Goterra’s collapse shows a ‘missing middle’ for green tech funding

After Goterra’s collapse into voluntary administration, leaders in the sustainable startup sector say Australia must be braver when funding its innovative but cost-intensive businesses.

Goterra, an ag-tech startup converting food waste into animal feed and fertiliser, entered administration last week.

The Canberra-based company had raised in excess of $8 million from leading VC funds, a $10 million bridging round in 2023, and completed a $2.25 million crowdsourced funding round last year.

The business counted customers including Woolworths, the City of Sydney, and Melbourne Airport, and had recently signed a partnership with the Hyatt Regency Sydney hotel.

But a company spokesperson told SmartCompany the enterprise depleted its funding runway before it could secure the follow-on investment it needed to scale.

Mick Liubinskas, co-founder of Climate Salad and a luminary in Australia’s climate technology sector, called the collapse “bitterly disappointing”.

“I can blame timing, luck or having enough experienced people in the industry but in the end I’ll know why,” he wrote on LinkedIn.

“Australia doesn’t back ourselves.”

Beyond software success stories like Atlassian and Canva, Liubinskas said the local economy could lose out without adequate investment in hard technology businesses and manufacturers.

“It’s risky, but it’s a bigger risk not to back them,” he said.

Sustainability-focused businesses like Goterra — which have built a customer base without establishing enormous scale — face significant hardships, according to Kate Gaffney, co-founder and director of partnerships, engagement and research at AxleTree Capital.

“In the clean economy transition, it is the scaleup phase, not the startup phase, which is most perilous because that’s where the capital dries up,” she told SmartCompany.

“That’s where things become long and lumpy, even with proven technologies and companies with traction like Goterra.

AxleTree Capital is behind the $150 million New Industries Fund, which plans to devote ‘patient’ capital to businesses focused on water, waste, and energy.

Gaffney said she admired Goterra and its founder, Olympia Yarger, but as AxleTree Capital is still raising capital for the fund, it “sat by without the capital to do anything”.

“So I was incredibly sad to see that the entire investment ecosystem couldn’t safeguard Goterra against that, and couldn’t prepare for the fact that this company would need patient capital in order to scale,” she said.

Investors should not just consider the benefits of ‘unicorns’ like Atlassian and Canva, but what Gaffney called “draught horses”: the “solid, stable, reliable, essential and unglamorous” businesses working on tough environmental goals.

There is a gap between the family offices who might write a check for $5 million, and major infrastructure investors providing $200 million, said Matthew Williams, managing director and co-founder of AxleTree Capital.

“There’s a mindset in both camps that VC and private equity need to look a particular way, because that’s the structure that they’ve seen,” he said.

While Goterra’s future is uncertain, the company spokesperson indicated the administrators will pursue its sale as a going concern.

The first meeting of creditors will take place on June 16.

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