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Letter from 2024: Mind your investors!

January 31, 2024

Happy New Year AgFunderNews family! I’m midway through my now-annual detox and gut reset. (It’s only my second time but calling it annual sounds more impressive!) Each year I do this, I learn more and more about the health boost a good gut cleanse can bring to the body and brain.

Another gut check I’ve recently had: not to count on anything when it comes to the current startup investment landscape. And I’ve seen some questionable behavior from investors already this year. 

While this is less uplifting than, say, the dewy skin a detox brings, constant vigilance is vital to the health of the overall agrifoodtech community.

We all know tech is in a down cycle and that funding is tight. The advice to startups over the past 18 months has been to exercise discipline in spending, get to profitability as soon as possible — almost at the expense of scale — and allow for a lot of time to raise funds for when you need them.  

We’re currently finalizing the agrifoodtech investment totals for 2023, but it’s not hard to see the savage reduction in funding compared to 2022 — think half of the $29.6 billion raised in 2022, which was already a decline from the previous year

Generalist investors have fled the sector, especially the hyped-up areas of alternative protein and indoor farming. And some investors appear to be taking full advantage. 

Any gap in funding, however short, could be exploited for investor gain, even by a startup’s most trusted shareholders.

As a venture capital friend I spoke with this week remarked, “founder-friendly seems to be a 2021 idea.”

“Founders (and all of us) are learning a lot about terms and clauses in practices at the moment,” they added.

While we hope that investors in our space have come to terms with some of the longer timeframes needed to establish and scale companies, you can’t count on that anymore, even if you have a solid business on the verge of greatness. So be careful, act accordingly, and try to diversify your capital stack.

It’s not in my nature to be a doomsayer — we have enough of that in the general media(!) – so I won’t linger on the negative here.

There are many great investors with integrity in our industry. More will come because it’s still a great time to invest in in agrifoodtech. Valuations are attractive and, more importantly, a broader audience now better understands the climate crisis and the role agrifood can play in fighting it. COP28’s first-of-its-kind agrifood declaration, signed by 159 countries, will hopefully mean more government support and potential clients for agrifoodtech startups. The extra attention could also mean more investors.

Positive market events like exits are typically better at bringing in new funds, and we’re on track to see more exits in 2024. Several VCs who took my annual survey predicted we will see exits this year based on how their portfolio companies currently fare. And with the rise of metabolic drugs like Ozempic, many of the industry’s large corporates should be on high alert for disruption.

The quality of startups has dramatically improved, too; the range of deep technologies our investment team now sees is extraordinary, and the pace of innovation will only accelerate further with the increasing use of AI via Chat GPT and the like. 

So take this letter as cautionary motivation for 2024. As Michal Klar from Better Bite Ventures wrote in the annual survey: 

“2024 will likely be another challenging year from the funding perspective, but the most resilient and most impactful companies are often created in the toughest of times.”

What do you think will happen in 2024? Do you have any horrifying investor stories to share? Or do you want to know details about the diet I’m following?! Reach out at [email protected].

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