Costa Rican bioeconomy companies face challenges in attracting impact investment

Report suggests untapped potential for the bioeconomy sector in Costa Rica.

San Jose, Costa Rica and Jacksonville, Florida August 28, 2024 – – Today, a groundbreaking report was released by the CRUSA Foundation and the Kirchner Impact Foundation. The report revealed that Costa Rica may be at the forefront of the bioeconomy, with more than 100 ventures identified at different stages of growth. However, many of the companies have investment readiness gaps that need to be addressed.

The study entitled “Analysis of the impact investment ecosystem in the bioeconomy sector at the national level” was conducted from January – December 2023, by the first cohort of the Kirchner Fellowship program in the country. The program is designed to train the next generation of capital allocators in nascent impact investment ecosystems. The report shares the main characteristics of bioeconomy companies and how this reflects their potential to receive investment. In addition, the report highlights the opportunities and challenges of the ecosystem in the bioeconomy sector, as well as the role that impact investing can play in the development of these ventures.

Impact investing refers to the allocation of capital in companies that not only seek a financial return but also aim to generate a measurable positive impact on the environment and society.

“Enabling financing at each stage of development of bioeconomy companies is key to boosting this sector and thus the transition to a more sustainable production model. This report provides an understanding of the current state of bioeconomy ventures and the challenges they face. For example, it was identified that, although 81% of the companies are generating revenue, they are still not profitable. Also, only 4% have a “Data Room”, which is a tool that allows investors to access company information for analysis as investment candidates. There is still work to be done and at CRUSA we are undertaking various initiatives so that these companies and the ecosystem itself can grow,” said Flora Montealegre, executive director of the CRUSA Foundation.

“Through this report, our goal is to share the state of the companies in the bioeconomy sector in Costa Rica, with a particular emphasis on their strengths, as well as opportunities for improvement. The goal of the report is to be used as a tool to enable conversations in the ecosystem by providing actionable intel to the public and private sectors.” said Abigail Napsuciale, former Director of the Kirchner Impact Foundation program in Costa Rica.

Key takeaways from the report

• The Costa Rican bioeconomy shows great untapped potential, with a larger number of companies (102) than previously reported, suggesting ample opportunities in the ecosystem. Of the 102 companies, 67% are active in the agriculture and food sector.

• 83% of companies are based in main cities (GAM), leaving room for job creation outside the capital. In Costa Rica and in many contexts impact investment can be a catalyst for the expansion of the bioeconomy, driving both economic growth and natural ecosystem conservation.

• Potential approaches to strengthening entrepreneurial skills in the country are also highlighted, including around financial literacy.

• Diversifying the capital available for each stage of growth is also considered. Having efforts to develop the venture capital and impact investment ecosystem for companies with more than six months in the market could facilitate their growth and scale with capital sources other than debt, given that currently the market offers mostly debt-based financing (56.9%) and only 6.9% comes from venture capital.

Three key areas for improvement are:

• Impact measurement: Implementing impact measurement and management strategies in companies will provide a pathway for quantitative data collection, adding more context to qualitative data that may already be collected. On the investors’ side, seeking standard metrics to facilitate their tracking in the ecosystem is needed.
  
• Financial management: To prepare entrepreneurs in knowledge and management of financial information to facilitate interactions with investors and understanding of what equity investment is.
  
• Accessibility of information for investors: To have clear and structured information available to share with potential investors during their due diligence processes through a “Data Room”.

Overall, the study provides a detailed overview of the current conditions and growth potential of the commercial bioeconomy sector, a key area in the fight against climate change and in promoting sustainable economic development in the country.

Costa Rica became the first nation in the region to launch a National Bioeconomy Strategy in August 2020. The objective is to position the country as a knowledge-based economy with sustainable, high-value-added production and fair and equitable use of its biodiversity.

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About CRUSA Foundation

The CRUSA Foundation is a private, non-profit organization dedicated to promoting sustainable development in Costa Rica. Since its founding in 1996, it has collaborated with more than 520 organizations, promoting almost a thousand projects throughout the country.

About Kirchner Impact Foundation

Kirchner Impact Foundation is a private, nonprofit organization that promotes sustainable business development through impact investing. With more than 10 years of experience, its flagship program, the Kirchner Fellowship, trains university students to become impact investors.

Press contact

Jason Garita Vargas | Strategic Communications Officer | jgarita@crusa.cr

Reporting contact

Kirchner Impact Foundation: info@kirchnerimpact.com