Climb By VSC: Episode 1

JK: Thanks for coming on Rob! Let's dig into your background for a bit to see how that led you to become the founder of AG Funder.

Rob: Thanks for having me on! Yeah, I did a masters degree in robotics and AI with the intention to be an academic. However, I started to look out into the world to see what else was out there. I even had a job lined up at Lehman Brothers, several interviews at McKinsey, and other things on my plate. These offers and interviews were eventually rescinded as 2008 loomed. It got me thinking about industries that would always be needed and stable. I realized that food was something people were always going to need. That's how I got into food and agriculture. After lots of informationals and meetings, I met my partner Michael Dean. Michael was a former lawyer who left his practice to set up a food and agriculture business and I joined him there. That ended up not working out as we had hoped and it made us take a step back. We believed in the space, so using my experience in tech and his background in law, we pushed toward an AGTech direction. At that time, there were only about 5 interesting companies, and looking for serious LPs was difficult. During those times, there were no exits in the space, so acquiring venture funding was not an easy task. What we realized was that no one was taking the space as seriously as it should because the storytelling aspects around it were poor. That's when we launched AGFunder News and today, we have over 100k subscribers to our channel. In 2017, we launched our first fund. Now, we are on the path to closing a 100M fund with 80M closed so far.

JK: That's so interesting! Using a media outlet to start a fund back in 2017 was definitely not he common thing to do. What are the risks to food and agriculture we are facing today?

RL: We require more food than ever, which means we have to produce more than ever. However, we also have to be mindful and cautious of how we go about this. There needs to be a balance between how much we produce and how ethically we produce it. The result of avoiding this problem are the issues you see around the world today.

JK: That's so interesting! Using a media outlet to start a fund back in 2017 was definitely not he common thing to do. What are the risks to food and agriculture we are facing today?

RL: We require more food than ever, which means we have to produce more than ever. However, we also have to be mindful and cautious of how we go about this. There needs to be a balance between how much we produce and how ethically we produce it. The result of avoiding this problem are the issues you see around the world today. Geopolitical issues arise when people don't eat. There are real world consequences to it all. Venture capital is a tool we can leverage to solve some of these major problems.

JK: So what are some of the companies that excite you at AGFunder?

RL: We've invested in alternative leather companies made from mushrooms, and other iconic brands that will be announced later this year. There is a lot to invest in. Food and Agriculture makes up 10% of our GDP, so while not everyone uses Facebook or Salesforce, everyone needs to eat.

JK: Do you perceive any company or vertical to be overhyped? Such as alternative meats or milk?

RL: Alternative meats seems to be a space that has a lot of players, with some of them very well funded or even over funded. This puts pressure on other startups wanting to enter the Food/AG space. Where there is still surprise is companies popping up as a result of the climate changing around us. Alternative leather or even fertilizer are two verticals that would have been overlooked 20 years ago. Today, they enter the space at a good time for attention.

JK: What's been the catalyst that's moved people towards more sustainable and agricultural practices?

RL: The consumer is playing a big role here. We have tried to invest in companies that have benefits more on the consumer side.

JK: Where does government play into this? Are governments doing enough?

RL: I don't have faith in government to solve any of these problems.They put policies in place that may shift the way the game is played, but I wouldn't really trust any company that has a heavy dependency on the government. They might react to consumers, but they are more of a trailing player in this space.

JK: That's intersting. We've seen that relying on imported goods and services has led to supply chain bottlenecks before, as it happened with chips and semiconductors. Whose to say our food supply chain isn't next? For you Rob, when evaluating companies for investment, how do you think about that from a cross border standpoint for like what we grow here and what is importaed, what is considered a net import?

RL: The U.S. is one of the biggest growers, but the cost of producing goods is one of the major challenges facing food and AG tech.

JK: You mentioned there being a list of things you look out for when potentially investing in a company. What makes a great deal for Rob?

RL: I have a background in deep tech, so I tend to gravitate more towards founders with great technical expertise. However, sometimes we come across companies who seem regular are pedestrian, but their founder and team have the ability to bring the concept to life and take you into the future of what things look like with them.

JK: We love hearing that, since we spend a lot of time telling the stories of founders ourselves. How has your media channel and number of subscribers played to your benefit?

RL: When we started, we initially started reaching out to Tech Crunch with ideas. They shot us down, so we decided to run with the ball. Our media team has its own complete organization, and they have complete autonomy to function as they see fit. It does help when trying to create relationships with investors or potential employees.

JK: So are you starting to see feedback from your readership or from the people that are sort of in the ad funder ecosystem to have more interest in food tech and ad tech is the sort of interest in this growing and why is that?

RL: Yeah, you know, we I think our audience in some ways is getting bigger and broader and you know, articles, certain types of articles will just get shared around. Our media team is really good at keeping us in the loop on the things that they're seeing. So we sync up with them. And they often refer a portfolio company because they're talking to startups and investors all the time.

JK: Let's chat company building for a couple of minutes here. What do you think is the biggest thing that founders maybe overlooked or underestimated when they are building a business in sort of food tech or ag tech broadly?

RL: Yeah, so I mean, there's there's probably a lot of things they overlooked and also a lot of things that VCs overlooks, I don't want to just put founders into the bucket. I think we all come in really, you know, with, with rose colored glasses, and then reality hits us in the face. To hear a founder say like, look, the minimum we can raise a Series A is 50 million. I'm like, you know, like, I think you can probably build a company for less than than 50 million on the series A and you're not thinking creatively enough and you're thinking you're really you're maybe your ambitions are a little too high and you're, you're overestimating what you can probably accomplish and so how can we break that down into sort of some more manageable steps? And it helps to kind of put your NBA hat on and say, Look, does this actually make sense? And so, I think we turned down a lot of opportunities just because they're going to be big enough for us. And they are not going to have the right return profile. I think founders are very influenced by what they see on TechCrunch and others and there's a huge selection bias that you know, there and, and that's often not and even then it's always kind of framed really nicely. And so, and so up, but they'll anchor on those and I don't think that that's necessarily a good thing. I think they can miss calibrated funding sizes and what they should be doing and where they should make ends meet themselves.

JK: I'm glad you brought that up about the selection bias because it's like, look, your PR should accomplish a goal right? Every time I meet a founder that wants PR that doesn't want it to attract new employees, funding, or customers in the immediacy, it's like well, then, like, we don't have anything to talk about right now. I'm glad you mentioned that. It's like don't worry about the selection bias as you know, first-time founder in the space. Do you have a goal to go do some kind of precedent announcement? If you don't, let's get back to building companies. Right. Ultimately, I'm sure you guys turn away stories on the media side as well for similar reasons. Yeah. On the point about building in the world of atoms versus bits, taking a little bit longer does that change how you think about your time horizon and the stages that you invest that talk a little bit about sort of where you come in and then how long you stay with those companies?

RL: Yeah, I mean, you know, we stretch our funds is tenure venture capital funds just like everybody else that you know, the two one-year extensions. We do have to think about like, what, what does that funding look like? I think our space ends up carrying a lot more financial risk than, you know, a pure software play where we know that there's a whole bunch of generalist investors dedicated to that kind of investing in those spaces. Investing in the world of atoms. You know, I think it was Paul Graham who talked about things being a slog, and you got to go and go through the slog. But a slog is a moat, right? And when you're working in the world of atoms, and you got to go through the problems, to learn from them, you know, revise your system and algorithms right? It means it's really hard for somebody to jump in and take over, particularly something like, you know, robotics is an example right there where, where you really do need that feedback, that environmental feedback loop and all the data labeling and you only get that by going out in the field and doing it that once you're three or four years in, it's gonna be really difficult for anybody to catch up because they have to go and do the slog. Now, you know, I think most VCs, though, are still a little hesitant to invest in hardware and in the world of atoms. I think the value accrues later on.

JK: Well, that's your moat, right. Your willingness to take that SLOG and be in those companies longer and you know, that's your moat against the traditional software VCs. I mean, we see that right? I mean, I think about companies that would traditionally raise a Series A or Series B from a specialist investor, at least last year had the likes of Tiger and Cotu. Competing for those same rounds. Now as the tide washes out, we'll kind of see who's who's still there. And backing those companies. Do you have a perspective on sort of what makes for a good lead for a food and ag tech, you know, founder when they're looking to put together their round? What should they be looking for in a lead investor?

RL: Yeah, I mean, look, and maybe I'm maybe I'm old school. You know, I, again, I think our space carries a lot of financing risk. I think the role of VC is often curative. I have a pessimistic view of venture capital. And so and when I talked to lots and lots of founders who have, you know, great firms on their cap table, you know, I don't necessarily get the sense that those firms are adding tremendous value, right. So so that the founder is largely responsible for getting things done right. You know, when you have a Sequoia, Andreessen coming in early that company, you take away a lot, a lot of financing risk, you know, when you do that, and so, I think those tend to be if you're looking at some of the biggest exits in the space, they tend to have been backed by you know, top tier Silicon Valley firms and I don't think that's an accident. I think there's, there are critical moments in time where a VC can be helpful to a founder, but you know, founders should realize that, like, they know best, they're spending 5060 7080 hours a week on a company thinking about it. So you gotta be aware of that.

JK: ya know, very, very fair. I guess where we'll close then, is knowing what you know now, and this is sort of more of a perspective for you as an investor, knowing what you know now about investing in this category. What is some advice that you wish you could give your younger self?

RL: Geez, that's a tough question. I think there's something that I picked up a couple of years ago, really thinking about how to craft that and really be comfortable with the decision that you make.

JK: intellectual honesty is one of the hardest parts of this job, man. I'm 100% with you, what, seven, eight years into my investing career to go back and be like, you know, I think I had it right. But I know that luck was also involved. It's very hard to like, almost take it away from yourself a little bit and say, Yeah, you had some of the puzzle pieces, but you also got lucky and I think a lot of folks in our business, refuse to sort of go that that second step and realize that you know, sometimes, also bad luck plays into it right. You might have had all the pieces right in the market when you invest it, but there was bad luck that played into that company or sort of what happened with them. And so I absolutely I subscribe to that wholeheartedly. Well, Rob, I think we'll close there, man, this was fantastic. I think the biggest thing that that I'm really taking away here is that, you know, food and agricultural supply chains need to be talked about in the broader scheme of how climate change is impacting really every aspect of our life. But then I think for founders, specifically building in this category, finding investors that are willing to be patient with them, finding investors that are willing to take on some of that financing risk, and just aligning your long-term outlook with an investor's long term outlook because there are investors that, especially in the last couple of years have been really eager about some quick hits. And you and I've been around this business long enough to know that like, it's a there's a reason to fund as a 10-year life for it. You have to be willing to commit that long. So that's sort of my biggest takeaway here. Rob, thank you so much for joining us. Is there anything that you would like to plug or somewhere that our listeners can come and find you?

RL: I mean, you can always see our portfolio at onehundred.com. And we've got we've invested some great companies in J. Hopefully we have an opportunity to work together.

JK: I'm very much looking forward to that. Rob, thank you so much for your time today.