After kicking off his career during the heady days of the dot com boom — and subsequent bust — Eric Archambeau cofounded Astanor Ventures with George Coelho in 2017 as an impact venture capital fund for food and agriculture.
“We founded it with a vision that agrifood was going to go through a deep disruption, needed to move from a system delivering cheap calories to a system delivering affordable nutrients,” Archambeau tells AgFunderNews on a new episode of the Future Food podcast.
We caught up with Archambeau on the Future Food podcast as part of a series of interviews and features for the 10-year anniversary of Monsanto’s Climate Corp acquisition and AgFunder’s creation. Read some highlights below and listen to the full interview on the podcast below, here, or wherever you get your podcasts.
Future Food: Did you see the Monsanto acquisition of Climate Corp as something that was pivotal for the agtech industry? And do you think it lived up to its valuation and the impact that it had?
Eric Archambeau: “Climate Corporation was pivotal in that investors could peg their expectation to the fact that there were deals in the sector. But it has remained an outlier in many ways, which makes sense because if you look at many other sectors that developed over the years, it takes a while to get maturity in both the offer and the demand; the demand from acquirers and the offer from companies that need to be maturing. I think we’re getting there and despite the gloom right now, companies have never been so developed and relevant for what the larger companies are looking for, whether they are companies that are offsetting big companies that are in the fertilizer business, or companies that are in the tractors business, or people who are in food businesses; they see the need to move to something so disruptive that they all have that in-house and they will be acquiring companies.
So my prediction is that we’re entering a phase where in the next two to three years, we’ll see, finally after 10 years, we’ll see the beginning of that M&A.
I think the the past 10 years were the equivalent of the late 1990s for the internet. The current time is the equivalent of the dot com crash, and then the next three, four years, starting probably next year, is going to be the beginning of a much more mature era for agrifoodtech.
Why have there been so few sizeable exits in agrifoodtech? Is there a problem or is it timing?
It is both the problem and the timing.
So from a problem point of view, corporates have rationale, up to a point, in the corporate strategy or corporate development strategy. They will need to understand what is the end demand from the customers; customers could be B2B customers and B2C customers, it could be consumers. And they need to understand what they are lacking in their own R&D groups, product development groups, and that they really need to acquire that from the outside. That takes some cycles: for the demand to be clear enough and the numbers to be clear enough takes a few years to develop. And quite frankly, also, the companies were not that interesting, either. I mean, let’s face it, some of the early plant-based companies, some of the vertical farming companies, were companies that were developing things with their love and wishful thinking about what will happen in the world, and you didn’t have a lot of validation of some really key polls, that needed to be there. I think we’re getting very close to that. And in our portfolio, we can see, for example, some of the companies, which have had some time for, for example, several seasons to demonstrate that the crops benefit from their products, or that some of the bioengineering has been now validated from a regulatory point of view. It’s not an anti-virus software where you can push a button and then you have 1,000 customers. Initially, it takes time: you need to build, you need to grow, you need to harvest, you need to measure and that took a few years for that to mature.
Which categories have been the most successful?
The most successful categories are the least impactful ones, you know, it’s 20-minute delivery of food to your doorstep, which I understand from the consumer point of view. But for us as impact investors, that’s not in fact useful. I would say that probably the most successful category has been around precision farming so far. We see a number of our investments there are really happening and it’s also about timing; we’ve made a few investments in vertical farming that were small investments really early on, and then there was a wave of interest into that but we were probably too early to really come back. But the precision farming category I think is really happening. And we, from a timing point of view, I think, well, they are the right time.
Is agrifoodtech by its nature impact?
No, but it can be. So it really depends. Finding a new way to make a seven-story pig farm more efficient is not necessarily impactful but it’s an agrifoodtech investment. So you need to look at internationality. And you need to look at what we call the impact unit economics, so is one unit of your product or service, impactful in its nature, so that when you’re going to grow and scale, your company is gonna be impactful. So we’re looking at that. And there are lots of things that are counterintuitive when you start looking at the entire picture. In Your Life Cycle analysis of a product, you can be really surprised. For example, a Nespresso capsule is most probably more environmentally and socially friendly than using ground coffee, or even bean in your own Home Brewed system, because the most negative environmental impact is not the packaging, bizarrely, and it’s counterintuitive, but it’s really about the energy you’re using to actually brew your coffee and obviously, where your coffee is coming from. But the volume of the coffee is important and actually Nespresso managed to optimize, not because they initially wanted to be that impactful, but from a cost point of view, they made the capsule amazingly efficient with the least amount of coffee possible and the least amount of energy coming from your machine. And so you’re gonna get a very environmentally and socially friendly coffee cup from your Nespresso. We regularly get surprised.
About $30 billion was invested in agrifood tech last year after about $50 billion the year before. Is it enough? And how much should it be?
It’s enough if you put that money to play investing in companies that are really going to make the system change, in our case, in the most impactful way but I think we’re far away from having saturated the market. There are so many new and really inspiring founders that are coming up with new ideas, access to technology that is really needed to make things move. I think we could probably use $100 billion a year overall across the supply chain, because what is really missing is not the early-stage tickets in seed, Series A and Series B where we have quite a few players, but really for the bigger tickets, the $50 million to $200 million or more; there’s not enough money to be put there. And so the big roles that will help those companies reach escape velocity and have the opportunity to have a sustainable path that are not necessarily going to be acquired but could develop into a bigger company. We don’t have enough for that, so, yes, we need more.