When I came to the Erb Institute, I wanted to pivot my career from government consulting to innovative food. It seemed like every day in the news, I was reading about a new innovative food or agriculture startup raising millions, a new venture capital (VC) firm that was addressing a new issue in the agrifood sector, or a formerly VC-backed powerhouse continuing to change the way we think about our food and nutrition (such as Sweetgreen, Oatly and Beyond Meat).
In 2020, agrifoodtech startups raised more than $26.1 billion, a 15.5% year-over-year increase. It became clear to me that startups and VCs are the biggest engines pushing the boundaries of the agrifood industry, not the companies that make up the status quo. So I decided to pursue an internship in VC that would offer the opportunity to dig in deeper in this space.
I accepted a summer fellowship at Supply Change Capital, a VC firm investing in the changing face of food. Here are some of the lessons, insights and experiences I gathered during my time there.
Some lessons about VC in general:
- It’s extremely risky. In VC, before investing in a company, the partners conduct a valuation analysis to understand how each investment may return not their investment amount but their entire fund amount, plus provide healthy returns for the investors. A VC company that invests in 30 companies is banking on one, maybe two, successful portfolio company exit(s), not 15.
- It’s just as much about the founders as the idea. While it may seem obvious, an idea isn’t everything, and while some VCs may invest solely based on an idea, such Shark-Tank-style investing is the exception. A more typical VC process is that the founders and VC spend weeks to a few months building a personal and professional relationship before deciding to invest.
- Network is critical. Whether it’s fundraising to have money to invest or finding the right startups, the network of those who work at the VC will largely dictate success. If the firms do not hear about opportunities before they are written about in the New York Times, Eater or AgFunder, they are already at a disadvantage. Having money alone doesn’t mean success; your network and reputation are critical.
These are some specific insights I gained from Supply Change Capital:
- VC has a long road ahead to be considered diverse and equitable. Black and Latino founders accounted for only 2.3% of all venture dollars raised in the U.S. in 2019. And in 2019, 2.8% of funding went to women-led startups; in 2020, that fell to 2.3%, Crunchbase figures show. While these are all-time highs, a lot of work remains to ensure diversity, not only at VC firms but also in the founders VCs are funding. Supply Change Capital is trying to be part of the solution in this area.
- VC is extremely decentralized. While Pitchbook and Crunchbase are helpful resources for information about market trends, other VCs, new startups and more, they are not complete nor always correct. There is no one website or resource that will have the information you want or will check all the boxes. Networking is important to find out about potential co-investors, have a strong deal-flow pipeline and hear about important industry events, for example.
Working in VC is a great way to learn about new business models, products and industries. The opportunity to do due diligence (such as a deep dive into a startup, its finances, its industry and founders) is an incredible experience.
My fellowship with Supply Change Capital gave me a better understanding of various parts of the food business, not just one aspect of it. Ultimately, I hope to help build new brands, disrupt supply chains and introduce new technologies. I want to empower consumers with access to healthy and sustainable food that can be both affordable and accessible.