In Conversation with ID Capital
Updated: Apr 30, 2019
ID Capital is a sector focused investment and advisory company committed to investing and nurturing entrepreneurs from Asia Pacific building innovative and sustainable solutions to address one of our generation's most pressing challenges
1. What is the story behind ID Capital?
When Isabelle relocated to Singapore in 2012, she looked for an investment vertical that was about to change radically. She looked into several ones and Agritech and Foodtech rapidly emerged as the best candidates. This was in 2014. The choice was made easier by the fact that she came from the Wines and Spirits business, a related industry. Further research convinced her that Agritech and Foodtech would need to make their revolution in the next twenty years and that technology would be a fantastic enabler. Asia-Pacific is where 60% population lives and yet in this large and fragmented region at that time there were no structured ecosystem to foster startup-driven innovation at the moment.
After closing a couple of investments, Isabelle decided that it made most sense to focus on APAC, especially when you live in Singapore. The agrifoodtech vertical was still in its infancy here, so if we wanted to have impact, we needed to be pan-Asian. Abhinav joined the team in early 2017 coming with a background in the food and finance industry.
Seeing the growing number of MNCs, impact investors and various stakeholders willing to embrace this revolution in the making, we came up with the idea of creating the Future Food Asia platform, delivering services to such stakeholders. And to create a momentum, we soon decided to start with the Future Food Asia Award, the 1st-of-its-kind annual competition in Asia. Now in its 3rd edition, it proved to be much more than another startup competition, more of a catalyst for investment transactions and value add partnerships in the region.
2. What is your investment philosophy and how do you make your investment decisions?
Over time we have identified a series of crucial pain points the F&A industry has to solve to deliver food to a growing population without depleting natural resources. More importantly as investors, we look at types of solutions that can be spearheaded by entrepreneurs. Not all problems can be solved by entrepreneurs, some will more naturally be the prerogative of larger players, other may depend on regulatory frameworks and government support. So for instance we tend to avoid innovations where the regulatory pathway is extremely uncertain and adds a degree of risk to the venture. We are also careful with business models that are based on government subsidies. As we have seen in the clean energy sector with the carbon tax, this makes businesses vulnerable to a change of government policies.
The design of our investment thesis leads us to mostly consider B2B startups, which also provides the advantage that it can become more easily international, hence more easily scalable in our opinion.
We’ve developed a gated investment process that enables us to quickly give feedback to entrepreneurs and handle a large volume of startups across the entire region.
Straight behind the importance of the problem addressed we assess the quality of the team, even before delving into their technology. While we recognize that technology is the strongest barrier to entry a start-up in this sector can develop, making sure the founding team is of the stuff of entrepreneurs. You need grit and resilience to succeed and not everybody has it.
3. Because of your vast investment experience across Asia Pacific, how do you compare the Indian food and agritech landscape with similar countries in Asia? (Would love to get insights on similarities/differences/challenges from India and Asia point of view)
There are not many countries similar to India :)
India is the most prominent country exemplifying the specificities of Asia in regards to agrifoodtech, vs the rest of the world. Just to name the most important specificity: the weight of small holder farmers and potential of technology solutions to address their challenges. The largest part of the increment of food production is expected to come from them, and more than 85% live in Asia.
In the region India offers a unique combination of high stakes, excellent academic bodies fuelling the pipeline of scientific and technology innovations, a sizeable population of well-travelled entrepreneurs determined to change things, and an environment relatively friendly to FDIs. It is rich in deep tech (for instance biotechnology-driven start-ups) as well as general tech start-ups.
We have been lucky to see the rise of the sector in India. A few years ago one would have seen only a handful of companies with a majority of them building innovative solutions for market access innovations, which is core issue for the Indian market. Today we can see a plethora of companies addressing issues both local and international in nature leveraging cutting edge biotechnology and information technology.
However, India’s situation widely differs from that of say China. Start-up growth can be more spectacular in China, owing to a more developed infrastructure. It is thus reflected in higher fundraising rounds and valuations. A sector where China is particularly advanced is A.I. applied to the food value chain. Last but not least domestic VC funding is more abundant in China than India. This might be why Indian start-ups to think global from day one, which in the longer term will likely benefit them.
4. What role does ID Capital see itself playing in the Asian Ag & Food Eco-system? (We can dedicate this question to Future Food Asia)
The first phase of our deployment has been to put Asia-Pacific on the map of agrifoodtech, and agrifoodtech on the map of regional VC investors. We think it has been a success, judging by the growing number of non-regional investors looking at the region, and non-core agrifoodtech investors now looking at this vertical.
As the first mover in that space and region we are attracting a high-quality deal flow and see ourselves deploying more capital in the coming years.
But we remain committed to also playing a role as ecosystem builders. It is very synergistic with our investment activity. Embarking private equity funds and strategics that can represent potential exits for portfolio companies remain important. We also believe that specific to Asia, exits can come from a much larger number and type of players than in Western countries, where the notion of “core business” is more prevalent and does not encourage investments or acquisition that are seen as a diversion from this core business.
5. What lies ahead for ID Capital and how do you see the Indian landscape fit into your future plans? (This can be for the next fund/future investments that you are making)
India is one of our 5 primary countries of focus as investors, and every year Future Food Asia has seen two finalists from the country. It should only be a matter of time before we close our first agrifoodtech investment here.