Just considering hiring as a barometer of success, AgriFood and ClimateTech growth has gone swimmingly in 2023.
Running CS Partners, an executive talent recruitment agency for AgriFood and ClimateTech companies, I wasn’t expecting 2023 to be this busy. Not after last year’s crash and burn in investment trends. Yet hiring searches for the first half of 2023 have been remarkably brisk, despite all the doom and gloom headlines of failed ventures, consolidations and lay-offs.
And competitive! There has yet to be any pool of surplus talent to dip into. Newly laid-off AgTech talent is snapped up remarkably fast. And, shocking to some, salary offers for C-suite executives, in particular, have been trending higher.
Hiring trends are, of course, a symptom, not a cause. But the cause is something to get excited about! I predict that AgriFood and ClimateTech sector has moved past rock bottom. We’re seeing now the restructuring of a new, better and more impactful industry — the proverbial phoenix rising from the ashes.
Three key trends, in addition to my busy daily calendar, have me bullish about the future of AgriFood and ClimateTech.
1) Company Valuations are Right-Sizing
If the last 18 months have taught us anything, there is no ‘too big to fail’ safety net for AgriFood and ClimateTech. But that’s not a bad thing.
Over-priced and over-hyped valuations undeniably drove many of the big-figure investment deals of 2020 and 2021. But big valuations ended up as a noose around necks, strangling the operational abilities of startups, shifting from concept to market reality. Too overpriced to satisfy their investors, with positive cash flow still years away, many companies could not meet overly-inflated investor expectations or secure additional funding. Hence the failures of once ‘unicorn’ startups, like the recent bankruptcy filing of AppHarvest, a favoured child of the 2019-2021 agtech VC gold rush.
Today’s AgriFood and ClimateTech entrepreneurs have the advantage of reality. Sure, walking out of an investment meeting with five offers on the table was a heady feeling, but too much money too soon didn’t set the stage for the rigorous business model early-stage startups need. Yet those entrepreneurs that can put proof to the pudding when it comes to concept validation, scale and market entry are finding opportunities.
To that point, Pitchbook’s most recent agtech funding analysis noted that while Q1 2023 funding declined 10% compared to Q4 2022, median pre-money values increased, leading many analysts to surmise that investors are favouring those startups that have proven their growth potential and business models, despite an unfavourable economic environment.
2) Failures are Turning Into Opportunities
Have you ever heard how the accidental creation of purple synthetic dye ended up founding modern-day immunology?
A failed experiment in the late 1800s by a young chemist to develop artificial quinine created a black sludge that, when mixed with alcohol, released a gorgeous ‘mauve’ color, the first-ever synthetic dye. That failure sparked a new synthetic dye manufacturing market (and a lavender-hued fashion craze). But even more remarkable was when microbiologists realised they could use synthetic dye to selectively target bacteriums, essentially the founding technology behind immunology and a process still used by modern bacteriologists.
From one that failure came multiple opportunities. We’re experiencing the same thing today in AgriFood and ClimateTech. Being first isn’t all it’s cracked up to be!
For every AgriFood and ClimateTech technology that didn’t make the grade, a new, refined version is rising to fill the gap. In some cases, the technology was solid; companies simply ran out of cash (cue point number one!).
We’re entering a ‘do-over’ stage of the industry. Early-stage startups have the space they need to grow without the dangers of an over-valued marketplace and with a foundation of technology success (and failure) to build upon. Indeed, a recent CropLife analysis found that for the last three quarters, the number of AgTech startups has grown, even while funding amounts have dropped.
3) Climate Change, Climate Change and More Climate Change
Then there is the whole reason AgriFood and ClimateTech exist in the first place – climate change. I wish I could say we now had a solid handle on the climate change crisis, but considering July clocked in as the hottest month on record (and likely in 120,000 years), there is obviously much work yet to be done.
Climate change continues to drive great interest in our space, especially around decarbonisation and healthy food systems. Climate change was a vital factor in the European Union’s recent proposal to relax restrictions on gene-edited crops, opening the door to faster growth in an AgTech sector that regulatory and policy hurdles have suppressed.
Indeed, ag biotech, or using technology to modify and improve plants, animals and microorganisms for food production systems, was one of the few categories to see funding growth in 2022, with investments rising by 8.5% over 2021, according to AgFunder. And a recent McKinsey and Company report noted that not only did climate-related investments significantly outpace the market in 2022, but they predicted continued growth in 2023.
But while interest in climate change solutions remains strong, if not even stronger than before, it also is more sophisticated. Investors are looking for those companies that can validate the demand for their technology, show that they are price-competitive in the marketplace and can scale.
Is Our “Plateau of Productivity” in Sight?
Time, of course, will tell where we are headed in AgriFood and ClimateTech. But from my perspective, the future looks bright, with solid signs we’re moving past the Gartner Hype Cycle “trough of disillusionment” and trending back up the curve toward a “plateau of productivity.”
How about you? Are you experiencing growth trends or positive signs in your startup? What’s keeping you busy and enthusiastic for your future in AgriFood and ClimateTech?
Feel free to chime in! I’d love to hear that I’m not the only one feeling chuffed about the future of Agrifood and ClimateTech. Send me a quick email at S.Leich@cs-partners.net.
Simon Leich
CEO, CS Partners
