The message from investors at World Agri-Tech and Future Food-Tech in San Francisco last week was clear: Storytelling is no longer enough, to quote our own Louisa Burwood-Taylor. Startups need to solve real problems for real customers, focus relentlessly on capital efficiency, and find ways to validate their tech through partnerships with strategics as early as possible.
“Six, seven years ago… there was a lot of capital being dumped into foodtech companies that had unrealistic or nonexistent paths to revenue,” observed SOSV general partner Pae Wu on a panel discussion Thursday evening. “There was zero discussion around the concept of margin. That is very different today.”
Meanwhile, the lack of exits has created a vicious cycle: limited investable capital as existing funds hit the end of their life and struggle to raise new capital, and few new funds emerging as LPs shy away from a sector with weak returns, said EcoTech Capital MD Adam Bergman, who predicted a wave of bankruptcies, fire sales and restructuring in 2026.
“If an exit is a billion or two, that’s a different story,” added Astanor Ventures partner Christina Ulardic. “But if the exit realistically is $400, $500 million, and you’re being approached by a company who has already raised $150 million, you can do the math [the capital raised is too high relative to the exit value], and I think that has been a very big problem.”
Speaking on a panel on Tuesday evening, FCC Capital MD Adam Smalley said expectations must be recalibrated: “Investing in this space is different than other venture capital spaces like AI and drug discovery. The exits aren’t going to return the portfolio like they might in these other areas so I think you need to have higher conviction on your portfolio, have bigger stakes in those companies, and accept the fact that you’re probably going to have smaller exits in terms of dollar value.”
A maniacal focus on what makes you you…
In the current environment, said Steven Finn at Siddhi Capital, “We either have to be right almost all the time… or we need valuations to be meaningfully lower so that those kinds of exits can get us the returns when we get our hit. But that then requires the companies that go through that process to need less cash, and that’s where they are trending…”
And with capital efficiency top of mind, he said, focus is essential: “We see too many companies in the space try to bite off more than they can chew instead of leaning into the actual thing that makes them special. You need to make less cash go farther and the way to do that is with maniacal focus on what makes you you.”
According to Wu: “One of our most capital efficient [portfolio] companies is Gilly, which is breeding fungal strains to apply to ag byproducts that are already used in silage and forage for the dairy industry. They just sprinkle on their fungal additive and after two to three days, it becomes up-valued in terms of digestibility, protein content, feed conversion and some nutrient profiles as well.”
Artificial intelligence
In more inherently capex-intensive sectors such as precision fermentation meanwhile, all eyes are on enabling technologies that can drive efficiency from optogenetics (controlling cells with light) to continuous fermentation, to using AI to optimize strains or find hosts that can eat a wider range of cheaper feedstocks.
Elsewhere, AI is compressing R&D and innovation timelines, driving supply chain efficiencies in sectors such as foodservice that have been slower to digitize, identifying high value ingredients in waste streams, and supporting robotics in food production.
Khosla Ventures, for example, is “particularly active in robotics and robotics models right now,” said Alice Brooks. “In production, in food prep, how can we leverage a couple advancements that are happening in the broader robotics ecosystem?”
“We need to see a company where either there is immense growth potential to invest in a business that’s not profitable, or we need companies who have crossed the profitability matrix and are basically willing to get our capital to scale, not to survive.” Sebastian Pascual, director, Temasek
Engaging with corporates
Several investors also stressed the importance of partnerships with strategics, while acknowledging the risks. “We’ve had companies in our portfolio that have partnered with big strategics only to be forgotten,” noted Lisa Feria at Stray Dog Capital. “And we have also had some where that partnership has been transformational.
“So making sure you know who your partners are, not only on the investor side, but on the strategic side, is essential, because if you pick a strategic partner that is known for leaving partners in the lurch, or not having the human power to support those partnerships, then you’re left without much recourse there.”
“A lot depends on how big of a problem you’re solving for the corporate,” noted Finn at Siddhi Capital. “The bigger problem you’re solving, the more likely they will have a fire under their ass to fix that problem.”
“We’re spending a lot of time on anything that improves resilience. That can be resilience to climate, but it can also be resilience to geopolitical concerns, so supply chains.” Adam Smalley, MD, FCC Capital
Beware AI-generated pitch decks
👉 In agtech, investors deemed plant genetics, animal health and genetics, supply chain tech, biologicals, robotics, superfoods as “hot,” but appeared to have cooled on regenerative ag.
👉 In foodtech, investors highlighted a range of technologies from robotics in food prep to optogenetics (using light to control cells in biomanufacturing), gut health, hybrid/blended meats, tech to improve the solubility and taste of proteins, and innovations around GLP-1 drugs, from high-protein and gut-friendly companion foods and wraparound tech to peptides fibers or other ingredients that trigger similar responses in the body.
Stepping back, AI has the potential to transform the food and ag industry, said investors across all four days. But founders should not fall into the trap of relying on it too heavily in investor presentations, noted Wu at SOSV.
“If your answers and pitch decks are so obviously generated by AI, that’s a problem.”
Further reading:
The good, the bad, and the ugly of agrifoodtech investing… in conversation with Adam Bergman
🎥 Ag’s new toolkit: AI, genomics, and robotics converge at World Agri-Tech
Buckle up, say investors as AI reshapes agrifoodtech: ROI may be “unusually tangible’
Leaps by Bayer’s PJ Amini on exits, epigenetics, AI-driven discovery and his ‘50% rule’
The post Investors demand capital efficiency, focus, and no AI-polished pitch decks at World Agri-Tech, Future Food-Tech appeared first on AgFunderNews.
