If you are an agrifoodtech entrepreneur or venture capital investor, chances are you are conditioned to project or be presented a “hockey stick” revenue curve as the desired revenue growth trajectory for the start-up.
Underpinning this habit is an entire mindset shaped by the software industry, which venture capital grew on. In their brilliant book “Capitalism Without Capital” Jonathan Haskel and Stian Westlake highlight that forecasts and policies based on a "supply and demand" economic model does not apply to intangible assets. And this is becoming a larger part of the economy. Microsoft might spend a lot of money to develop the first unit of a new program, but every unit after that is virtually free to produce. What applies to software also applies to data and implications for the VC industry are well documented.
For startups with a SaaS model, it makes sense to spend time and effort getting the blade of the hockey stick right, thus priming their company for superlative growth and returns for investors. But compared to rare companies like Groupon, founded in 2008, that hit the billion-dollar mark in top-line sales in four years, any agrifood biotech start-up, any agritech start-up with a piece of hardware (and there are many) may seem to have agonizingly slow sales growth.
CAPITAL AS A STRATEGY IS OVER. NOW WHAT?
This capital - that allows them to drive extremely rapid sales growth without worrying too soon about turning profitable- used to be abundant but these days are over. We hear time and again investors now talking about “profitable growth”, which for early-stage tech startups sounds a bit like an oxymoron, or as a fall back option this nicely ambiguous “sustainable growth”. Said more simply, it’s about not buying top-line growth by all means, but focusing on unit economics and cash flow.
If the pure SaaS and software playbook seems ill-suited to agrifoodtech, can the vertical, which had suffered a market correction as investments plummeted 44% in 2022, define its pathway to success?
We turned to 3 start-ups that exemplify 3 winning strategies to cope with stakeholders’ expectations.
OF GAZELLES, COCKROACHES, AND THE ELUSIVE UNICORNS 🦌🪳 🦄
If you want to liken your startup to a spirit animal, options are aplenty!
Either way, everything points to the necessity of learning how to sell early in the life of the startup. There is wide academic evidence pointing to the fact that companies that do not learn to sell, whose sales pattern flattens out early as well will eventually fail, even if it takes several years.
For more insights on the Agrifoodtech VC’s New Deal, save the date to join us at Future Food Asia 2024.
*SepPure and XSights are ID Capital’s portfolio companies
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