Amasia's Investment in TreeDots
We have, over the last two years, developed a strong point of view about food and climate change — and about how behavior change should inform our investment approach. Here is a schematic overview.
Note: the text below contains brief extracts from a much longer internal report on Amasia’s food-related investment strategy. Two Amasia Fellows labored on that document, and many thanks here to Alina Goh and Chloe Chemtob, whose excellent work I have repurposed.
The Evolution of Food
The industrialization of agriculture in the late 18th century drove output beyond the reach of human labor alone. Advances in the transportation and communications industries in subsequent centuries resulted in unprecedented supply chain connectivity. More recently, advanced robotics and smart devices have reshaped the industry, setting new standards of precision and efficiency.
Changing cultural appetites have also played a key role in shaping the food industry, especially in recent decades.
Health and wellness have accelerated in popularity, with health-centric products and services gaining traction amongst consumers. The clean eating trend has propelled many companies to adopt marketing strategies that double down on minimal ingredients and buzzwords like “organic” and “all-natural”.
Food and Climate
In the coming decade, the world population is expected to grow from its current size of 7.7 billion (2019) to 8.5 billion (2030), reaching nearly 10 billion by mid-century. Population growth of this extraordinary magnitude places great pressure on two key ecosystems: climate and food.
The two are inextricably linked. The climate crisis is already altering the food production landscape, forcing us to re-evaluate the structures that underpin the global food supply chain.
Losses arising from food supply chain inefficiencies are massive contributors to greenhouse gas emissions. Lengthening food value chains and resource-intensive farming systems underline the need for climate-positive innovations.
Food, Behavior Change, and Amasia’s Investment Focus
We divide tech/innovation in the food industry into four main categories (this is how we think about it — it is definitely not the only way to think about it!):
Supply Chain: innovations pertaining to any step of the food supply chain, from blockchain-driven solutions to optimized processing equipment and smart quality control.
Surplus Food/Waste and Loss: minimizing avoidable food waste through marketplaces that increase transparency and efficiency, supply chain infrastructure and repurposing solutions. There is obvious overlap with the first category.
Agriculture: this involves: (a) technological innovation in the traditional farming process, resolving existing inefficiencies through smart devices and software; and (b) novel farming processes that redesign traditional structures and techniques to optimize production.
Consumer: any consumer-facing product or service at the end of the food supply chain. This includes product-centric innovations such as alternative protein; hardware innovations that streamline food manufacturing and delivery to the consumer; and services innovations such as app-based delivery and grocery services.
We have developed a climate and sustainability-related investment thesis targeted at behavioral change. Our expertise is in capital-efficient software and software-enabled businesses. This combination leads us to eight sectors within the four categories above.
Food Surplus Reduction
Food surplus reduction is one of those eight target sectors, and perhaps the one in which we can see the most immediate “wins” from a climate and sustainability standpoint.
This graphic shows the staggering climate effect, ecological waste, and humanitarian issues that arise from food waste.
I knew very little of this when we began our food investigation. The numbers are staggering. And fixable.
Technology companies in this sector help minimize lost and wasted food within the food supply chain (between harvesting and consumption). This opportunity is so large, in every sense, that, at Amasia, we could make the case for all of our food-related investing to be focused here.
And so we come to TreeDots.
Because retailers will not tolerate suppliers being out of stock, the food supply chain has been overbuilt with massive spare capacity. Suppliers inevitably get stuck with oversupplied products that find their way to the local landfill.
TreeDots operates a B2B marketplace that matches food supply and demand in Southeast Asia -- thereby decreasing food waste and helping fight the climate crisis.
TreeDots began as a non-profit project, a “social enterprise”, and then evolved into a business as it became clear that was the best way to build a scale operation that is world class in its team, technology and processes. But given the heritage, there is a mission-driven element to TreeDots that we applaud and support.
We like many things about TreeDots. Of course we like a hyper growth capital efficient technology business in a giant market, and of course we like a founding team that learns remarkably quickly and is hungry for advice. What’s not to like?
Here are three other things we like about the business:
Network effects: this is obvious -- it is a marketplace! -- but deserves stating: both sides of the TreeDots marketplace engender network effects. More buyers lead to more sellers; more sellers lead to more buyers.
Product possibilities: A B2B marketplace of this kind lends itself to many additional product possibilities — possibilities that are in themselves multi billion dollar markets. A manifest example is global sourcing which leads to...
...Regional expansion: The Singapore market is in itself sizable. But this is a sector in a region in which being cross-border is both a necessity and a competitive advantage.
One More Thing
There is a balance in small high-growth companies between: (a) “stick to your strategy” and “do one thing really well”, and (b) “respond quickly to an unusual opportunity” and “don’t let focus blind you either”. We understand that balance and are sympathetic to the push and pull from either side.
And so we love the fact that TreeDots, in keeping with its roots as a social enterprise and leveraging its technology and marketplace infrastructure, moved quickly to respond to a consumer need in the era of the pandemic. This involves using their platform to allow households to make group purchases. More here.