Sofia Hmich cut her teeth in agtech venture capital backing a startup involved in a nascent field: insect farming. That company, Paris-based Ÿnsect, has since gone on to raise more than $180 million to harvest bugs for its range of sustainable animal and plant feed products. For Hmich, Ÿnsect’s growth from a wonky concept to Europe’s soon-to-be first industrial insect farm validates her hunch about the importance of early believers—and backers—for emerging technologies.
Now, armed with $57 million and an investment team, the young Frenchwoman and her firm Future Positive Capital intend to place more bets on wonky tech ideas that have the potential to drive systems change while reaping profits in long-established markets, like food and agriculture.
“Solving complex challenges creates bigger value,” Hmich tells AFN. “[Companies with] interconnectedness to an environmental and social mission will over-perform.”
It isn’t a baseless claim. It’s one that investors have already staked $500 billion on worldwide, and which could represent a $12 trillion market opportunity, according to one estimate—$600 billion in food and agriculture alone.
For that reason, Future Positive Capital is unapologetically impact-focused, and its thesis is that emerging deep technologies like artificial intelligence, robotics and synthetic biology have the greatest potential to both drive and profit from positive change. Hmich, having several agrifood tech deals under her belt already, sees the global food and agriculture systems as particularly ripe for disruption.
“The combination of decreasing technology costs, recognition of the high contribution of food production to climate change, [and] an expanding middle class that wants to eat more and healthier means the sector is ready for radical change,” she says.
An accidental founder
Hmich says she’s always been interested in how technology can be used to solve complicated problems, but never necessarily set out to launch her own investment fund. Growing up in an immigrant neighborhood in the banlieues of Paris, Hmich studied mathematics, then business, then took a short stint at Google before jumping into the venture capital world. It was working as an investment manager for London-based Index Ventures where all of these experiences merged. There, she says she actively began hunting for companies with an intentional impact focus, but struggled to introduce impact into the traditional “winner takes all” venture capital culture.
“It’s just not what traditional venture capital does, even the best firms,” she says.
So she left, and began making small investments of her own, and structuring deals on behalf of other investors. Ÿnsect’s Series B funding round in 2016 was one of those.
Going alone was slow, however, so in 2017 Hmich joined forces with Alexandre Terrien, who was then head of General Assembly in France. Investing as a firm with a clear thesis and group of partners and advisors was an easier sell, she says, but also, the market was just ready for a firm like Future Positive Capital.
“It reached a tipping point. There’s a new rise of entrepreneurs and serial entrepreneurs who are tackling systemic problems,” she explains. What is driving that trend is maturing professional talent, people in their 30s especially, who “want to do work that’s progressing society” either by stepping into corporate leadership positions or starting their own companies.
The European opportunity
Future Positive Capital’s mandate is broad, sector-wise. Geographically, however, the firm is committed to European startups. Developing and getting new technologies to market is a research and resource-intensive process, and in Europe, it can be hard for startups to find early investors in the yawning gap between government-backed grant programs and private equity capital.
Indeed, Europe’s venture capital market is neither as robust nor as competitive as other parts of the world: European companies claimed only 10% of the $254 billion in venture capital transacted in 2018, according to KPMG. (Europe’s share of global food and ag-venture capital was comparable—9% of the global total, according to AgFunder’s 2018 Europe AgriFood Tech Investing Report.)
There are multiple factors at play, but the perceived “riskiness” of investing in early-stage technologies is one. One issue that deters investors from the types of ventures Future Positive Capital is looking to back is the impression that early capital needs to be “patient” capital, offering flexible financing terms and longer investment timelines, or that it needs to compromise on returns. Hmich explains that this is one issue against which European-focused investors have an advantage.
“Being in Europe is great because there are a number of grants that can really move the needle,” in startups’ technology development, she says. Most of the companies Future Positive Capital is looking at already have years of research and several million dollars in grant funding behind them. “You’re already de-risked as an investor,” Hmich adds.
Take the Dutch cellular meat startup Meatable, which Future Positive Capital backed last year alongside Berlin-based investors BlueYard Capital and Atlantic Food Labs. The company officially launched in 2018, but the technology behind it had been in development by scientists at Cambridge University and Stanford University for years beforehand.
Future Positive Capital doesn’t have the capital or bandwidth to invest early in the research and development stage. (The fund is set up for a standard five+five-year trajectory.) It, therefore, scans for signals that the market is shifting, and looks for the early movers.
“You may see a company that’s phenomenal but maybe the market or regulation isn’t there. We won’t invest where the market isn’t ready,” she explains.
When Hmich backed Ÿnsect three years ago, there weren’t many other companies wading into insect farming, she says. But the company was already actively lobbying for regulations and standards. She surmised that Ÿnsect was ahead of the market, but only by one to three years, not a decade ahead.
Now, Ÿnsect is among the best funded and most technologically mature among its 50 or so insect farming peers.
Excitement for agrifood tech
Agri-foodtech is not Future Positive Capital’s only focus, but it is a key one, and one that Hmich is personally committed to.
“Agriculture is one of the biggest industries and one that needs the most optimization at every level to reduce negative impacts,” she says. “Our existing food system has been designed to produce cheap calories at a minimum cost and scale.” It is also resource-inefficient, wasteful and environmentally destructive.
As such, Future Positive Capital is targeting tech startups that could influence system-level change, like the production of new and more sustainable forms of protein or improving food supply chain transparency. On the firm’s radar are technologies that use imagery and software to assess foods’ nutritional value, advanced fermentation and tissue engineering, novel forms of food production, and solutions supporting regenerative agriculture.
Already, there are more investment opportunities in Europe than Future Positive Capital could pursue on its own, Hmich says. “Consumers are driving a tectonic shift. They want better tasting, healthier and sustainable food.”
In turn, she adds, “the future of agriculture and food are being completely reimagined with a sustainable lens—and it will be transformative.”