More VC money sloshing around Europe, this time with the launch of a new early-stage fund targeting food and agriculture technology. Backed by the likes of European Investment Fund, Nestlé, Fondo Italiano d’Investimento, and Bpifrance, Five Seasons Ventures is announcing the first closing of its fund with commitments “in excess of €60 million” to invest in food/agtech in the region.
The France-headquartered VC says it plans to focus on early-stage companies developing tech innovations aimed at solving key challenges in the sector. These span healthier food, to shorter supply chains, to quantified and personalised nutrition, to alternative proteins.
Five Seasons Ventures is founded and managed by Ivan Farneti and Niccolò Manzon. Farneti is a seasoned VC and was previously a founding partner of Doughty Hanson Technology Ventures and a board member of Seedcamp. Niccolò meanwhile is said to bring quite a lot food and agtech investing experience. In his previous role leading a European family office, he’s previously backed 10 companies in the food tech sector, such as Impossible Foods, Perfect Day, Beyond Meat, Clear Labs and Memphis Meats.
In an email Q&A with the Five Seasons Ventures pair we delved a little into why Europe is crying out for a new early-stage fund dedicated to food and agtech, the new VC firm’s investment thesis, and how it hopes to find the next generation of entrepreneurs innovating in the food and agriculture industries. Full text below.
Why does Europe need a new “Food and Agri Tech” fund, and why now?
NM: The timing of our new fund is perfect, across the EU we are seeing a huge surge in innovation across the food and agri tech sector, due to numerous factors. The consumer mindset has shifted, people are becoming increasingly more conscious of what they eat and the wider impact that food has on their health and wellbeing. The cost of technology is lowering and there is a wider misalignment between the global demand and supply of food. Increasingly, we’re seeing larger incumbents acquiring early-stage companies.
We see many clear reasons for why it’s time to have an independent new European fund that can invest in these high-growth companies. There is a lot of innovation, entrepreneurs and startups growing in this space, and while we’re seeing incumbents are open to innovating outside of their own R&D labs by partnering with startups, there is a limited supply of specialised capital from experts in this area. We believe that Five Seasons Ventures can be the expert partner providing capital and value-add to help these companies scale.
In the area of “Food and Agri Tech”, does Europe have any particular strengths or weaknesses compared to other parts of the world, including Silicon Valley?
NM: Among its strengths, Europe is home to many of the most innovative food corporates, the biggest of which, Nestlé, has joined as one of the investors in our fund. There is less competition for capital, therefore lower valuations and more ‘frugal’ startups. European Universities are playing a key role in incubating food innovation, as an example the top agri tech University in the world is Wageningen University in the Netherlands. In addition to academic institutions, there has been a growing number of food and ag tech focused incubators and accelerator, with over 30 based across the continent. Europe has a culture and heritage in food and nutrition and non-dilutive funding is available from Horizon 2020 and Innovate UK, among others, to support companies at the earlier stages of development.
The areas where Europe is currently lacking are on the regulation side, but we are already seeing improvement in the EU with a simplified, quicker and cheaper Novel Food approval process . While it’s also been lacking in specialised funding, our fund is aiming to fill this gap, but we recognise that given the deal flow within the space, we could easily see further food tech funds develop in the future to further plug this gap. It’s an exciting time to work in food tech in Europe!
What stage companies are you planning to invest in, and what is your average size cheque?
NM: We’re investing at the Series A level into companies with high growth potential, a largely proven technology and early commercial traction. We will invest an initial €2-4m in exchange for a significant minority, ideally as part of a syndicate with other value-add investors. We will retain up to twice the amount invested in the entry round for follow-on investment and can fund up to €12m in each portfolio company.
Can you talk a little bit more about your investment thesis, what specific areas of food or agriculture pose the biggest investment opportunities?
IF: Over the past four years we have defined four initial investment themes, based on our analysis of the most pressing needs in the industry and the most promising startups and entrepreneurs. .
The first theme is “Shifting Diets”, where new technology is applied to changes in the consumer diet, this could be preferences for healthier, natural, and more sustainable food. Think of alternative sources of proteins, or solutions that lower the amount of sugar, salt or saturated fat in our diet or personalised nutrition aimed at making our lives better and healthier.
Secondly, we’re looking at “Trust and Transparency”. Consumers are more interested than ever in where their food comes from, but big food companies and retailers are concerned about recalls, counterfeits and brand damage. Several digital technologies can be applied to shorten supply chains and make them more transparent.
“Food Waste Reduction” is another key theme. The amount of food that we are wasting, in supermarkets, restaurants, and on the production line, is huge and it’s a disgrace! More than a third of food made for human consumption never gets eaten. We’re already seeing several technology companies addressing this global issue throughout the supply chain, from the fields and distribution stages, to restaurants and at home.
Finally, a key theme is the “Increase of Food Production Yield” without an impact on environmental resources, where a lot of digital and biotechnologies are being applied to solve the growing misaligment between the demand and supply of food. We are very excited by the application of gene editing in agriculture as well as big data analytics and robotics, to name just a few.
What do you look for in founders and how important is domain expertise not just tech?
IF: We discovered that there is no shortage of technical and scientific talent in food and agri tech in Europe. But ambitious founders with a big vision for their business are harder to find. When we find the combination of both, maybe in Co-Founders, we normally get hooked and engage in deeper conversations. We expect more managerial talent to come out of big food and big agtech companies to join startups in the coming years, when current big mergers will lead the inevitable reorganisations.
How will you generate deal-flow, and what is the best way to pitch you?
IF: We have logged about 500 new food and agri tech deals in the last 18 months. We find many companies by attending specific industry events as speakers, panelists, mentors and judges, where we have the opportunity to explain what we are interested in and how we work as venture investors. Quality deal flow comes from our network of contacts in the industry and from generalist investors looking for the specialist’s point of view and our role as possible co-investors. Finally, we take a proactive view on specific themes and we scout the sector far and wide looking for the right company. We aim to respond to an entrepreneur’s email within a week, so a short mail with an exec summary is very efficient. We love to sample the products, wherever possible!