TRANSKRIP 🔗
WEBVTT
1
00:00:07.360 --> 00:00:10.480
It's interesting, you know, ten years ago, trying to get
2
00:00:10.480 --> 00:00:13.839
people to invest into food and food systems was near impossible.
3
00:00:14.240 --> 00:00:16.320
You know, the returns were low two to three percent.
4
00:00:16.839 --> 00:00:19.039
Of course everyone back then was looking at their mining
5
00:00:19.079 --> 00:00:21.800
stock returns. But there seems have been a lens put
6
00:00:21.800 --> 00:00:24.879
on it, as you've mentioned over the last well since COVID,
7
00:00:24.960 --> 00:00:28.199
especially around you know, and there's some buzzwords here right,
8
00:00:28.440 --> 00:00:32.719
sovereignty and food security and national security. But it's not
9
00:00:32.840 --> 00:00:34.640
until we've spoken about this in the past. It's not
10
00:00:34.719 --> 00:00:37.840
until people can't get their either their their finished product
11
00:00:37.920 --> 00:00:41.880
on the shelves or their cauliflowers or or whatever in
12
00:00:41.880 --> 00:00:45.159
the green grocery aisle that they realize that there's a challenge.
13
00:00:45.759 --> 00:00:50.320
And I think that the advent of obviously food technology
14
00:00:51.759 --> 00:00:54.439
is over the last ten years, especially in Australia, has
15
00:00:54.479 --> 00:00:58.399
made food of very and food systems very attractive to
16
00:00:58.479 --> 00:01:00.799
invest in. And there seems to all be a bit
17
00:01:00.799 --> 00:01:04.560
of that nationalistic pride driving that too. I'd love to
18
00:01:04.560 --> 00:01:05.400
get your thoughts there.
19
00:01:07.280 --> 00:01:09.599
I think we should be very proud of the food
20
00:01:09.599 --> 00:01:13.439
system that we have in Australia. The Syro study a
21
00:01:13.439 --> 00:01:18.239
few years ago came out with a measure that Australia's
22
00:01:18.239 --> 00:01:23.120
food system feeds over seventy five million miles. We are
23
00:01:23.120 --> 00:01:27.799
inherently an exportination for our primary industries. We are well
24
00:01:27.799 --> 00:01:34.439
regarded for being clean, green, sustainable, and most importantly of quality.
25
00:01:35.120 --> 00:01:40.079
And as someone who gets the privilege of facing this
26
00:01:40.159 --> 00:01:43.640
every day in the supermarket when there is without the
27
00:01:43.680 --> 00:01:47.319
constraints in the supply chain, I think we sometimes forget
28
00:01:47.359 --> 00:01:51.879
to appreciate how magical our food system is, and so
29
00:01:52.000 --> 00:01:54.959
the question is how do we make it more, How
30
00:01:55.000 --> 00:01:58.319
do we increase productivity, how do we support the full
31
00:01:58.359 --> 00:02:00.719
supply chain, How do we make sure or that there
32
00:02:00.760 --> 00:02:03.840
remains high degree of profitability so that we have an
33
00:02:03.879 --> 00:02:08.960
ongoing sustainable food system around us. One thing that Mark
34
00:02:09.000 --> 00:02:13.159
and I constantly discuss is I think everyone understands that
35
00:02:13.599 --> 00:02:16.280
food is important because we all need to eat. But
36
00:02:16.439 --> 00:02:19.599
getting the private sector to part ways with their own
37
00:02:19.599 --> 00:02:22.599
capital to invest in the ecosystem has been very challenging.
38
00:02:23.280 --> 00:02:28.719
We've been across not only Australia but globally food systems.
39
00:02:29.000 --> 00:02:33.520
Food ecosystems have been predominantly supported by policy level or
40
00:02:33.560 --> 00:02:39.240
through development banks and financiers. It is very challenging to
41
00:02:39.280 --> 00:02:43.000
put an investment opportunity in our food system next to
42
00:02:43.680 --> 00:02:48.000
some of these more attractive financial returning and dividend paying
43
00:02:48.759 --> 00:02:52.400
assets and investment opportunities, and it's been a real challenge
44
00:02:52.919 --> 00:02:56.719
for us. We wish, we know that we can deploy
45
00:02:56.800 --> 00:03:00.639
so much more capital into the future of our food systems,
46
00:03:01.199 --> 00:03:05.319
but it's been very, very challenging to convince not just
47
00:03:05.360 --> 00:03:07.319
the every day investor in the high net worths, but
48
00:03:08.039 --> 00:03:10.879
through to the institutional investors on why this is a
49
00:03:10.879 --> 00:03:16.599
strategic investment opportunity which they must allocate into. And so
50
00:03:16.680 --> 00:03:21.240
it's something that we we advocate for every day and
51
00:03:21.639 --> 00:03:25.280
it feels like the investor conversations that we have not
52
00:03:25.319 --> 00:03:28.639
only just in Australia but globally, most of the work
53
00:03:28.719 --> 00:03:31.719
is actually an education around why this is such an
54
00:03:31.759 --> 00:03:37.159
amazing opportunity, let alone the obligations to society and.
55
00:03:37.479 --> 00:03:41.240
Talking about you know, other other companies that you guys
56
00:03:41.560 --> 00:03:45.840
have backed and in this exact frame as well, around
57
00:03:46.520 --> 00:03:51.680
protein food security harvest B it's a plant protein and
58
00:03:51.960 --> 00:03:56.520
the category has a credibility problem over time, you know
59
00:03:56.599 --> 00:03:59.879
beyond meads. Share price tells that story, but harvest BE
60
00:04:00.639 --> 00:04:03.639
isn't playing the same game, is it? Mark maybe you
61
00:04:03.639 --> 00:04:05.560
could tell me, or Tim, because you've got a lot
62
00:04:05.560 --> 00:04:07.039
more to do with the company, I guess, but maybe
63
00:04:07.039 --> 00:04:09.719
you could tell me what they're actually doing differently and
64
00:04:09.759 --> 00:04:10.599
why that matters.
65
00:04:12.479 --> 00:04:17.519
Yeah. So Harvest by our investment thesis and behind the company,
66
00:04:18.000 --> 00:04:22.160
really started around what is the market acceptance for future
67
00:04:22.199 --> 00:04:26.759
protein systems and looking at it not just around
Load full transcript
plant
68
00:04:26.800 --> 00:04:30.480
based proteins or any of the climate imperatives. Is about
69
00:04:30.759 --> 00:04:33.839
what is the number one inhibitor for us to diversify
70
00:04:33.959 --> 00:04:38.639
protein options for the consumer and for the market. And
71
00:04:39.040 --> 00:04:43.000
ultimately what that led to is two driving factors. Firstly,
72
00:04:43.240 --> 00:04:48.160
it's texture and texture has been one aspect which I
73
00:04:48.199 --> 00:04:52.560
think every future protein solution has been trying to work on,
74
00:04:52.680 --> 00:04:57.759
and what we believed was harvest B's texture was is
75
00:04:58.079 --> 00:05:04.079
the market leading solution, an option and market Secondly, is
76
00:05:04.439 --> 00:05:07.000
what is in the food, which really comes back to
77
00:05:07.480 --> 00:05:13.360
the provocation that opens this whole discussion. Today we having
78
00:05:13.399 --> 00:05:18.720
a clean label where Harvest b has somewhere around a
79
00:05:18.800 --> 00:05:21.360
dozen ingredients rather than if you look at the back
80
00:05:21.399 --> 00:05:24.399
of the label of some of the other alternative protein
81
00:05:26.160 --> 00:05:29.879
solutions in market. Is a clean label's really critical to
82
00:05:30.160 --> 00:05:32.399
so that we can ensure that we provide a hard
83
00:05:32.439 --> 00:05:36.920
degree of nutrition without putting all the additional additives into
84
00:05:36.959 --> 00:05:42.959
it to make it feel and taste like a animal
85
00:05:42.959 --> 00:05:47.680
protein solution. And so, for us, advancing the food system
86
00:05:48.160 --> 00:05:51.319
is very much around finding not only just the great
87
00:05:51.360 --> 00:05:53.720
products in market, but the innovators who've been able to
88
00:05:53.720 --> 00:05:57.800
pivot and find that market product market fits. And so
89
00:05:57.879 --> 00:06:02.439
for harvest B is an exceptional team and they've gone
90
00:06:02.439 --> 00:06:10.519
through a range of various formats, integrations, applications, and integration
91
00:06:10.680 --> 00:06:13.399
trials with a range of customers to really try to
92
00:06:13.439 --> 00:06:19.480
find how do we materially advance the protein ecosystem that
93
00:06:19.519 --> 00:06:22.360
we have available to us. And then secondly to that
94
00:06:22.759 --> 00:06:24.839
is how do we do that in a sustainable manner,
95
00:06:25.160 --> 00:06:28.639
predominantly on the basis that we need to feed a
96
00:06:28.680 --> 00:06:32.000
growing population and the food system is not the current
97
00:06:32.000 --> 00:06:34.120
food system is not going to be able to achieve
98
00:06:34.160 --> 00:06:35.399
that in itself.
99
00:06:35.319 --> 00:06:39.560
And harvest B is complementary, it's not a replacement. So Mark,
100
00:06:40.079 --> 00:06:42.680
why did this look investible? You know, when the category
101
00:06:42.800 --> 00:06:44.519
narrative seemed to be collapsing.
102
00:06:46.199 --> 00:06:47.720
It's a very good question. One of the things we
103
00:06:47.839 --> 00:06:50.920
really liked about harvest B wasn't necessarily just the fact
104
00:06:50.959 --> 00:06:54.639
that they're producing an amazing texturized protein that essentially can
105
00:06:54.680 --> 00:06:57.879
replicate the mouth feel and the palette feel of traditional
106
00:06:57.879 --> 00:07:02.120
based animal proteins. But they're also not of the opinion
107
00:07:02.199 --> 00:07:05.399
that it's either animal or plant, which a lot of
108
00:07:05.519 --> 00:07:08.040
I think the other alternative protein that have come to
109
00:07:08.120 --> 00:07:12.240
market have divided the market. On harvest B's focus is
110
00:07:12.360 --> 00:07:15.519
very much around increasing the protein availability across the whole
111
00:07:15.519 --> 00:07:18.439
of the food system, now that includes animal and plant.
112
00:07:18.519 --> 00:07:21.040
But what they're doing that's very very interesting is they're
113
00:07:21.040 --> 00:07:25.639
actually blending their texturized plant based proteins with animal proteins.
114
00:07:26.000 --> 00:07:28.759
And so if you think about a suv or think
115
00:07:28.800 --> 00:07:32.000
about age care defense, how you might how you might
116
00:07:32.000 --> 00:07:35.240
actually cook at a commercial scale, blending the harvest bee
117
00:07:35.279 --> 00:07:38.720
proteins in with animal proteins at the same time does
118
00:07:38.759 --> 00:07:41.399
a number of things. It reduces the actual cost of
119
00:07:41.439 --> 00:07:44.480
the protein consumption for the user by I think tim
120
00:07:44.480 --> 00:07:47.480
can correct me by twenty five or thirty percent. It
121
00:07:47.560 --> 00:07:51.800
increases the fiber content and it actually increases the protein
122
00:07:51.839 --> 00:07:54.360
content as well. So when you actually blend together both
123
00:07:54.399 --> 00:07:57.560
animal plant based proteins, you're getting a much more nutritious
124
00:07:57.560 --> 00:08:00.480
food system at a cheaper cost. That's more accessible to all.
125
00:08:01.040 --> 00:08:03.759
And so where you see a lot of the other
126
00:08:03.920 --> 00:08:07.360
plant based protein companies saying meat is bad, Harvest B's
127
00:08:07.399 --> 00:08:09.439
these this is very much rained. Well, let's increase the
128
00:08:09.439 --> 00:08:12.800
availability of the protein stack across the whole of the
129
00:08:12.800 --> 00:08:18.079
food system that's going to benefit consumers around the board,
130
00:08:18.079 --> 00:08:22.839
and that includes things like aged care, defense, school, school mills,
131
00:08:22.920 --> 00:08:26.120
and others. And so that's something that's uniquely different about
132
00:08:26.120 --> 00:08:28.480
the strategic positioning of Harvest B versus some of the
133
00:08:28.519 --> 00:08:29.879
other plant based protein companies.
134
00:08:29.879 --> 00:08:31.879
And as you mentioned earlier
too, you're drawing that line
135
00:08:31.879 --> 00:08:35.919
from Hanoi down to Jakata others. How many people make.
136
00:08:36.480 --> 00:08:39.320
It's seven hundred millions people that represent the fastest growing
137
00:08:39.320 --> 00:08:40.440
middle class on the plane.
138
00:08:40.240 --> 00:08:44.000
Seven hundred million. So places like Indonesia where the president
139
00:08:44.679 --> 00:08:47.840
is boarding programs trying to feed school children at least
140
00:08:47.840 --> 00:08:51.000
once a day, something like Harvest B would be a
141
00:08:51.000 --> 00:08:51.679
game changer.
142
00:08:52.519 --> 00:08:56.039
Yes, absolutely, And you know the technology that's come through
143
00:08:56.080 --> 00:08:59.799
Harvest B that allows for these sorts of these sorts
144
00:08:59.840 --> 00:09:02.919
of of food product to be produced and also transferable
145
00:09:02.960 --> 00:09:05.000
because they can come dehydrated, which means you don't need
146
00:09:05.000 --> 00:09:08.440
cold chain. That's incredibly important across regions like Indonesia where
147
00:09:08.440 --> 00:09:11.360
you've got challenges with infrastructure and hub and spoke models.
148
00:09:11.679 --> 00:09:14.200
So yeah, harvest b solution is incredibly important, and it
149
00:09:14.200 --> 00:09:19.080
can be transported, it's light, it can be blended with
150
00:09:19.120 --> 00:09:22.559
animal proteins or a communised by itself, and that Indonesian
151
00:09:22.559 --> 00:09:25.279
example of the getting every child one million day is
152
00:09:25.320 --> 00:09:28.039
a perfect example of why these companies are incredibly important.
153
00:09:28.639 --> 00:09:32.919
So jens I guess, overall, what does the operational reality
154
00:09:32.960 --> 00:09:37.279
of scaling a food manufacturing business in Australia actually look
155
00:09:37.440 --> 00:09:40.200
like today?
156
00:09:41.519 --> 00:09:43.799
That's a really good question. We are working with a
157
00:09:43.840 --> 00:09:46.960
company at the moment that we've recently invested in which
158
00:09:47.000 --> 00:09:49.600
is actually in the fiber space, Todd and a new
159
00:09:49.679 --> 00:09:53.759
type of fiber that essentially would be used to replace
160
00:09:53.799 --> 00:09:58.240
inulin but also to increase and benefit things like gut
161
00:09:58.240 --> 00:10:02.799
Biome Indland is one of the one of the fibers
162
00:10:02.799 --> 00:10:07.200
currently used in the baking industry and also in the
163
00:10:07.240 --> 00:10:12.840
cereals and museley bar industry as a fiber component. There
164
00:10:12.879 --> 00:10:17.039
are better alternatives available now, with companies like health Food
165
00:10:17.080 --> 00:10:20.879
Symmetry that create their fiber product being trilled now by
166
00:10:20.919 --> 00:10:25.279
a number of food ingredients companies now to work with
167
00:10:25.399 --> 00:10:27.840
them and to get them into our food systems. As
168
00:10:27.879
--> 00:10:30.440
Tim mentioned earlier, does take time. It takes about twelve
169
00:10:30.440 --> 00:10:33.879
to fifteen sixteen months to actually do the trialing and testing,
170
00:10:33.960 --> 00:10:36.759
and that's got to be with then large manufacturers the
171
00:10:36.759 --> 00:10:38.799
food products you can name any of them, you know
172
00:10:39.159 --> 00:10:42.440
that produce breakfast cereals, musuly bars and others. So getting
173
00:10:42.440 --> 00:10:45.399
those trials trials in there takes time and requires a
174
00:10:45.480 --> 00:10:48.919
champion on both sides, both within the startup company but
175
00:10:48.960 --> 00:10:52.759
also within the food ingredients company. And then once that's done,
176
00:10:52.799 --> 00:10:56.159
making sure that the recipes fit, that they can scale efficiently,
177
00:10:56.200 --> 00:10:59.960
they can produce enough product and material for large national
178
00:11:00.039 --> 00:11:03.399
and international markets. And then most importantly, the unit metrics
179
00:11:03.399 --> 00:11:05.399
makes sense, so that's the cost of the product that
180
00:11:05.440 --> 00:11:07.519
it might be replacing. And so these are also the
181
00:11:07.600 --> 00:11:10.080
sorts of challenges and opportunities that we work closely with
182
00:11:10.120 --> 00:11:12.600
the companies that we invest in in to solve, and
183
00:11:12.639 --> 00:11:16.799
also then creating those institutional relationships and contacts for those
184
00:11:16.799 --> 00:11:20.279
companies to actually start to do pilot scull production that
185
00:11:20.320 --> 00:11:22.799
will then lead to large commercial scale opportunities.
186
00:11:23.000 --> 00:11:27.000
Conventional wisdom says that you know traditional foods have had
187
00:11:27.039 --> 00:11:30.039
their moment and the markets moved on. But harvest be
188
00:11:30.360 --> 00:11:34.559
full Foods, Embryo and the other companies you've you've mentioned,
189
00:11:34.600 --> 00:11:39.720
they've you know, they make the case that conventional wisdom's wrong. Mark,
190
00:11:40.679 --> 00:11:44.080
do you see the capital you know, you see the
191
00:11:44.120 --> 00:11:47.799
capital cases for these three companies, and Tim, you see
192
00:11:47.840 --> 00:11:50.840
the operational reality? Can you walk me through the last
193
00:11:50.879 --> 00:11:55.399
time you landed in genuinely different places on something and
194
00:11:55.799 --> 00:11:56.559
what resolved it.
195
00:11:58.519 --> 00:12:01.279
I think Tim and I probably spent the life we've
196
00:12:01.279 --> 00:12:03.399
been working together for over a decade and certainly spent
197
00:12:03.440 --> 00:12:06.679
the last six years deeply embedded within the food system.
198
00:12:06.799 --> 00:12:09.960
So our views and the thesis that we've built around
199
00:12:10.000 --> 00:12:12.840
Mandlay are very much united in that in where we
200
00:12:12.879 --> 00:12:16.480
see the opportunities. I think one of the areas that
201
00:12:16.600 --> 00:12:20.720
has been challenging because of the lack of knowledge is
202
00:12:20.720 --> 00:12:24.240
that investing in the AG and the food category actually
203
00:12:24.279 --> 00:12:28.240
can provide significant investor returns and higher returns than a
204
00:12:28.240 --> 00:12:31.559
lot of the traditional venture venture categories, which might be
205
00:12:31.600 --> 00:12:34.440
like B to B SaaS. So when we invest in
206
00:12:34.440 --> 00:12:38.080
a company, we work with them closely, we support them
207
00:12:38.120 --> 00:12:41.000
through other follow on investments. We introduce a lot of
208
00:12:41.120 --> 00:12:45.320
other capital and institutional investors and strategics coming in is
209
00:12:45.320 --> 00:12:48.240
that we can fast track them to an exit opportunity. Now,
210
00:12:48.279 --> 00:12:51.639
an exit opportunity from a venture perspectives, where there's either
211
00:12:51.639 --> 00:12:53.679
a secondary market or a trade sale that allows for
212
00:12:53.720 --> 00:12:57.200
that original principle to be returned to the investors with
213
00:12:57.440 --> 00:13:01.519
the profit as well. We know, having invested now in
214
00:13:01.559 --> 00:13:04.919
the category for close to a decade that when managed properly,
215
00:13:05.000 --> 00:13:09.120
that this category does provide top quartle return So you know,
216
00:13:09.320 --> 00:13:12.960
very very top level returns in comparison to a lot
217
00:13:12.960 --> 00:13:16.559
of the traditional venture venture industry verticals as well. But
218
00:13:16.639 --> 00:13:20.039
there are very few that have the detailed, detailed domain
219
00:13:20.120 --> 00:13:23.519
expertise to work with in diligence companies like the ones
220
00:13:23.559 --> 00:13:26.200
we invest in, because it takes a very very broad
221
00:13:26.279 --> 00:13:30.320
knowledge of food systems everything from on farm animal genetics
222
00:13:30.360 --> 00:13:33.360
right through to restaurants SaaS and so it does take
223
00:13:33.480 --> 00:13:36.320
a very broad knowledge and understanding of the system and
224
00:13:36.320 --> 00:13:39.240
the ecosystem that we operate within. And the other thing
225
00:13:39.279 --> 00:13:41.759
on top of that, Todd is that across the systems
226
00:13:41.759 --> 00:13:43.480
that we work with and the companies we invest in,
227
00:13:43.759 --> 00:13:45.919
we know that mid market exits. That's two hundred to
228
00:13:45.960 --> 00:13:48.320
six hundred million dollar exits are roughly where we land
229
00:13:48.840 --> 00:13:52.559
with food companies, feed ingredients and agricultural companies. So we're
230
00:13:52.559 --> 00:13:55.639
not necessarily unicorn hunting in it. And what that means
231
00:13:55.679 --> 00:13:57.399
is not looking for that one company that's going to
232
00:13:57.440 --> 00:13:59.679
do one hundred x and that returns everything for a fund.
233
00:14:00.080 -->
00:14:02.919
It's amortizing and averaging that across a portfolio where we
234
00:14:03.000 --> 00:14:06.000
know there are active mid market exits to provide top
235
00:14:06.080 --> 00:14:10.120
quartal returns for our own investors, but also allows us
236
00:14:10.159 --> 00:14:12.039
to grow the companies to scale where we know there's
237
00:14:12.080 --> 00:14:16.200
an opportunity for founders, investors and strategics to come in
238
00:14:16.360 --> 00:14:18.799
and helps grow and scale beyond a certain point in time.
239
00:14:18.879 --> 00:14:22.080
So Tim Marks has given me the pr version, Mate,
240
00:14:22.120 --> 00:14:24.480
give me, give me some reality. When you two disagreed
241
00:14:24.519 --> 00:14:28.360
on something and how you solved it, was it paper scissors?
242
00:14:28.399 --> 00:14:30.039
Was it a bit of a punch on in Kelvin Grove?
243
00:14:30.240 --> 00:14:30.759
What we're on.
244
00:14:32.200 --> 00:14:34.720
I think I get a fair share of stinki from
245
00:14:34.720 --> 00:14:38.320
the Mark when I talk about opportunities across our desk,
246
00:14:39.440 --> 00:14:41.240
and I think the most critical thing is not to
247
00:14:41.440 --> 00:14:45.159
come with our own prequency assumptions of where the industry
248
00:14:45.480 --> 00:14:50.080
is at all not and that for us, discipline is
249
00:14:50.080 --> 00:14:53.120
not just about taking our time and being considerate about
250
00:14:53.120 --> 00:14:57.679
our investments. But really I think what unites Mark and
251
00:14:57.759 --> 00:15:01.879
myself is we both come from a engineering or scientific background,
252
00:15:02.679 --> 00:15:05.200
and that first principle approach is how we look at
253
00:15:05.240 --> 00:15:09.360
our investments, even though we act in a more you know,
254
00:15:09.480 --> 00:15:14.120
non scientific environment sometimes and particularly an investment where there's nonlinear.
255
00:15:15.360 --> 00:15:18.360
But what I do want to highlight is Mark and
256
00:15:18.399 --> 00:15:22.320
I are not two gentlemens who are farmers by background,
257
00:15:22.720 --> 00:15:25.679
and so for us to come in to ag and
258
00:15:25.759 --> 00:15:28.440
food and talk about what is the future and where
259
00:15:28.440 --> 00:15:32.320
the innovation is is something which is not fitting to
260
00:15:32.399 --> 00:15:35.679
be frank And so how do we solve this as
261
00:15:35.720 --> 00:15:40.960
an industry or thematically focused fund manager is to really
262
00:15:41.080 --> 00:15:44.200
lean on our networks and industry partners to give us
263
00:15:44.240 --> 00:15:47.720
the feedback and insight to what is the actual needs
264
00:15:47.720 --> 00:15:50.879
and demands to market. And trust me, Mark and I
265
00:15:50.960 --> 00:15:54.360
have walked into hearing a first time pitch and walking
266
00:15:54.360 --> 00:15:57.519
away with our own assumptions of what the challenges are
267
00:15:57.600 --> 00:16:01.320
in the commercialization journey ahead, only to be proven wrong
268
00:16:01.720 --> 00:16:05.840
consistently by the company and the founder more than between
269
00:16:05.840 --> 00:16:10.759
market and as myself between each other. That said, one
270
00:16:10.759 --> 00:16:15.200
thing that Mark and I constantly debate is around timing.
271
00:16:15.799 --> 00:16:20.919
I think we see, with no doubt we see a
272
00:16:21.080 --> 00:16:27.159
volume of amazing innovation products and then you sprink on
273
00:16:27.240 --> 00:16:31.279
top some very enthusiastic founders and it looks like a
274
00:16:31.360 --> 00:16:36.360
very sexy job. But the reality is, whilst there might
275
00:16:36.399 --> 00:16:40.279
be some great products and innovations in market, our fund
276
00:16:40.360 --> 00:16:45.320
is determined by not only just returns in absolute values,
277
00:16:45.639 --> 00:16:50.600
but also timing and funds a benchmark on an internal
278
00:16:50.639 --> 00:16:53.679
rate of return which is a function of time and
279
00:16:54.399 --> 00:16:58.919
the absolute number of cash return. And so we are
280
00:16:58.960 --> 00:17:01.759
on the clock. And as much as we want to
281
00:17:01.840 --> 00:17:06.400
back everything which is the best future of AG and food,
282
00:17:06.880 --> 00:17:09.720
the reality is we need to also get the timing right.
283
00:17:10.279 --> 00:17:13.599
And that's probably what really challenges Mark and I around
284
00:17:13.720 --> 00:17:18.680
our internal debating is what do we foresee the forward
285
00:17:18.839 --> 00:17:22.920
timing being on the commercialization and an adoption. What is
286
00:17:22.960 --> 00:17:26.400
the timing in getting the company ready or having the
287
00:17:26.480 --> 00:17:30.920
metrics for an acquisition or exit or IPO, and what
288
00:17:31.039 --> 00:17:35.279
is the timing for the broader market to have an
289
00:17:35.319 --> 00:17:41.200
appetite to acquire these companies? And so timing has been
290
00:17:41.240 --> 00:17:44.160
a real debate between us And the example I'll give
291
00:17:44.160 --> 00:17:48.440
you is the company Mark just discussed, which is health
292
00:17:48.440 --> 00:17:54.720
Food Symmetry, a advanced prebiotic fiber solution or ingredient which
293
00:17:54.759 --> 00:17:58.319
is derived from virgin sugarcane. So basically, out of sugarcane
294
00:17:58.400 --> 00:18:02.200
they remove the sugar, which is completely opposite to what
295
00:18:02.240 --> 00:18:04.960
you would generally think. But by removing the sugar and
296
00:18:05.039 --> 00:18:09.559
keeping the fiber intact, it lasts through the gut for longer,
297
00:18:09.880 --> 00:18:13.079
which means it's better for you. Now, the question we
298
00:18:13.160 --> 00:18:16.559
had to ask ourselves is, yes, this is a great product,
299
00:18:17.200 --> 00:18:20.079
Yes there is a lot of clinical trials, Yes you
300
00:18:20.079 --> 00:18:24.160
can put a claim on label, but is the time
now?
301
00:18:24.759 --> 00:18:28.200
And what that ultimately led to is a belief that
302
00:18:28.279 --> 00:18:32.079
we have gone through the protein wave as a macro
303
00:18:32.559 --> 00:18:35.279
and that the next one is going to be fiber
304
00:18:35.480 --> 00:18:40.039
as a key macro nutrient in markets. So that's timing piece.
305
00:18:40.119 --> 00:18:42.839
And then the second piece is the industry piece. And
306
00:18:42.880 --> 00:18:46.680
what really the way that we looked at it was
307
00:18:46.720 --> 00:18:50.039
we thought, very much through the lens of innovation is
308
00:18:50.039 --> 00:18:54.000
about what is the nutritional claim, what is the IP position,
309
00:18:54.160 --> 00:18:58.519
what is the operational ability to executing scale? But actually
310
00:18:58.559 --> 00:19:01.799
the question that came from industry is what is the
311
00:19:02.079 --> 00:19:07.519
functional benefit both well, fundamentally, what is the functional benefit
312
00:19:07.680 --> 00:19:11.839
to adopting and replacing my current fiber solution with this
313
00:19:11.920 --> 00:19:17.960
new innovative alternative And functionality means firstly, do I need
314
00:19:18.000 --> 00:19:20.960
to change my production line? Secondly is what is the
315
00:19:21.000 --> 00:19:25.559
impact to my formulational recipe And what ultimately got us
316
00:19:25.559 --> 00:19:29.200
over the line with this investment is the understanding that
317
00:19:29.839 --> 00:19:34.640
by using this ingredient as a fiber the fighter Biomes
318
00:19:34.880 --> 00:19:39.759
as the trade name, you're able to use less fiber
319
00:19:40.319 --> 00:19:46.079
whilst getting a more complete and better for your guard
320
00:19:46.200 --> 00:19:50.960
to nutritionally fiber solution in your product. And so for them,
321
00:19:51.480 --> 00:19:54.119
one dose each is one point five grams, and so
322
00:19:54.359 --> 00:19:58.000
even if the per kilo or per gram cost of
323
00:19:58.039 --> 00:20:01.559
fier Biome is more than injurelent, the reality is used
324
00:20:01.640 --> 00:20:04.359
less and so we're still able to achieve a price
325
00:20:04.480 --> 00:20:09.960
parity whilst also being able to was also where the
326
00:20:10.200 --> 00:20:13.759
customer does not need to change their production line to
327
00:20:13.839 --> 00:20:16.119
adopt this alternative fiber solution.
328
00:20:17.200 --> 00:20:19.720
Yeah, I might add Todd just on top of what
329
00:20:19.759 --> 00:20:22.160
Tim has said then, is that one of the reasons
330
00:20:22.160 --> 00:20:26.559
we don't really clash on investments is that we don't
331
00:20:26.559 --> 00:20:29.160
come with preconceived conception, but both Tim and I are
332
00:20:29.240 --> 00:20:32.680
very much data driven and where we're seeking to get
333
00:20:32.759 --> 00:20:35.880
validation on an opportunity to either one of us or
334
00:20:35.920 --> 00:20:38.480
both of us or the team have queries about, we
335
00:20:38.680 --> 00:20:41.400
lean into our venture partner network. Now, venture partners are
336
00:20:41.880 --> 00:20:45.319
groups with an adventure fund that actually support deal flow,
337
00:20:45.480 --> 00:20:51.119
market validation, competitor analysis, and have been operators in the
338
00:20:51.200 --> 00:20:53.559
verticals that we invest in. So we have about adventure
339
00:20:53.599 --> 00:21:01.720
partners globally including Australia, Singapore, Indonesia, the UK, France, the Luxembourg,
340
00:21:02.119 --> 00:21:05.039
and there's a few others. And these are operators who
341
00:21:05.079 --> 00:21:09.440
have either founded or worked deep within food agriculture or
342
00:21:10.359 --> 00:21:14.440
downstream companies. We lean heavily into our venture partner at
343
00:21:14.480 --> 00:21:17.519
work to support the endorsement of opportunities that we look
344
00:21:17.559 --> 00:21:20.759
to invest in, and they provide the data, analytics and
345
00:21:21.039 --> 00:21:24.079
deep market knowledge and understanding. And the reason that's important
346
00:21:24.119 --> 00:21:27.000
is because we're not vets, we're not agronomists, we haven't
347
00:21:27.039 --> 00:21:31.200
necessarily run food ingredients companies. But we have people in
348
00:21:31.279 --> 00:21:34.119
our network that are our venture partners that have and
349
00:21:34.200 --> 00:21:38.039
can provide that deep domain expertise and analysis, which is
350
00:21:38.160 --> 00:21:41.079
underpinned by data that allows us to come to the
351
00:21:41.119 --> 00:21:44.599
assumptions and the strategic thesis of investment that we do
352
00:21:44.680 --> 00:21:47.000
come to. So it's not a sit around and debate.
353
00:21:47.079 --> 00:21:50.240
It's let's use data and the people we know around
354
00:21:50.319 --> 00:21:54.720
us as points of validation for the assessments we make
355
00:21:54.799 --> 00:21:57.200
as we're thinking about any investment.
356
00:21:56.920 --> 00:21:59.839
And data is king, isn't it. It provides the insights,
357
00:22:00.039 --> 00:22:06.519
optimization and then eventually the experience should be used more
358
00:22:06.599 --> 00:22:10.319
openly gence. I want to come back to a question
359
00:22:10.400 --> 00:22:12.680
at the end of this conversation. It's the one that
360
00:22:13.039 --> 00:22:18.039
sits underneath everything we've been talking about. But first, before
361
00:22:18.079 --> 00:22:20.720
we get to that, you're both in Brisbane in June
362
00:22:20.759 --> 00:22:24.400
for Global agg invest Australia June ten to eleven Mark.
363
00:22:24.680 --> 00:22:26.519
Who should be in the room that isn't planning to
364
00:22:26.559 --> 00:22:28.839
be there and what should they be asking that they're
365
00:22:28.880 --> 00:22:29.759
not asking now?
366
00:22:30.640 --> 00:22:33.160
Yeah, so Global Like Investing is actually an interesting event.
367
00:22:33.200 --> 00:22:36.480
It's only previously been held
in New York, Tokyo and London.
368
00:22:36.920 --> 00:22:39.400
It's the first time the event itself is being held
369
00:22:39.400 --> 00:22:43.160
in the Southern Hemisphere and in Brisbane for that matter.
370
00:22:44.200 --> 00:22:46.680
The event itself was traditionally for a lot of natural
371
00:22:46.680 --> 00:22:49.079
capital providers, so those that are looking to invest across
372
00:22:49.720 --> 00:22:54.440
agricultural land and agricultural systems. But this year, and particularly
373
00:22:54.480 --> 00:22:57.279
the Brisbane event, there is a big focus on ag
374
00:22:57.319 --> 00:23:02.359
technology and technology adoptions on farm to increase productivity. So
375
00:23:02.480 --> 00:23:08.799
the event itself traditionally tends to attract institutional investors, so
376
00:23:09.319 --> 00:23:13.000
the large corporates, large super funds and others that invest
377
00:23:13.039 --> 00:23:16.680
in land assets, as well as high net worth individuals
378
00:23:17.519 --> 00:23:21.039
and those that actually work within the corporates in that space.
379
00:23:21.440 --> 00:23:23.160
This year, I think there's going to be much more
380
00:23:23.200 --> 00:23:26.319
of a focus on the technology companies that help drive
381
00:23:26.319 --> 00:23:30.079
and underpin food production and productivity. So if you're an
382
00:23:30.160 --> 00:23:32.839
investor or an angel, if you work within the food
383
00:23:32.880 --> 00:23:37.000
systems or the food manufacturing supply chains, or if you're
384
00:23:37.480 --> 00:23:42.559
associated with natural capital and investing across natural capital that's there.
385
00:23:42.759 --> 00:23:44.519
That's the sort of audience that is going to be
386
00:23:44.519 --> 00:23:47.400
attracted to Global Egg Investing. It's exciting to say that
387
00:23:47.440 --> 00:23:48.920
it is the first time it's been held in the
388
00:23:48.960 --> 00:23:52.240
Southern Hemisphere and so I think there's a really interesting
389
00:23:52.279 --> 00:23:54.519
opportunity for Australia to put its hand up to say
390
00:23:54.920 --> 00:23:59.319
we are world leaders in food innovation, agricultural production, and
391
00:23:59.359 --> 00:24:02.759
if you think about the whole of the Australian geography,
392
00:24:03.079 --> 00:24:07.720
we actually represent almost every growing geography across the world.
393
00:24:07.799 --> 00:24:11.200
So we have tropical, we have cold climate, temperate, we
394
00:24:11.240 --> 00:24:16.079
have subtropical, and we have intermediate agricultural zones. So whether
395
00:24:16.079 --> 00:24:20.279
you're comparing us to areas of North America, the southern
396
00:24:20.279 --> 00:24:24.480
parts of the US, Brazil, Argentina, the Middle East and
397
00:24:24.559 --> 00:24:27.599
parts of Asia, the technologies that we actually produce in
398
00:24:27.640 --> 00:24:31.160
Australia have the relevance across all of those jurisdictions and
399
00:24:31.200 --> 00:24:33.079
that's something that we need to become a lot more
400
00:24:33.359 --> 00:24:36.799
vocal about and a lot more supportive of across our
401
00:24:36.799 --> 00:24:38.000
own investment landscape.
402
00:24:38.119 --> 00:24:40.720
We'll be there, looking forward to seeing you guys there too.
403
00:24:41.720 --> 00:24:44.000
But the question I said I'd come back to earlier,
404
00:24:45.160 --> 00:24:48.440
who controls the technology that feeds the next billion people?
405
00:24:49.200 --> 00:24:51.279
And what does Australia have to do in the next
406
00:24:51.359 --> 00:24:55.319
five years to make sure the answer isn't not us?
407
00:24:55.920 --> 00:24:57.720
Mark you first, then Tim.
408
00:24:58.640 --> 00:25:00.599
So I think in Australia we have an in credible
409
00:25:00.960 --> 00:25:06.680
research and development base. We have very unique systems and
410
00:25:06.720 --> 00:25:10.799
financial systems around our growing industry, having levees that might
411
00:25:10.839 --> 00:25:14.599
go to various levy groups like Horticulture Australia or groups
412
00:25:14.599 --> 00:25:18.000
like Agriculture Victoria's Services, and there are levy bodies across
413
00:25:18.039 --> 00:25:21.000
all of the major industry groups. Now a percentage of
414
00:25:21.039 --> 00:25:23.359
the levees that come out of those levy bodies go
415
00:25:23.480 --> 00:25:26.640
back into research and development for the innovation. Australia has
416
00:25:26.640 --> 00:25:29.680
some of the best R and D and innovation coming
417
00:25:29.720 --> 00:25:31.599
out of anywhere in the world when it comes to
418
00:25:32.359 --> 00:25:35.400
the horticultural and agricultural food systems that we work in.
419
00:25:35.960 --> 00:25:39.359
Where we fall over is the follow on investment required
420
00:25:39.400 --> 00:25:43.000
to take that capital or to take those opportunities, capitalize
421
00:25:43.000 --> 00:25:45.839
them appropriately to grow into global markets. Where we don't
422
00:25:45.839 --> 00:25:49.079
do that, we lose them. And a concern that we have,
423
00:25:49.359 --> 00:25:53.359
both Tim and I have, is that if investment in
424
00:25:53.799 --> 00:25:58.200
the technology and the food systems and agricultural area is disincentivized,
425
00:25:58.400 --> 00:26:02.119
and that could be through anything from the increasing capital
426
00:26:02.200 --> 00:26:06.519
gains for investors right through to duties and taxes involved
427
00:26:06.519 --> 00:26:09.319
in land tax, we lose these opportunities to global markets.
428
00:26:09.680 --> 00:26:15.839
Australia itself is fairly behind much of the rest of
429
00:26:15.839 --> 00:26:19.640
the world when it comes to financial innovation, across our
430
00:26:19.880 --> 00:26:23.240
systems that support food and agriculture, and so that's an
431
00:26:23.319 --> 00:26:25.359
area where we really need to lift our game is
432
00:26:25.960 --> 00:26:28.440
for our banks to become more innovative and more supportive
433
00:26:29.039 --> 00:26:33.039
of fast growing companies in the space. And that could
434
00:26:33.039 --> 00:26:37.160
be through everything from things like trade financing opportunities, credit
435
00:26:37.200 --> 00:26:42.079
lines not necessarily directly associated with securing land asset as principal,
436
00:26:42.519 --> 00:26:47.759
and others. So our innovation across our financial institutions needs
437
00:26:47.759 --> 00:26:52.000
to become much more aggressive and much more thoughtful so
438
00:26:52.000 --> 00:26:55.079
that we don't continue to lose opportunities to foreign markets.
439
00:26:55.200 --> 00:26:56.880
Tim, I'm going to throw to you, but I'm going
440
00:26:56.920 --> 00:26:58.640
to give you a little bit more of a challenge
441
00:26:59.079 --> 00:27:00.519
sum it up in one's for.
442
00:27:00.519 --> 00:27:08.000
Me, I love to think that Australians are an ecosystem
443
00:27:08.160 --> 00:27:12.880
and population of early adopters, and so my single line
444
00:27:13.160 --> 00:27:18.119
is everyone should be everyone should take a little bit
445
00:27:18.119 --> 00:27:20.960
of a risk, everyone should try something a bit different.
446
00:27:21.519 --> 00:27:24.480
And what that ultimately means is everyone as a customer
447
00:27:24.680 --> 00:27:29.920
has the power to really try these future solutions and
448
00:27:30.079 --> 00:27:33.200
get out of our day to day status quo and
449
00:27:33.200 --> 00:27:36.759
what we feel comfortable with, because ultimately innovation is a
450
00:27:36.799 --> 00:27:41.039
little bit uncomfortable, but it's the excitement of something a
451
00:27:41.039 --> 00:27:46.079
bit different which will ultimately drive the future of our economy.
452
00:27:46.839 --> 00:27:52.240
Markostowski, Tim Hue, Adelaid Venture Partners in Tundra three Companies
453
00:27:52.559 --> 00:27:56.359
eight bits. One question that matters more than most people know.
454
00:27:57.279 --> 00:27:57.920
Thank you both.
455
00:27:59.400 --> 00:28:01.000
Thanks, thanks so I got really appreciate it.
456
00:28:08.480 --> 00:28:15.440
Mark Gstowski, Timothy Hughes, Mandalay Venture Partners and Tundra three
457
00:28:15.480 --> 00:28:20.000
Companies eight bets. One question that matters more than most
458
00:28:20.000 --> 00:28:25.599
people know. Thank you both for intelligence optimized on Todd Crowley.
459
00:28:26.279 --> 00:28:29.920
If this conversation shifted something for you, share it with
460
00:28:29.960 --> 00:28:32.400
someone who should hear it. And if you're heading to
461
00:28:32.440 --> 00:28:35.640
Global agg Invests Australia in Brisbane and June, come and
462
00:28:35.680 --> 00:28:38.880
find us. These conversations are better in person