies, so that leaves a couple of deals to look elsewhere, but mostly in Australia. And we really look at team, so we’re actually working right now and have been evolving our approach for how to do this. How do you measure execution? How do you measure a belief in culture? How do you measure how much they know and care about their customers? Their ambition and ability to attract talent? So some of that stuff can feel really squishy or really common, and we’re building out processes to make that rigorous and to develop what hopefully can be our way of measuring and evaluating that with our companies, as well as supporting them to develop those capabilities.
We also look for a business model insight: how will whatever technology they’re using enable a new business model that captures value? We think that business model insights are so important in the future of agriculture. That goes back to our thesis that agriculture was built in an industrial model with an industrial mindset, for example where things need to be bigger and you’re solving for scale. And now we live in a digital world; it’s not that all the technologies we’ll invest in will be digital, but what does agriculture look like in a ‘digitally native’ form? The really exciting part there are the new business models and practices that this type of thinking will unlock.
AFN: There aren’t many female fund managers. Do you have a sense of why?
I don’t know why. I mean probably all the things that plague finance generally. I’m in agriculture and technology, and now venture capital. So you’d think that those are probably the least likely to have females. But actually with agtech, we do see a lot of women, a lot of female founders, which is really exciting. But definitely very few female investors. There are a lot of females in the ecosystem, accelerators, community managers; they’re in positions that really support a lot of startups, but not any fund managers. I hope that by changing that, we attract more amazing women to this sector.
AFN: How have you found the fundraising process? Did you sense any bias?
The fundraising process has been really fun and really challenging. I really believe in what we’re doing. I love our team, and I love the companies that we work with and want to support. So that’s given me a lot of confidence to sell and talk about what we’re doing. But agtech and venture and Australia is definitely not for everyone, so any pushback we’ve had probably comes from someone not liking one of those things.
In terms of bias, I can’t really think of anything. One observation is that while raising I’ve often been the only female in the room. I love this challenge though. Investors want to back great teams, whether male or female, and I truly believe in what we’re doing and that we’re the right team. I’m really proud and excited that Matthew and I bring such different perspectives and different skill sets; different ages and genders and nationalities, sure, but just different perspectives, and yet so much alignment around what we value in companies and how much we value executional experience and business model insights. Founder hustle and execution- that’s just so core to what we want to do at Tenacious. Of course tenacity as well!
AFN: What are some of your biggest concerns about how agtech industry is developing?
My biggest concern is that still too many agtech companies have not spent enough time with their customers. They often lack an understanding of how agriculture really works, and what will move the needle for their users, whether it’s ROI, ease of use, or fitting within workflows and constraints. One thing we’re doing to try and help with this is to bring on farmers and agribusiness experts as investors. We don’t believe agtech is something that is happening to agriculture, and we believe farmers especially can be much more than customers of agtech. They deserve upside! And that’s what we’re doing, building a community of like-minded investors who believe in the power of technology to transform agriculture, and want to be part of that change by supporting founders.
AFN: What have been your biggest lessons learnt since starting AgThentic in 2016 and getting the AgTech So What podcast up and running about the adoption of agtech in Australia and globally?
So many things! I love agriculture because you might think you’ve dug deep on an industry, and you have done a project on sheep, or on wine, or on grains, and you just realize both how similar industries are to each other, but also how much more there is to learn.
And I really like that kind of constant learning, that constant need to deep dive. The appreciation of its complexity is what I think drew me to agriculture initially. The conundrum is that what has worked in tech generally or VC generally, I think won’t often work in agriculture. The kind of software type metrics and business models might not work in natural systems and with some of the physical constraints of agriculture. And that’s really exciting; to think about how things need to be different and how do we learn the best practices in those industries, but apply them to natural systems, and into this globally complex industry.
I love my time with farmers and I’m so fortunate to get to spend a lot of time in rural Australia, and then to get back to the US and other countries, and spend time in agriculture and with farmers the world over.
Really, when I started AgThentic, one of the big insights was that so much of the technology was being developed in places like Cambridge, Massachusetts, Silicon Valley, or Sydney, and not being connected to the real users. And the conversations you’d have about farming — whether it’s in Iowa or elsewhere — they just were not speaking the same language. It didn’t resonate with all the things being built in cities. And that was, I thought, initially a really challenging ecosystem question. How do we build accelerators and incubators and such, to help agtech companies solve real problems with a sense of the actual needs of users? I continue to see that problem in Australia and around the world, but it’s starting to improve. Agtech is attracting a lot of new perspectives into agriculture, and as we bring in technologists, investors, and entrepreneurs with new ways of thinking and new skills, but can combine them with deep industry expertise, that’s when we will find innovative ways to solve problems and unlock new business models; it’s that intersection that’s really, really exciting.