An insider’s guide to raising capital in the agtech sector
When raising capital in the agricultural industry, you are typically dealing with either expansion, new large-scale production, or emerging technologies. While Findex deals with all three, this article will focus on raising capital in the agtech space.
How much does your business need and when?
The first step is to ascertain how much capital your business needs and when it needs it. This will depend on what stage your business is at: for example, you may be ready to go to market, ramp up production or be in the middle of R&D. Working out the true amount needed to cover all costs to the business and achieve your goals means assessing the pros and cons of raising more in initial rounds or raising more as your product progresses.
What is the value?
One of the most difficult things to do in the early stages of your agtech business is to determine what your company is worth. Instead, try asking yourself this: how much ownership are you willing to give up raising your desired sum of capital?
While there are various ways to calculate the value of a business, these become less relevant the earlier in the lifecycle of the business. If you have sales and forecasts you can generally utilise a conventional valuation technique, however, if you are raising money to fund a prototype or R&D this becomes a lot harder. While there are comparable transactions and typical rules or guidelines, at the end of the day it comes down to what the investor and the founder agree on.
Who do you want as investors?
Investing should be a two-way street. The interests of both investors and founders need to align.
Outline what you want from investors: is it cash, expertise, relationships, assistance? Then think about what you don’t want from investors, such as micromanaging, over reporting, and time wasting.
Setting out some simple dos and don’ts will help manage expectations so both parties are clear on their involvement before accepting any investment.
Who do you raise funds from?
Depending on the stage of your business, any of the following investors may be desirable:
Early stage: friends and family; sophisticated investors; debt funding, crowd funding; and certain venture capital funds.
Growth and expansion: venture capital; private equity; strategic investors; family offices; investment funds; and an IPO.
There are pros and cons to each of these so it’s worth discussing this with a professional adviser who can help you make the right strategic decision.
While these are the initial steps in capital raising in the agtech sector, the same principles apply to agribusinesses, however information is usually more developed, and the investors tend to enter the picture at a later stage.
If you’re after more information, speak with your adviser or get in touch.
Reproduced from “The Australian Farmer” digital journal with permission from One Mandate Group. www.theaustralianfarmer.com/digital-book
The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex.
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