Quick background on Five Seasons Ventures…
This Paris-based VC focused on foodtech can only be described as prescient. With the breakout success of companies like Beyond Meat (which had the most successful IPO since the 2008 recession), it seems everyone has wanted a piece of the sizzling foodtech scene in the past six months.
Three years ago, the founders of Five Seasons Ventures anticipated this “tidal shift” in the food space – before foodtech was even really a term. The firm is Europe’s first of its kind to explicitly target emerging innovations in food (though there was a community of investors – angels, family offices and private equity – playing in the space prior). Five Seasons has raised nearly €80 million and is one of only a handful of funds with more than $50m AUM focused on this broader sector. It is thus one of the few actors well positioned to reap the rewards of what many believe is just the beginning of a broader transformation of what and how we produce, deliver, and consume.
The company’s investments focus on four main areas – 1) Shifting diets (new ingredients and proteins, personalized nutrition, microbiome), 2) Trust and transparency (supply chain and clear label solutions), 3) Increased Yield and Efficiency (gene editing, precision agriculture, indoor farming), and 4) Reduced Wasted Calories (shelf life extension, circular use of food waste).
On the spectrum of “seed to mouth” (as you map the value chain through the supply chain), this VC errs more towards the side of consumer, as the vast majority of the value created is captured closer to the end product.
Why this is SO EXCITING…
If we are going to feed 10 billion people by 2050 (and not destroy our planet in the process), we need to figure out how to produce more with fewer resources. And, according to Five Seasons, if nature has four seasons, then technology can be the fifth, optimizing the quality and quantity of the output of what we eat. And yes, the firm’s name is a nod to this idea.
Five Seasons Ventures doesn’t go out of its way to find sustainability-focused companies to back, nor are they willing to make concessions on growth and profitabiliy in pursuit of purpose like is the case for some impact investors. Yet, all the companies this VC has backed to-date are highly sustainable and purpose-driven nonetheless: “we like companies that make great products that are substantially better than the existing ones.”
Meet Ivan Farneti (Founding Partner)…
For starters, Farneti graduated from the world’s best business school (cough, cough INSEAD), after which he took part in the internet boom with a top technology banking team investing in what was becoming the internet bubble. In 1997, the internet was causing another huge tidal shift in major industries (think online shopping and long distance calls).
“Companies were scratching their heads wondering what to do with this shift… and there were a few companies and investors positioned with take advantage of this disruption,” Farneti recalled. He became one of those poised to take advantage of rather than fall victim to the innovation (he soon switched job to join a new venture capital fund in London where he stayed for over 13 years).
In 2015, Farneti visited the Milan Food Expo: “If there is one thing VCs are good at, it is pattern recognition.” Like the sea change Ivan had navigated nearly two decades before, he couldn’t ignore the signs that forces were underway to transform the food industry: “Even in 2015 there were a lot of companies innovating along the food supply chain. But there were also a lot of corporates left behind thinking what is AI? What is big data? How does this apply to my world?”
On profit and purpose…
By the nature of what Five Seasons Ventures invests in there is “always an implication of impact.” When evaluating prospective investments, they look for a higher purpose – including all attributes of the companies like gender equality because “they are good for business not because we are tree huggers.”
Take one of their recent investment, Butternut Box, a pet food company targeting the $90B pet food market – specifically the growing segment of pet-owners who are consciously choosing meals for their beloved animals. The Butternut Box model taps into a larger trend of pet owners preference for fresh, customized food for their pets by offering well-balanced meals with ‘real food’ (i.e. materials that are acceptable for human consumption) to pets.
But, the company also employs a circular economy approach: repurposing those parts of animals that humans wouldn’t eat (think of kidneys or ‘ugly’ veggies) but are perfectly fine in terms of nutritional values and taste for pets. Beyond a sustainability-focused model (that is direct to consumer, subscription-based), the company has embedded sustainability into other aspects of its business: transportation is offset with carbon credit, packaging is recyclable and compostable, etc.
“It is very easy to take shortcuts, and it takes a company that has those higher values high up in their priorities to make it happen.” And these values translate into good business: the company is growing at more than 10% a month. Clearly they are barking up the right tree.
On the green premium…
Farneti contends that for now there isn’t a real “green premium” – most people aren’t willing to pay more for sustainability… Yet. This reinforces the generally accepted notion in the food space that people buy food according to holy trinity of taste, price and availability.
Though, according to Farneti, the trinity has two new additional value-drivers: nutritional value (4) and impact on the environment (5). Millennials and Gen Z – who are becoming increasingly conscious of their consumer choices and voting with their wallet – are incrementally driven by these factors in their purchasing decisions. (Note: a 2016 Deloitte Study on Consumer Value Trends in the Food Industry produced similar conclusions, citing the increased role of new value drivers in purchasing decisions including “health & wellness”, “social impact” in addition to “safety”, “transparency” and “experience”).
On balanced measurement…
Five Seasons Ventures is completing their first ESG report, which they committed to doing for their investors – and something they believe in doing regardless.
“If you don’t measure, you don’t manage, but the difficulty is to be honest and straightforward… for every action there is a reaction and its really complicated to measure on a fair and broad scale across sustainable goals.”Ivan Farneti | Five Seasons Ventures
Take the new trend in AgriTech of self-guiding robots that replace humans in doing repetitive tasks in the field. These robots are already in the fields of California performing what is otherwise backbreaking and monotonous work – like weeding, for example. From an environmental impact perspective, the robots used in precision agriculture are vastly superior to traditional methods: they will use fewer chemicals and avoid destroying topsoil (for starters). Indeed, the technology and its applications to improve farming process are undoubtedly exciting – there is even a new open source consortium on robots.
But what happens to all the temporary seasonal workers who rely on this task? With this work no longer available, how do they earn an income to feed their families? For them, the introduction of multipurpose robots is nothing short of disaster.
“It’s really complicated,” admits Farneti. And in measuring more outcomes and aspects of an innovation, Five Seasons doesn’t know what they will find exactly, but they are determined nonetheless to measure “so we can optimize”.
Perhaps the sixth season can be measurement.