FMC Ventures has been shutdown abruptly
Welcome to another edition of Software is Feeding the World.
Before we get into this week’s edition, I want to let you know about an IRL event organized by the AgTech Alchemy team in the San Francisco Bay Area on Wednesday, January 22, 2025. If you are going to be in the area on Wednesday, it would be great to meet in person. You can register for the free event here.
The retreat of corporate venture capital
In August last year, I had written about the retreat of tech giants like Microsoft, Google, and Amazon from the AgTech space. I had pointed to factors like the magnitude of and time to return on investment and opportunity costs in AI wars as one of the main reasons for Google, Microsoft, Amazon to scale back their ambitions in agriculture.
Now we are seeing a similar phenomenon within corporate venture capital firms in the agrifood sector. AgFunder News announced that FMC ventures has restructured their venture operations, effectively shutting it down. The AgFunder article does not give us any more details, and so we are left reading between the lines.
If we look at the US Venture Capital industry as a whole, the VC industry has been a massive force multiplier for R&D spending, innovation, and value creation, according to research published a few years back. The AgTech industry needs to continue to figure out the types of problems which are most amenable to be solved and scaled using venture capital.
“Venture capital-backed companies account for 41% of total US market capitalization and 62% of US public companies’ R&D spending. Among public companies founded within the last fifty years, VC-backed companies account for half in number, three quarters by value, and more than 92% of R&D spending and patent value. The US did not spawn top public companies at a higher rate than other large, developed countries prior to 1970s ERISA reforms, but produced twice as many after it. Using those reforms as a natural experiment suggests that the US VC industry is causally responsible for the rise of one-fifth of the current largest 300 US public companies and that three-quarters of the largest US VC-backed companies would not have existed or achieved their current scale without an active VC industry.”
Gornall, Will and Strebulaev, Ilya A., The Economic Impact of Venture Capital: Evidence from Public Companies (June 2021). Available at SSRN: https://ssrn.com/abstract=2681841 or http://dx.doi.org/10.2139/ssrn.2681841
Venture in AgriFood
Venture capital has had a chequered history when it comes to the agrifood sector, because of some of the challenges I had laid out in my article about the retreat of tech giants. Post the pandemic venture capital has taken a big nose dive and its impact has been felt on the Agrifood sector as well.
From 2021 to 2023, initial public offerings (IPOs) in all tech segments dropped 85% from 1,035 to 154 while venture capital has dropped 50% from $345B to $171B. AgriFoodTech venture capital has suffered a similar fate, dropping 70% from $53B in 2021 to $16B in 2023 (and 2024 looks no better – first half total was $7B).
Image from AgFunder’s AgriFoodTech Investment report (2024)
The emergence and slow down of corporate venture capital in agrifood
Corporate Venture Capital is a relatively new phenomenon in the agrifood sector, with FMC venture arms being started in 2020 (in the middle of pandemic and zero interest rate phenomenon). The old guard of BASF, Syngenta, and Bayer started their venture arms in 2001, 2009, and 2015 respectively.
