A recent report on funding of agritech startups has provided some compelling numbers, but it barely received any attention in the media.
More and more venture capital is being invested in the sector, which is great news, but these funds apparently are not serving all demographics equally. Some are being left behind, most importantly, women. The report is from the U.S., but one can suspect the same scenario is happening here in Canada.
According to Money Where Our Mouths Are, released a few days ago, some serious gaps exist between the extent to which men are supported in new ventures compared to women. This report is the first ever investigation into the funding disparities between female and male founders in the agrifood sector.
In 2018, only 16 per cent of all agtech ventures had at least one woman as co-founder, and only seven per cent of funded projects were led by women founders. These percentages have barely changed in the last five years, according to the report.
Some may explain the disparity, saying that projects led by men will outnumber those represented by female-only entrepreneurs, but this goes to the core of a very important issue. In most sectors, women find it challenging to find any financial support. But with food, stakes are much different. Food is cultural, emotional, and the foundation of our communities. It involves us all, one way or another, many times a day.
With little or no diversity of thought in the system, food manufacturing has struggled to innovate for many years. It’s only in the last few years we have seen disruptors completely redefining our relationship with food. Whether it is with proteins, the meaning of environmental stewardship in food, or simply how we connect with consumers through other distribution means, everything is changing.
Most of these changes have been spearheaded by leaders outside the normal spheres of the food sector. We’re seeing more high-quality ready-to-eat products, more e-commerce, the emergence of a very interesting plant-based portfolio, lab-produced foods, and more. Non-traditional investors in the agrifood sector essentially have a different vision for agriculture and how we should produce food, whether it’s to conform to our modern expectations related to animal welfare, the environment, or nutrition. Generally, women certainly have a different take on food systems.
Women will manage risks differently and will also see the market multi-dimensionally, more so than men. And results usually come along with that. According to the report, food businesses founded by women ultimately deliver higher revenue, in fact, more than twice as much per dollar invested. Women also tend to be more capital efficient, achieving 35 per cent higher return on investment. Numbers do build a case for women entrepreneurs in the food industry, but differences remain.
What’s more alarming is at the second cycle of financing. Over the last few years, female-founded startups raised larger deals at seed stage but typically raised much less during subsequent rounds. Women tend to be more successful with meal kits, food service companies, and home cooking companies. But when some farming and major scalable processing are involved, women are next to absent.
Investors, mostly men, will all be financially focused and mostly driven by scalability. Women tend to appreciate the nuances food can provide and will understand imperceptible stories, linked to the financial part of the business. Women will often give more honest assessments of challenges and opportunities in a business. Teams led by women focus on long-term success, which is critical in the food industry. Here, patience is a virtue, unlike high-tech or other fast-forward industries.
The report suggests that women entrepreneurs in food will pay back their loans much faster than men. Women also tend to reinvest newfound wealth back into their communities, including families, health, and education.
Venture capital is a very piecemeal, insular system, especially in food. We may think investment decisions are rational, but they are not. It is about who you know, full stop. We need to get more women in front, and foster inclusions during all cycles of funding.
Gender equity in food business and giving more opportunities to women is not just a purely feminist issue. It is truly about making food innovation much less anemic than what we have seen in the last 30 years.
This report looked at gender, but the same argument can be made for different ethic groups who can equally contribute to the growth of our food economy. Embracing diversity is not just about having more underrepresented groups in schools, businesses and classes. It’s also about creating a world in which our mosaic society is reflected in our food, at our dinner table, every day.