Agribusiness scientist Shane Thomas provides insight into why there is a growing demand for alternative money designs that combine venture capital with different types of investment, such as concessionary loans or other methods, in a recent issue of Upstream Ag Professional. Here’s a summary of that content:
With the exception of a few significant acquisitions, the venture capital (VC ) model has struggled to consistently deliver high returns in agtech. In order to better support development in this business, other revenue models are being proposed. These designs, such as blending walk funds with concessionary loans or adopting foundry-like approaches, aim to offer more persistent investment and administrative support. This is critical because agriculture poses unique challenges, including local specificity and a small number of potential buyers.
Debates surround the best VC financing strategy for crops. Although many industry insiders may wonder why this concerns, it’s crucial to understand that driving technology and attracting investment are essential to the development of the agricultural industry. Effective funding is required to provide new tools to promote and provide practical returns that continue to attract funds, whether the goal is to increase production, decarbonize processes, improve crop quality, or improve the lives of farmers and workers.
Some believe that VC is the best money path, while others disagree. Although there may not be a clear answer, there are claims for and against VC in agtech that frequently fail to fully tackle the complexity of the issues involved. One common criticism is that agriculture’s time horizon is too small for VC. However, statistics shows that other industries funded by VC even have much time perspectives, with middle exits taking around 13 times. This suggests that the issues in agtech may be more complicated than just day constraints.
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