Coronavirus: Investor Outlooks in the F&A Industry

Part Two: The FoodBytes! investor community perspective

 

In the second of this three-part series, we connected with some of the investors of the FoodBytes! community to learn more about their perspectives on the hurdles the F&A industry is faced with, and the opportunities they are seeing in the industry. From optimizing resources to showcasing leadership, here’s some inspiration from investors in our network.

Reminder: Part 1 of this series focuses on the startup perspective. You can check it out here.

 

Challenges: liquidity and changing consumers’ demand

Tom Spier, from Boulder Food Group, a venture capital firm that partners with early stage food and beverage consumer product companies, explained that due to the rise of consumer staple product consumption, the challenge is to ensure manufacturing capabilities can meet that demand. For consumer discretionary products, Tom said their portfolio companies are experiencing flat to declining momentum as consumers purchase “must-have” products instead of “nice-to-have’ items.

 

Another big challenge is liquidity, especially for businesses in the process of raising capital or about to raise capital. That’s the reason why Tom advises BFG’s portfolio companies to review all unnecessary spending to ensure money is being spent in only the areas of utmost importance. Michael Movitz, of The Movitz Group, a consultancy specializing in connecting brands and investors in the natural products industry, agrees and adds a reassuring spin. “Market uncertainty is forcing downward pressure on valuations in general, but liquidity remains in the system. There’s still money to invest,” Michael writes in a recent blog post detailing capital strategy considerations for early stage brands amid the Coronavirus pandemic.

 

Opportunities: automate processes, resolve bottlenecks, test leadership, demonstrate prudence

Michael Lavin of Germin8, a multi-stage Venture Capital firm that invests in food tech and agtech companies, sees ample opportunity for founders who can look beyond obstacles and adapt quickly. He had a lot of constructive ideas to share with the FoodBytes! community. “Startups can re-evaluate milestones, stretch runway and wait this out, or more proactively put their spirit of innovation to use by embracing the opportunity to automate processes, cleverly resolve bottlenecks and optimize shifts,” he tells us.

Michael sees the test of leadership Coronavirus presents as a silver lining. “Startups, which often source a competitive advantage through lean highly connected teams and flat hierarchy, are now forced to mimic that dynamic remotely.” He believes this this challenge will promote a “valuable new skill in the founder arsenal,” as entrepreneurs scale to larger organizations in the future.

Setting up a Coronavirus taskforce of sorts is integral. Michael suggests all F&A startups establish a small, multi-disciplinary response team to lead Coronavirus-related efforts, communicate downstream, establish protocols, build redundancies, identify the bottlenecks and uncover creative solutions. 

 

Germin8’s portfolio is primarily agtech software-as-a-service companies selling to farmers and synthetic biology companies developing next gen food technologies. Michael offers distinct insights into how each group is seizing on opportunities.

  1. AgTech: While they’re having uninterrupted success in selling to farmers, they’re actively developing more tools in order to automate the sell-cycle, implementation and technical troubleshooting processes, especially focusing on those that are most resource-intensive and would enhance the customer experience if resolved.
  2. Food Tech: The synthetic biology companies that are largely focused on R&D with team members constantly rotating between office and lab are challenged to balance resources like truckload receiving and shipping and lab management. Michael has encouraged his food tech portfolio companies create shared calendars for not just team members but for lab equipment, creating a kind of digital virtual assembly line.

For his CPG portfolio companies, Tom advises founders to review all discretionary spending, and reallocate dollars to areas of utmost importance. On the supply chain side, he recommends finding redundancy where possible as well as bolstering supply chains, if possible. “Without knowing when the capital markets will improve, the focus is on extending cash runway,” he says. Tom stresses that deal making will certainly be more challenging, but not impossible. Patience is key right now.

Michael Movitz shared many key recommendations, chief among them being to “protect and strengthen our vulnerabilities during the crisis, and set the stage to emerge post-crisis ready to capitalize on opportunities.” This includes preserving capital and increasing its efficiency, seeking capital, and re-forecasting and adjusting where needed.

 

For more insights from investors in the FoodBytes! community, you can watch our webinar, featuring Tom and Michael Lavin, as well as Amanda Donohue-Hansen from Cultivian Sandbox, Daniëlla Vellinga from Rabobank’s F&A Innovation Fund, Brad Blomstrom from Anterra Capital and Roderik Bronkhorst from the Rabobank Equity Private Placement team.

 

Stay tuned for our final perspective on this series, featuring our corporate partners and how they are navigating the challenges and opportunities ahead.