Agri-finance models are showing great innovation

In 2021, the value of UK agri-tech acquisitions hit a new high of £1.3 billion, indicating continued interest in innovations that address the concerns of growing input prices, food security, and environmental consequences. Behind the headlines, there is a solid pipeline of early-stage startups assessing the optimal investment strategy and the expanding variety of funding possibilities.

The business network Agri-TechE is bringing together financial specialists to analyze the choices for the sector at the event 'Focus on Agri-Finance' on May 18, 2022, due to the increasing diversity of financing methods and the potential of the appropriate investors to boost growth.

Among the most recent agreements in the Agri-TechE ecosystem are:

• With the help of individuals, especially farmers interested in using its autonomous drones, DroneAg surpassed its £500k crowdfunding goal.
• Glaia, which raised £1 million from the Green Angels Syndicate, is a group of high-net-worth individuals who believe its innovative "sugar-dot" technology would revolutionize the world.
• Breedr has raised £12 million in a series of fundraising rounds that have included public funds as well as corporates from throughout the value chain.
• Better Origin, an insect-tech startup, has received $16 million in funding from venture capitalists.

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"What's suitable for every one firm will be driven by particular requirements and aspirations," says Steve Thackwray, Director at PwC, ahead of the event. "It is crucial to ensure all sensible paths are investigated before picking what is right for you and your organization."

Jodi Bartin, CEO of Citicourt & Co, a financial advising firm, agrees. Citcourt mostly works with institutional investors (banks, pension funds), which means that for funding, they are looking at firms with revenues of more than £5 million. However, she is willing to assist businesses of all sizes and guide them in the correct direction: "It's very uncommon for someone to come in believing they want to do one thing - for example, sell their house – only to realize they have other alternatives after speaking with us."

More benefits are available with smart capital.

Greg Michel advises that businesses should explore all of their alternatives and that selecting an investor properly pays well. Greg is a partner at Cell Capital, a venture capital firm that has recently worked with agritech startups Breedr and Bon Vivant. He argues that for entrepreneurs, finding smart capital,' which refers to investors who provide more value to the founders than simply money, is becoming increasingly important.

"Investors can provide entrepreneurial expertise, sector knowledge, or specialized industry ties to early-stage enterprises," he explains.

Cell Capital is based on a number of theme funds that have already been established and are ready to invest. Each fund is managed in accordance with a plan devised in collaboration with the investors, who include family offices, high-net-worth individuals, and corporations, as well as traditional funds. This is referred to as 'Venture Capital as a Service' by the firm (VCaaS).

"We are advisers to the Investbridge Agritech VC Fund, which is presently approaching its first close," Greg continues. We're hoping for a $40 million final closure. This will provide us with enough firepower to establish a strong portfolio and offer follow-up as needed. We've led or co-led three of our five agrifoodtech portfolio firms thus far.

"The start-up collaborates with us throughout the investment's lifespan, simplifying the process and fostering a close partnership." In addition to these funds, we have the opportunity to invest in highly attractive firms prior to seed fundraising."

In a volatile market, are SPACs a viable option?

SPACs have lately been utilized to generate financing by a few of vertical farming firms. Companies preparing for an IPO (Initial Public Offering) may consider combining with a Special Purpose Acquisitions Company, or 'SPAC,' as an alternative to going it alone in a turbulent market. A SPAC is a shell corporation created by investors for the sole aim of obtaining funds and purchasing another firm.

AeroFarms announced a SPAC contract with Spring Valley Acquisition Corp in 2021, however, it was later canceled. Kalera stated in February 2022 that it will utilize a SPAC to list on the Nasdaq, and if approved, the merged firm would have an equity value of $375 million.

"A SPAC merger is merely another means of taking a company private and obtaining considerable funds to support future growth," Steve Thackwray explains. It has the potential to eliminate some of the difficulties that come with a typical IPO. They are usually quicker to complete, reduce the risk of price fluctuation, and bring you into collaboration with the SPAC Sponsor team, possibly giving extra financial and sector knowledge, but there are drawbacks, and the firm should be well advised."

Alternative foods and dairy and meat substitutes appear to be capturing the headlines and the finances, but Greg believes that non-specialists may not fully comprehend the complexity of this industry and that firms will require enormous sums of capex (capital expenditure) to expand.

"We're seeing a lot of interest in a lot of different options." Generalist capitalists will lean toward what they are familiar with; for example, in agriculture,' software as a service' marketing strategies that generate datasets are quite strong. Biocontrol agents, biostimulants, solutions for controlled environment agriculture, water management, epigenetics, traceability, and post-harvest procedures have all sparked the interest of specialized investors.

"Right now, the industry is booming, and we're seeing a lot of interest in investing."