Slow and steady wins the race

Different financing instruments lead to different outcomes

Last week I got to hang out at Regenerative Food Systems Investment Forum with some of the highest quality humans I know. Eva Goulbourne, Sophia Vanderheym and I hosted a workshop designed to get people thinking about the impact of mission-driven agtech startups taking on different types of investment.

Sarah Nolet beat me to the punch on getting a follow-up post out within 12 hours of the workshop. In an attempt to keep this post short and make sure you’re following her, you’ll have to click to her post for full details on the workshop questions and case studies.

Claude.ai and I designed a case study on a fictional company called PrecisionBean, and Eva and Sophia designed guiding questions. We divided workshop participants into tables, hosted by the incredible Devon Klatell, Renée Vassilos, Mitch Rubin, Sarah Nolet, Schuyler Dalton, Antony Yousefian, Jessamine Fitzpatrick, Jordan Kraft Lambert, and Brian Dawson.

Each table was assigned one of the following six stakeholder groups to consider:

1. Founders/startup employees

2. Investors

3. CPG/Big Agribusiness

4. Civil society/eaters

5. Farmers & farmworkers

6. The environment

Here, I’ll focus on summarizing some of the workshop’s most interesting creative financing solutions and takeaways:

1. Sometimes you have to slow down to go ultimately go fast.

   This was a point made by the founders/startup employees table, but I heard several versions of it throughout the workshop. Taking the time to take a thesis through to experiment and eventually to product market fit is critical, and pouring proverbial rocket fuel on an idea rarely sets a founding team up for success. Take your time in that stone soup phase, acquiring targeted funding (eg/ grants) and planning your next steps.

2. “Free money” has real downsides.
   These downsides include reporting burdens, fund-use constraints, and rigid and long timelines.

3. Cooperative models wherein customers (farmers) can both fund companies and hold them accountable are appealing.

   I’ve said it before and I’ll say it again - AgLaunch is a cool version of this. So is AgVentures Alliance. Farm-credit funded Rural Business Investment Companies (RBICs) are sort of like this, too.

4. Equity-based venture capital has both positive and negative consequences for all of the stakeholders, particularly in agriculture.

   While VC funding can enable a startup to grow quickly and without too many constraints, it can also lead to mission drift and an inability to acknowledge or address unintended consequences. Sales and ultimately liquidity become the end game.

5. It’s very rare that one single type of funding is optimal for an agtech company.

6. This is an interesting and valuable exercise, and we should do it more often!

   Seriously, what if every investor included “impact on [x]” in each one of their investment memos? I know I’m already including “impact on farmworkers, pros+cons.” I think you should, too.