While the broader venture capital landscape experienced a downturn, agricultural venture capital investment in 2023 bucked the trend with a marginal increase over the previous year, as reported by the Canadian Venture Capital Association (CVCA).
Contrasting this slight uptick, the sentiment at the recent Agri Tech Venture Forum in Toronto was less than sanguine. Industry insiders pointed to a substantial decline in the availability of capital for agriculture technology entrepreneurs, a stark departure from the investment fervor experienced during the pandemic.
David Kornacki from the CVCA highlighted that the agribusiness sector saw a stellar performance in 2023, securing $273 million across 50 deals.
This robust activity in the agricultural sector stands in stark contrast to the 34 percent drop in venture capital deals across other industries last year, with a further 50 percent decline the year prior.
Kornacki suggests that recent declines signal a normalization of venture capital activity following the exceptional pandemic years. “Excluding the pandemic surge, we’ve observed an increase in investment relative to 2019,” he commented.
Despite Kornacki’s positive take, venture capitalists at the forum expressed concerns. Jonathon Goodkey from the Business Development Bank of Canada (BDC) described the recent 18 months as particularly challenging for deal-making and securing pivotal investment partners.
Pitchbook, a reputable source for investment deal information, reported a downturn in North American agriculture venture capital investment in early 2024, indicating a deviation from the high investment levels of 2021.
“It’s tough times,” acknowledged Louis Brown from Carrot Ventures, echoing the prevailing industry concerns.
Yet, Paige Addesi of Yaletown proposed that downturns could be breeding grounds for outstanding businesses, praising the resilience of founders in these conditions. “This industry doesn’t just go away,” Addesi remarked.
Amidst this, rising interest rates and the potential implications of heightened capital gains taxes, as specified in the recent federal budget, are anticipated to further cool investment in Canada, noted Kornacki.
AgriTech entrepreneurs are now tasked with demonstrating a more comprehensive understanding of their development plans and profit trajectories to attract investment.
Investors, on the other hand, have become more conservative with valuations compared to the peak years. Artem Zemskov from Radicle Growth’s Canadian office pointed out, “We want our returns, and admitting that we’re worth less than a couple of years ago is challenging.”
The inflated valuations of the past were partly a result of abundant venture capital and a limited understanding of the investments’ true value. Panelists at the forum concurred that while there is currently an abundance of unspent capital, entrepreneurs must recalibrate their expectations when seeking investors.
