As a venture capital firm, our work with entrepreneurs, investors and industry partners, requires that we look for well designed products and companies with sound business fundamentals that have the potential to grow and become successful.
We do however, choose to invest in an industry that allows us to have a positive impact on many other elements in society.
Food systems have a great impact on social, environmental and economic issues around the world and have some type of impact over most of the UN’s Sustainable Development Goals.
By 2050, the world’s population will reach 10 billion, there will be an increase in caloric demand of 70% and an increase of 100% in crop demand. On the other hand, the rural labor force will be reduced with almost 70% of the world’s population living in cities. On top of that, land degradation and water shortages will create intense resource constraints making it difficult to feed the world.
- Food & agriculture are responsible for 30% of global green-house gas emissions.
- Every year 1/3 of food produced for humans is wasted at various stages of the value chain. That’s 1.6 billion tons of food or USD 1.2 trillion lost each year.
- There are more than 821 million people undernourished around the world.
- About 48 million people become ill from food every year.
- It’s expected that demand for meat will increase by 76% by 2050, placing further pressures on water resources and green-house gas emissions.
- Climate change and extreme weather is another factor that’s already impacting people around the world.
These important issues, plus various consumer behaviors and preferences, will pressure the industry towards innovation.
It’s a huge industry with very little digitization and a lot of inefficiency and waste that can be reduced significantly through the use of technology and innovative business models.
Arpegio’s role is to help entrepreneurs build great companies that can directly or indirectly solve some of these problems, profitably, and generate attractive returns to investors.
Resource Curse & Productivity in Latin America
Latin America is the world’s largest food supplier with net exports of US$146 billion of agricultural products (2014). It holds 8% of the world’s population, but generates 16% of the world’s global agricultural exports.
The region offers a wide variety of products and is rich in natural resources, but it risks falling victim to the “resource curse”. One clear and simple example is coffee; the region is the source of 55% of the global exports of not-roasted and not-decaffeinated coffee, but it accounts for only 1% of the global roasted coffee exports.
On a similar note, recent economic growth has been due mainly to labor inputs rather than increases in productivity. Between 2000-2015, the region had the lowest productivity growth in the world, with 22% coming from productivity increase vs. 78% from labor inputs. It’s lower than Africa (37% productivity vs. 63% labor) and significantly lower Asia (86% productivity vs. 14% labor).
Innovation through research and technology is the clear long-term solution to this problem, and something that Latin America will have to invest in to maintain its export competitiveness and supply domestic demand.
Arpegio is one of any players that need to be present to create an environment that promotes innovation, risk taking and entrepreneurship to produce value added products, increase productivity in the region and continue feeding the world.