Introducing ... The Tramlines Fund

One of the greatest luxuries of life is the opportunity to focus on what you yourself think matters most. Luckily I enjoy just such luxury and so I am pleased to confirm my involvement in creation of The Tramlines Fund, focusing on investment in growing agritech businesses as they engage in global expansion, alongside my continued involvement with AI-driven drug discovery.

For me, these are the two most important forces to focus on right now.

So what is the Tramlines Fund?

Having been involved in the formation of UK agritech early-stage investment syndicate Cambridge Agritech, colleagues and I realised that there is a serious and harmful gap in the agri investment market: growth capital. There are a decent number of early stage funds and groups like Cambridge Agritech around in the UK now, but hardly any specialist ag funds able to help companies move to the next stage. The market needs investors able to support business scale-up, once the start-up phase is done.

This is where Tramlines comes in. ​

Link to website

​​The Tramlines Fund is a growth capital investment fund, dedicated to upstream agritech, where market risk is replacing technology risk as the key challenge. Our target companies show evidence that technology risk has been addressed by delivery of a simple proxy: the generation of genuine product revenues. The Tramlines team seeks companies that have generated c£2m revenue per annum and whilst we do look at companies with lower levels of turnover, significant additional scrutiny is required in these circumstances before investment.

There are three major reasons for adoption of such a strategy:

1. Exit cycles: Personal experience as investor in multiple start-ups has taught me that, whilst the founder's assurance that the business will grow to a profitable exit 'in three to five years' is always well meant and believed by the speaker, reality proves otherwise: few ag start-ups have achieved a profitable exit in anything like this time frame. Tramlines is a 10 year fund and we believe that this gives us JUST enough time to take our slightly later stage c3 to 5 year old investee companies from investment to exit. 
2. International arbitrage: We are focused on UK companies for the majority of investments and believe/observe a growing disparity between valuations in the UK and Europe compared to the US and Asia. So our strategy includes international expansion aided by access to the West Coast but also to China, and delivery of capital accumulation by investing in the UK and exiting in the US or Asia.
3. Investment moment: Industry is tough right now and, as we will see all too clearly over the next 18 months in particular, start-up businesses are at high risk of failure. However the risk of failure diminishes as 'real' revenues are generated. Many investors observe the faltering steps of start-ups as they move towards revenue generation and perceive that the risk of failure remains unchanged until companies achieve profitability. Analysis of market data tells us otherwise: risk of failure diminishes significantly as first revenues arrive, even pre-profit. So ... invest post revenue and enjoy the arbitrage benefit over a three to four year period.

Right now we are engaging with major family offices and HNW as potential Limited Partners, establishing special purpose vehicles to allow us to invest immediately in specific projects prior to completion of fund set up, whilst taking care to look after our many existing investments from the Cambridge Agritech era. We already have support for investment of £40m during our investment period and will seek a further £1m, £2m, £3m, £4m and £5m - £15m in total - over the next 5 years.

Key themes for us include the cross-over from biotech to agtech, development of alternative crops and products and the whole agronomy/sustainability/zero carbon challenge. These are our specialist themes but we are keen to engage with all upstream technologies and capabilities. Target investment size is £1m to £7m, typically in syndicated deals with co-investors able to contribute to the growth of the investee company.

We can discuss investment strategies until the proverbial cows come home. But the simple truth is that it is time for action.

With food security issues, population growth, climate change and a dose of politics to deal with, the issues and opportunities of agritech are here to stay. If there is one sector you should spend some time on now, I urge you to make it this one.