Trends Watch: Food, Beverage and Agribusiness

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks with Alexander Borschow, Managing Partner, Semillero Ventures.

What is your outlook for private equity/venture capital?

WeWork’s failed IPO in 2019 impacted valuations and investor appetite for capital injections into unprofitable businesses. We saw a pullback from investors in those types of those deals and also saw valuations come down a bit, which we believed would continue even before the COVID-19 pandemic struck. Most venture-backed companies are cutting expenses and conserving cash to extend their runway until institutional investor appetite returns.

On the private equity side, the companies that funds invest in tend to be profitable already, but similarly, they face challenges regarding the increase in valuations in terms of multiples being paid. Buying expensive and trying to sell at an even more expensive price is getting challenging; therefore, PE firms are holding companies longer and not looking to exit as quickly. At the same time, there have been greater amounts of capital invested into PE funds from investors. This means there is around $1.5 trillion dollars of dry powder on the sideline looking to be deployed. With the global economic shutdown due to COVID-19, many private equity-owned companies that have large debt loads may be forced to restructure that debt, rely on sponsors for additional financing, or face defaults.  

What are the greatest opportunities you see?

We are most excited about the food and agribusiness sectors. We see that the trends for clean, transparent, and healthy food are not diminishing. In addition, we see the trends of an appetite and demand for plant-based foods are increasing because consumers are looking to eat healthier and view food as medicine. We don’t see this changing anytime soon.

In addition, given the “melting pot” in the U.S., with numerous cultures within the Latino and Asian communities, this has created even more diversions amongst food preferences within these groups, which has created further opportunities for firms like ours.

What are the greatest challenges you see?

In the short term, the impact of COVID-19 shutdowns is the 800-pound gorilla. We don’t know exactly when or how the economy will get restarted. Stepping back, one of the greatest hurdles I see is the lack of acknowledgement of the impact that mass consumption is having on our planet: the energy used, the plastics used, etc. Therefore, I worry about how we can change consumption patterns or the way we source and supply things. We work with our portfolio companies to see how this can be an opportunity for differentiation and long-term value creation. It is imperative we all play a role in reducing the negative impact we are having on the planet through consumption, such as reducing the use of plastics and the amount of packaging, which is not being recycled, hence creating major problems.  

What keeps you up at night?

I have a 15-month daughter and what keeps me up at night is worrying what the world will look like when she is a teenager and an adult. I am concerned she may never see beautiful coral reefs or a green healthy Amazon rainforest. The environmental impact and changes we are going through really worry me. That is why we look for passionate and driven entrepreneurs who are making change happen fast with the companies they are growing.