How the Pandemic Has Impacted Investor Relationships in AgTech

All partnerships take work, and that’s no different with start-ups and investors.

This was the key part of the Funding Talk panel discussion with EU-based venture capital group Capagro at the International Forum of Agricultural Robotics (FIRA) virtual event in December 2020. The panel discussion included investors, manufacturers/suppliers, and start-up points-of-view.

There are many strategies that can work in these arrangements, but particularly in the current pandemic climate, there are some nuances that must be explored to perfect mutually beneficial agreements.

How The Pandemic Has Impacted Investments

The global pandemic did have some impact on investor partnerships in the agriculture market.

“We saw a strong stop in the investment communities for maybe six months,” said Aurelien Demaurex, co-founder of ecoRobotix, Lausanne, Vaud, Switzerland. “We stopped everything and focused on our current portfolio. But once that time passed, investors started investing again.”

BASF Ventures, for instance, didn’t stop investing entirely in 2020, but the company cut its investments to half, shared Claus Hackman, investment manager for BASF Ventures.

Others, like Capagro, actually made more investments. “COVID-19 created momentum and an urge to work together even more closely than people have in the past,” explained Tom Espiard-Cignaco, Capagro’s president and managing director. “We found some very interesting companies and business models. We had more opportunities, and they weren’t impacted by COVID-19. Some companies are even doing very well. So, there’s a shift toward some new business models or distribution channels, and the idea is to leverage those and find companies that are well-positioned.”

Investing Into 2021

This year, Capagro will continue to invest. “We still have money to deploy if we find interesting business models and good teams,” he said, adding that they hope to deploy two to three investments in 2021.

What the pandemic has taught start-ups and their investors is that entering into a more challenging business environment is best done with strong partnerships in place. “The goal is to have strong investors on board when stuff like this happens,” Demaurex said. “If you have the perfect product and team, there will always be funding, but it’s probably more complicated to find in this climate vs. before COVID-19.”

The goal with investments this year is to make sure everyone in the partnership grows and becomes better. “The goal is to always move forward to make a better future,” said Aymeric Barthes, CEO, Naio Technologies. “That really is the mission we have when we create a start-up, and investors bring the financing to make that better future possible.”

How to Create Beneficial Investor Partnerships

All of the members of the Funding Talk with Capagro panel agree that there are some key ingredients that are necessary for a great start-up/investor relationships:

1. Start Strong – Start-ups and investors should have shared goals and a common objective that all parties and team members are comfortable with.
2. Good Information Flow – Every start-up and investor will go through a learning curve in the beginning when their goals can shift. Keeping open communications lines is vital to making this work. Start-ups and investors should meet often to share and build strategy together. What causes unnecessary tension and frustration are last-minute strategy changes and mistrust that results from this a lack of communication.
3. Talk Frankly – Trust between both parties is important. “Because the reality of start-ups is violent and everything is moving fast, it’s important to talk frankly and face reality when there are new issues or problems or concerns about your clients, legislation, fundraising, etc.,” explains Aymeric Barthes, CEO, Naio Technologies.
4. Mutual Learning – Start-ups bring new business models, market knowledge, and new dynamics that corporate investors can learn from. Investors bring their network and experience with strategy. Leveraging these relationships for growth can bring positives such as new introductions and better distribution agreements.
5. A Good Exit Strategy – Most investment horizons are roughly four to five years. An exit strategy must be part of the agreement as a way to liquidate the investment. Both partners should have a clear understanding of this strategy from the beginning; it should be worked out in the governance so no one loses value at the exit. As Tom Espiard-Cignaco, president and managing director of Capagro, said, “It’s part of our job to make sure the company is ready for exit and has approached the right potential partner.”