CarbonCrop: Know your intentions when seeking funding

‘Do you have a plan to get to the next step, and does this get you to the next step?’ They’re two simple questions, but it’s crucial a founder knows their answers when seeking investment, says Nick Butcher.

Being clear on your intention for raising capital is a key lesson Butcher has learned on his journey with CarbonCrop – a climate-tech company applying AI to carbon forestry. 

The Nelson-based firm has so far helped more than 300 New Zealand landholders access the Emissions Trading Scheme, unlocking and distributing more than $25 million in carbon incentives in 2023 for predominantly native forests.

The company recently raised a total of $1.3 million from NZVC, Agnition (Ravensdown) and the Aspire NZ Seed Fund (operated by New Zealand Growth Capital Partners), along with existing investor K1W1, building on an initial investment of $1.5 million from WNT Ventures, and a seed round of $1.9 million.

The funding, taking the form of convertible notes, will go towards supporting CarbonCrop’s expansion within New Zealand, and entry into international markets. 

A primary focus of the funding for CarbonCrop will be to refine and extend its data-driven forest carbon platform with new collaboration and supply-chain analysis features for all forest carbon market participants. These include landholders, forestry and agriculture professionals, and primary-sector suppliers and processors. 

Caffeine asked CarbonCrop co-founder and CTO Butcher to share his experiences seeking funding. 

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Know what you need, and ask for it

When Butcher asked those opening questions of CarbonCrop, it helped clarify that if the company wanted to deliver its desired impact on climate change, it needed to scale up. To do so, the company needed to raise capital to expand its product line. 

Better understanding its direction meant CarbonCrop could establish a plan and a minimum monetary target before embarking on financing rounds. 

Butcher says that the target must support the company through to its next phase – whether that be raising further capital or becoming self-sustaining. And considering the current state of capital markets, it is good to be prepared in case you’re unable to raise another round. 

“There's no point taking half a million dollars when you need a million dollars. Then you're just going to lose half a million dollars.” 

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Listen closely to VC questions

There are common questions investors ask of New Zealand founders, says Butcher, which often revolve around international expansion plans and what makes a company unique.

One of Butcher’s biggest takeaways is that there are many small businesses with interesting local potential but they’re not suitable for venture capital because of their return profile.

Venture capitalists typically target companies with credible pathways to valuations of $100 million or more, which can be hard to get in the New Zealand market alone, says Butcher. 

In these instances, he recommends listening closely to what VCs are saying. 

Vague statements like ‘you’re too early’ can mean they don’t want to shut the door on you forever, while statements around scalability – whether related to markets or a company’s business model – often hint at a larger issue, he says. 

“That's the stuff that I think is very important to listen to because either it's not [scalable] – in which case you're barking up the wrong tree – or it is, but you failed to communicate that properly, in which case you really need to change how you present it.” 

He has also found that VCs like to know about previous investors and those behind current funding rounds as this provides them with “social signals” of a startup's credibility.

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Even a ‘no’ can help

Investors not only bring funding but potential insights into a company’s product, and Butcher says some investors have given him ideas for product extensions.

“If someone invests in you, it will be because they see something in you as a company that they think is interesting. But it won’t necessarily be something that you can predict in advance,” he says. 

Butcher likes to ask investors what they find interesting about his company because it can provide insights into what investors are looking for, why they want to invest and a broader perspective on competition or opportunities in the space. 

He says it’s also an opportunity to consider if an investor will philosophically align well with the company’s values, as this makes it easier to navigate relationships down the line. 

And even the investors who say ‘no’ can offer valuable insights. 

“You've got to listen to the feedback that you're getting. If people keep saying no and they say why and you never address that in your next pitch, that's not smart.”