Back in 2015, AFN spoke with Mitchell Presser, then head of US M&A for law firm Freshfields Bruckhaus Deringer, about the relationship between the private equity investment and growth in agrifoodtech. A lot has changed since then, including Presser’s work.
He recently joined Morrison & Foerster’s M&A practice as well as its private equity investments and buyout practice and will continue to explore the agrifood space. So, what has changed in the last five years?
“You continue to see a lot of excitement from both focused funds and investors, as well as investors with a broader mandate who see the opportunity in ag,” Presser tells AFN.
With Presser is Michael Ward, global head of the firm’s life sciences practice group, head of its patent practice group, and co-chair of its intellectual property practice group, to learn more about their view on agrifoodtech.
Presser describes Ward as “the most value-added lawyer in the food and ag sector.” Ward holds a PhD in philosophy and plant physiology from the University of California, Davis and a law degree from Golden Gate University. He did his postdoctoral research at Harvard Medical School in plant molecular biology.
AFN: How has the agrifoodtech investing space changed in recent years?
Mitchell Presser (MP): Ag remains a really exciting and interesting place for a lot of investors. But a challenge that it has had for a long time is that we haven’t seen enough exits and we haven’t seen how and when investors get the liquid return on their investment. It remains one of the biggest challenges overall – access to capital that the ag sector needs. Also, the ag sector doesn’t have the same investment mentality that you do in something like the pharma sector, where big companies will say ‘We have to come up with a drug that does X’ and they will fund hundreds of millions into that. Ag is still this really interesting, real opportunity, but it’s a little bit harder for investors to figure out how to access it and have the confidence to invest.
Mike Ward (MW): I agree. I think it’s the haves and the have-nots right now.
MP: Where you see some success is when capital comes in looking at something like the Beyond Burger and sees a lot of money. Some see it as a consumer packaged goods, healthy lifestyle play, but in part, they’re saying, ‘We saw what that IPO did, and we know there is a return there.’ When you see some of those returns, you see more money jumping into similar businesses around that sector.
What’s holding back the exits?
MP: I think ag and food are separated here a bit. One of the challenges that ag has — and there’s no way of overcoming it — is from the tech perspective, the development time takes longer. You are much more tied to agriculture growing cycles – things where development and scaling take longer.
What excites you most in the agrifoodtech space right now?
MW: Clay Mitchell at Fall Line Capital is a farmer half the time and an investor half the time. Every two years, he hosts a seminar where he gets together all the farmers and all the startups to talk about tech and companies like Trace Genomics [Disclosure – an investee of AFN‘s parent company, AgFunder] who are doing deep sequencing and soils. He invited me to the seminar in Salt Lake City in February 2019. One of the interesting areas they work on is biodegradable plastics. They are using them in Wisconsin to plant corn three to four weeks earlier than usual. The earlier you plant, the later you can harvest, and the higher the yield. Things like this that are going on are fascinating and [they’re] looking at how to get those to scale.
MP: There are two themes I get really excited about. Regenerative agriculture and the supply chain. We still have something designed as bandaids rather than surgery. There are not nearly as many people who are ultimate buyers of things. Even in the tech space, there are all different kinds of tech out there. It’s about figuring out how to use them in an integrated way. Consolidators of tech and the use of tech are going to create real value, and then they are going to be able to become the exits for a lot of these companies. For regenerative, it’s really about our resource limitations and how we make much more of what we have without destroying what we have at the same time. We’ve spent so many decades going for yield intensity, but when we look at some effects of yield intensity, its soil degradation [and] nutrient loss.
Have you seen many technologies that fit into the regenerative space? Does biotech have a place in regenerative?
MW: Using gene editing to make plants grow in poor soils. Regenerative should embrace biotechnology. Gene editing is amazing. Biodegradable plastic is one [interesting use case] because it also preserves the soil. The plastic reduces wind movement. Trace Genomics is another example.
MP: I think the challenge is that we should be doing everything we can and use science; however, we can make the soil better and improve all of these things. I think the challenge is around the global acceptability of some of these things. When the risks associated with it are not accepted in parts of the world, it becomes a big business challenge. Will people in Europe accept it or not? Hopefully, they will, and we [can] find ways to get them more comfortable with it.
What do you think about plant-based foods?
MP: We are really still in the early stages. I don’t think we’ve seen everything. I am not telling you that we won’t eat meat, chicken, or fish anymore. But all those things put so much [pressure] on the environment, [plus] you have the health benefits of a plant-based diet. Not everyone is going to be vegan, but people are choosing this more and more. I have an investment in a company called Redefine Meat that is using 3D technology to print plant-based meat.
MW: I come at this from a different angle. We do work for a company called Amycel that is related to Monterey Mushrooms, one of the US’s biggest mushroom growers. They provide spawn for Monterey Mushrooms. Their sales have skyrocketed since Covid-19 hit, and the theory is that people think mushrooms look more like meat for some reason and are eating more mushrooms. It’s a fascinating discussion.
Speaking of the pandemic, what impact do you think it will have on the future of agrifoodtech?
MW: It all depends on how you define investing. What I am seeing is companies, not so much startups, but companies that have money that are established and investing in technologies and trying to move things forward. I see this in vertical farming and indoor ag. I do not see [as many] new companies get formed and funded since Covid-19 hit.
MP: It’s way too early to really know what is or isn’t happening. So many people went on freeze and had to check what was in their portfolio. But we still need to eat, and food is very important. I think this goes back to how we think about the supply chain because logistics and delivery are really the places where there are some serious issues.
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