Investing in agritech and foodtech, interview with Daniel Skavén Ruben 🌽
Impact Supporters Issue #25. Thanks for being here. If you have comments or feedback drop me a message.
Disclaimer from August Solliv: The views expressed are solely my own i.e. it’s my Sunday fun work 😉
Key insights:
Interview with Daniel Skavén Ruben, Founder of Solvable Syndicate
Agrifoodtech has two important impact areas: the environment and human health
The challenge of the last century was producing enough calories to eradicate global hunger, the challenge of the current century is to nourish people in an environmentally sustainable way
Agrifoodtech start-ups face: Regulatory obstacles, technology obstacles, and consumer behavior obstacles
Agrifoodtech has long development times and requires patient capital sometimes
Indoor vertical farming, quick commerce, and alternative protein are some previously hyped segments currently going through some tough times
The next wave of agrifoodtech will focus on things such as regenerative agriculture, AI, and personalized nutrition…
Greetings, Impact Supporters! 🌍 It’s August Solliv 👋 Here is what we discussed with the “foodtech and sustainability geek“, Daniel (≈8 min reading time):
Agritech vs foodtech definition 📚
What is impact in agrifoodtech? 🌱
Biggest challenge in the food system 👊
Hardware, patient capital, and ecosystem obstacles 🛠️
Assessing climate founders - tips for generalists 🤓
Oatly case 🥛
Saturated agrifoodtech topics 📉
Hot agrifoodtech topics 🔥
Meet Daniel Skavén Ruben 👋
Daniel is an investor and advisor who, as he puts it, “works with tech, innovation, and policy to help advance a better food system that’s environmentally sustainable and nourishing”. He is the founder of Solvable Syndicate and has angel invested in 30 agrifoodtech and climatetech start-ups, is a mentor for major accelerators like Katapult Ocean, Norrsken Accelerator, and Big Idea Ventures, is a venture partner for a couple of VCs, and has a newsletter, FoodTech Weekly, where he writes weekly about foodtech (yay, a fellow newsletter writer 🔥)!
Meet Solvable Syndicate 💼
Daniel started Solvable Syndicate last year. It is a group of 150+ angel investors and family offices from around the world who want to invest in early-stage impact foodtech and agritech start-ups that advance a better food system 🌐 Beyond capital, Solvable Syndicate brings experience and expertise from all the LPs in anything from marketing to distribution to culture to science and to leadership, etc.
Agritech vs foodtech definition 📚
Agtech/agritech covers the upstream solutions close to the farmer 🌾 Foodtech covers the downstream solutions close to the consumer 🛒 They are not always super easy to separate so some use the term agrifoodtech to cover both of them (that’s also what I’ll do in this article). Some also just use the term foodtech as an all-encompassing term for both types of solutions. Basically, they both are tech solutions that help build a better food system - more efficient, nutritious, resilient, and environmentally sustainable - and with less food loss and waste.
What is impact in agrifoodtech? 🌱
Food has a strong impact on both 1. the environment 🌎 and 2. human health 🏥
Firstly, the food system is the industry in the world with the largest environmental footprint. It represents around 21-37% of all greenhouse gas emissions (Our World in Data, 2021), 70% of freshwater use (World Bank, 2017), and 50% of habitable land use (Our World in Data, 2024)). Simultaneously, the food industry is also the industry that uses the most animals 🐮 More than 100 billion animals every year (Our World in Data, 2023). Through our agricultural practices, the food industry is the major source of antibiotic resistance and a large source of triggering pandemics.
Secondly, poor dietary patterns are the number one risk factor for diseases and disability leading to premature death. There are 11 million people worldwide who die prematurely every year due to poor diets through falling ill with cardiovascular diseases, high BMI, high blood pressure, diabetes, stroke, cancer, etc. (Afshin, 2017) 🏥 Our food system is creating a lot of unnecessary human suffering.
Moreover, our food system risks driving the healthcare system bankrupt in many countries worldwide in the future. Daniel exemplifies this with the US which already today spends hundreds of billions of dollars every year treating diabetes and that number will only increase.
As Daniel states, if you aim to fix the world, food is a very good place to start 🌟 That’s why Daniel spends all his time in the food industry and why he thinks impact VCs should focus on the topic.
Biggest challenge in the food system 👊
In the last century, the big challenge was to feed people enough calories. After the Second World War, Daniels says up to 50% of the global population was undernourished. We therefore, built a modern food system leveraging irrigation, machinery, synthetic fertilizer, and new crop varieties to deliver cheap calories and high yields.
The food industry has been successful at solving last century’s challenge of nearly eradicating hunger. Today, undernourishment represents just 10% of the world population, which is still high but a smaller problem than previously (FAO, 2015). It, however, also led to a plethora of new problems 🤔
The big challenge of the current century is to make sure the food system will be environmentally sustainable and have a positive impact on human health. Daniel believes that it will be solved partly through better policy, information, and education. But Daniel also believes that tech and innovation have a central role in driving change. Tech and innovation are not the entire answer, but usually it is part of the answer 🧩
Agrifoodtech’s major obstacles 🛠️
Daniel sees quite a bunch of hardware solutions with little scalability that fail to meet the requirements of VCs. But also a lot of software and hardware solutions that succeed. Overall, Daniel sees that agrifoodtech faces 3 main obstacles toward VC-grade growth:
Technology obstacles 🤖
Regulatory obstacles ⚖️
Consumer behavior obstacles 🧑🤝🧑
The major consequence of the obstacles is that agrifoodtech start-ups have long development times and need patient capital 💰 For example, looking at consumer behavior obstacles, both farmers and consumers are slow to adapt to changes in food. On the one hand, farmers work with low profit margins and can’t afford to take big risks because they usually only have 1 or 2 growing seasons per year, so it’s hard to convince them to try new tools or products. On the other hand, consumers are very sticky and loyal to their diets. They usually put the same things in their baskets in the supermarket every time. So for an agrifoodtech start-up to succeed, takes time.
Given these existing obstacles for agrifoodtech start-ups, Daniel suggests that start-ups might sometimes be better off with a mix of VC money, and non-dilutive capital like public and philanthropic grants, and dilutive capital with larger flexibility like from some family offices.
Assessing agrifoodtech founders - tips for generalists 🤓
Daniel argues that assessing agrifoodtech founders and start-ups is pretty much like in any other industry. However, you usually need a bit more sectorial expertise to understand the technological, regulatory, and consumer acceptance obstacles mentioned previously. That expertise can either be brought in in-house or hired externally through consultants.
Daniel states that agrifoodtech VCs still analyze the general investment criteria that any VC would look at: fit with investment scope, team, why now, current traction, market, defendability, cap table, valuation…
Getting fingers burned in agrifoodtech 🤒
Daniel says that a lot of generalist investors have gotten their fingers burned in agrifoodtech and have shied away from the agrifood sector. But especially with the current surge in climatetech investments, the interest for agrifoodtech is coming back as society can’t solve climate change without addressing food system emissions.
Some of the start-up categories, that investors burned their fingers on during the ZIRP (Zero Interest-Rate Policy) years and that are considered cold segments are:
Indoor farming 🌱 It is very CAPEX and OPEX heavy, while primarily growing vegetables and fruits with very low margins so it was hard to make the unit economics works.
Quick commerce 🚚 Just like indoor farming, the unit economics of delivering food nearly instantly was simply not doable in many markets.
Alternative proteins 🥩 Start-ups have raised billions for alternative proteins (GFI, 2024), but they often didn’t meet consumer expectations in terms of taste, price, and convenience.
Oatly case 🥛
Daniel highlights Oatly as an interesting case of an agrifoodtech start-up that illustrates many of the points made above. Firstly, they needed patient capital. Oatly was founded in 1994, but consumers didn’t take to their product before the 2010s and they only scaled then. This means that it would not have been a successful deal for a VC investing at the early stages even though it is a successful company today.
Secondly, some investors have gotten their fingers burned with Oatly. Investors valued Oatly similarly to a tech company rather than an food company. That meant that when Oatly IPOed, it had a 30x revenue multiple (revenue was $420M, stockmarket value at IPO was $13B; CNBC, 2021), whereas food businesses typically have a 3-5x revenue multiple (Wiles, 2021). Oatly’s valuation later dropped significantly until it was lower than the level of a typical agrifood business.
Hot agrifoodtech topics 🔥
Daniel believes that: “Companies that can show viable, sustainable business models with healthy unit economics are popular again 🧠 Profitability rather than growth is hot. I'm seeing a lot of startups working in areas such as:
AI. Many startups claim to use AI, it's definitely a buzzword (just like in previous years start-ups would mention words like Web3, blockchain, crypto, NFTs, etc.)
Regenerative agriculture
Personalized nutrition and “Food is medicine”
Alternative chocolate (cocoa)
Alternative coffee
Decarbonizing the food system / climatetech solutions (e.g. methane-reducing technologies for livestock, fossile-free fertilizer, green ammonia, etc.)
Robotics/automation
Weight-loss drugs like Ozempic (they will rock the boat quite a bit!)”
Did you like the article? Do you want to follow more of what Daniel is doing? Then check out his newsletter here and his angel syndicate here.
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