Successfully Investing for a More Sustainable Food System in 2023 – Where Should LPs and GPs be Looking This Year?

January 4, 2023

BY Archie Thomason

In the venture capital world, 2022 could be characterised as the year when big money fell dramatically back to earth once the sugar rush of cheap-financing and optimistic valuations receded. As inflation and recession continue to take centre stage, investment in the venture capital realm has come increasingly under the spotlight. However, in times of economic stress, there are great opportunities to be had for companies strong enough to withstand turbulent waters and for those investors nimble enough to swim against the tide. This piece reflects on the year just gone and seeks to provide guidance for both LPs and GPs in 2023

The 2022 Food & Ag Investment Market

A key feature of 2022 has been global inflation, in particular, that of energy and food. According to the UN’s Food and Agricultural Organisation, global food prices have surged by 65% since the coronavirus pandemic[1]. Spiralling prices of agricultural inputs, as a result of energy prices and climatic turbulence, have had a downward pressure on the food production and agricultural market. Consequently, as yields have declined, so too have the revenues of companies providing inputs, and in turn, we are seeing strategic investments reducing. While this is problematic for food security at both the farm and household level, one may hold cautious optimism that this has increased farmers’ tolerance for adopting novel production methods that incorporate sustainability at the core.

From Covid-19 to the war in Ukraine, the last few years have laid bare the vulnerabilities of farmers in our increasingly globalised system. As such, ensuring producers are not susceptible to climatic and geopolitical changes must be central to innovation in the Food & Ag industry and thus sustainability must be core to this safeguarding. In this climate, where there is an expectation that wider markets will continue to decline, investors are trying to price in the length and depth of the recession. For venture capitalists, in particular, this provides an opportunity to deploy capital at a reduced valuation in sectors where their unique expertise lie. For both LPs seeking to deploy capital and fresh funds in their investment phase, the de-rating of equities and volatility in capital markets will likely translate into better investment opportunities. Moreover, the current energy crisis in Europe is a further trigger point for climate change-related debates, which arguably will benefit long-term growth themes in industries that are in their infancy (i.e., hydrogen, precision agriculture and cultivated meat processing).  

Beware of the Herd

As all investors will know, value can be found through granular due diligence, not only on the science and business model, but, very importantly, the teams behind companies. Prudence is also a fundamental attribute of those fund managers who succeed during economic downturns. It could be argued that this prudent attitude is illustrated in how first-time funds statistically outperform later iterations. This shrewdness is integral to making well-judged decisions that lead to successful returns in the long term.

At the LP end of the VC chain, we expect that in 2023 they will also reassess where their money is deployed by seeking more conventional investment sectors. We are already witnessing a bearish environment for those raising funds and one would predict a reduction in the target close of funds. According to Crunchbase, there has been a 33% decline in the total VC funding in Q3 2022 from the previous quarter[2]. However, this instability in the macro-economic outlook may be viewed as benefitting the micro-environment for Food & Ag investments by shining a light on vulnerabilities of our food system internationally. This is indicated in how VC funding into agriculture has remained high during this instability, with Q3 2022 becoming the third-strongest quarter on record, according to Pitchbook’s latest report[3]. With reduced valuations and continued deal activity, venture capital firms will have greater competition securing deals than in previous years, which would indicate the recent drop in valuations to plateau. Yet, LPs wishing to enter the Food & Ag sector should be wary of certain sectors, such as Agtech, that risk being exposed to the winds of change that are rushing through the market, as a result of a frothy market that some may blame on generalists deploying capital at overestimated valuations.

We at Milltrust believe that those companies with robust novel science are those that are well placed to ride out this bear market and move our Food & Ag industry toward a more sustainable future. For LPs looking to invest in a fund, one must ensure that aside from the GP team’s own scientific background that they are also plugged into the IP emanating from universities, research institutes, and places of learning from across the globe. We are beginning to see larger corporate entities entering the Ag investment space that was previously considered niche, such as the likes of JP Morgan, Goldman Sachs, and Lombard Odier. Purists of sustainable VC and PE investing begin to shudder at the prospect of green buzzwords that only label rather than back true green innovation, as has arguably been the case with ESG. Thus, those working in this space and holding in-depth industry knowledge should challenge themselves to illustrate their portfolio’s sustainable credentials, where other GPs cannot. This will be fundamental for those GPs looking to raise funds at the smaller end of the scale who, one may predict, will find themselves over the next year battling to raise against the larger institutional funds moving into this sector.

Out of the hundreds of agbiotech start-ups we have assessed at Milltrust, below are two examples of such companies with ground-breaking intellectual property that we have backed recently.

Green Bioactives

Emanating out of Edinburgh, Green Bioactives is the leader in the commercial utilisation of plant vascular stem cells, which has allowed them to create a reliable and economical platform for the sustainable biomanufacturing of plant biomolecules that are widely used in the pharmaceutical, cosmetic, food and agricultural industries. It is estimated that only 5-15% of the approximately 750,000 species of plants in the Amazon rainforest have been screened for beneficial bioactive compounds. However, once discovered, the process of transforming them into viable commercial products is inefficient and destructive of the natural source.


Originating from Ben-Gurion University Life Science Department in Israel, BugEra improve and increase the Black Soldier Fly’s natural traits by introducing genetic editing and modifications resulting in the patent-pending Modified Black Soldier Fly (M-BSF) Platform. The M-BSF Platform gives rise to a novel array of safe and sustainable bi-products for new potential markets and revenue streams for the BSF industry. With Black Soldier Fly (BSF) larvae reared on organic wastes and residues, it is estimated that BSF oil will be among the most cost-effective and sustainable on the market – a critical attribute for biofuel production which will also allow biofuel producers to generate far more carbon credits than fuels produced from crop-based oils. Milltrust’s decision to back this company after evaluating over 60 BSF producers comes hot on the heels of an investment by a strategic, US-based partner who is today the global leader in the production of biofuel.

Final Thoughts

As we embark on 2023, venture capitalists should look beyond the buffeting headwinds that are currently slowing global economies. Instead, the GPs that will prosper in years to come will be those that are able to successfully find businesses with long-term quality, aid any existing portfolio companies through these difficult times, and finally, if raising, win the battle with the largest of GP fundraises for the limited LP money looking to be deployed.

Milltrust International is a leading UK and Singapore-based investment group focused on sustainable investing. Milltrust International LLP is regulated by the Financial Conduct Authority in the United Kingdom and serves as investment manager and investment adviser for a range of sustainable institutional investment solutions focused on Global Emerging Markets, Agriculture, Science, Technology & Innovation, Climate Change, and other Sustainable impact investments.

Milltrust Ventures’ Green Earth Ventures is a discretionary venture capital portfolio domiciled in Singapore investing in pioneering real climate solution ventures across the Energy Transition, Clean-Tech, Recycling Waste Streams, Crop and Animal Protection Innovations, and Food Production Systems.

[1] https://www.morganstanley.com/ideas/rising-food-prices-2022-outlook

[2] https://news.crunchbase.com/venture/global-vc-funding-pullback-q3-2022-monthly-recap/

[3] Pitchbook, Q3 2022 Agtech Report, pp.9.

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