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To play in the big leagues

Investors with deep pockets are asking, “Why aren’t Canada’s ag entrepreneurs taking the world by storm?” Now they think they’ve figured out how to join in making it happen

From his desk in San Diego, former farm manager turned corporate investor Arama Kukutai has been pitched 822 times in the last year by farmers, ag scientists and entrepreneurs, all of them wanting to use his money to grow their brainwaves into the next Apples and Amazons of the world’s $3 trillion ag market.

Almost none of those pitches have originated in Canada.

Kukutai has worked around the globe, having served as executive chairman of New Zealand’s PKW Farms before climbing the corporate investment ladder in Australia, Asia and now North America. So you’d think there’d be few surprises left. But even he raises his eyebrows at Canada’s entrepreneurial no-show.

When I met Kukutai in Toronto earlier this summer, it was clear he is cultured and soft-spoken, the sort of exec who knows the crowd around him who lean close to hear every word. On the subject of Canada’s ag opportunity, however, there was no trouble getting his point.

For global ag investor Arama Kukutai, with $150 million to pump into ag projects, the hard question is why so few Canadians end up at his door.
photo: Supplied

“Canadian entrepreneurs… you should get off your asses,” Kukutai said. “The world is your oyster.”

Kukutai is co-founder and partner of Finistere Ventures, which has $150 million for investing in ag startups. And with him were Kirk Haney, CEO of the $15-million, rapid turn-around Radicle Accelerator Fund, also based in San Diego, and Mark Carlson, managing director of Canada’s Verdex Capital, with offices in Edmonton and Montreal.

In their new relationship, a good chunk of Haney’s and Carlson’s jobs is to spot the potential winners among all the drawing-board concepts they can find, and funnel the best toward that Finistere cash.

All three agree there are big opportunities for ag entrepreneurs in Canada. In fact, when we met in Toronto, they were in the city as part of their joint commitment to make it happen.

It’s more than time to break the quiet, they say. Veredex’s Carlson, for instance, points out that ag and food makes up 20 per cent of Canada’s GDP, yet the sector attracts a mere two per cent of the country’s venture capital, private equity and pension fund investments.

More broadly, the three also believe that the $10 billion spent annually on public ag and food research in Canada and the U.S. is sadly under-exploited, even though governments (including Ottawa) have been opening up to the idea of working with investors.

And although farmers may not know all the fine points of working with venture capital, they do have good entrepreneurial instincts, Kukutai says, who sees farming as a great entrepreneurial training ground.

Every farm decision is incredibly complex on its own, and each decision affects all the others, he explains, so farmers excel at understanding all the details.

So the world should be flooded with farm ideas, perhaps now more than ever. Not only are there more corporate mergers, which counterintuitively hurt R&D because inevitably, Kukutai says, discretionary spending comes under intense pressure as the corporate suites try to keep shareholders happy, but a century of corporate experience also shows that big companies aren’t much good at big innovations. Yes, they excel at the kind of thinking that protects their core business, so if they make cars, they’re good at getting another mile per gallon out of their engines, or if they produce seed, they’re good at getting another bushel of yield per acre.

But when it comes to what is called “disruptive” change, they’re on the sidelines.

This, Kukutai adds with a detectable flourish, is why Dow and Bayer have invested in Finistere.

And this kind of “disruptive” change is what he, Haney and Carlson see coming in a big way. Indeed, they see it coming with “unbelievable velocity,” Kukutai says. “It will be almost overwhelming.”

There are two good reasons to believe this, he says. First, ag innovation is “horizontal,” not vertical. Ag doesn’t have to wait for the “vertical” growth of whole new branches of science. Instead, it excels at adapting the breakthroughs made in almost any other field, which explains the quick progress of self-steer and robotics technology.

Second, innovations can arise anywhere in the world. Agriculture is the opposite of Silicon Valley, Kukutai says, pointing to California’s software hotspot where companies fed off each other to transform the world of computing. Instead, ag and food innovations can pop up wherever farmers farm.

In that context, Canada can have a leg up on other countries, partly because of our world-class, science-based farms, and also because of our high educational levels.

There’s a challenge, though, and it’s one that Carlson spends a good deal of time thinking about. It’s for our entrepreneurs to think first and foremost about making it big in the U.S.

If a Canadian company isn’t relevant in the U.S., it’s unlikely to be relevant anywhere,” says Mark Carlson.
photo: Supplied

“I don’t mean that you can’t deploy in Canada,” Carlson says. “But you need to be sure that you’re competitive, and that you’re solving a problem beyond Canada.”

“If a Canadian company isn’t relevant in the U.S., it’s unlikely to be relevant anywhere,” he says. “There can be some nuances to that, but it’s pretty close.”

That means our entrepreneurs need to succeed in the world that Radicle’s Haney lives in. Radicle is an accelerator investor with $15 million that it selectively distributes in $500,000 shots via 12-month investments to ag and food entrepreneurs.

Haney’s team then grooms the projects so they can move another step up the ladder to funding from Finistere.

It makes him a popular guy. But then, he is also good at saying no. In fact, knowing when to say no, and getting to that point as efficiently as possible is key Radicle strategy.

In the 10 months up to this past June, Radicle received 170 pitches from entrepreneurs. By June, 70 per cent had already been rejected.

But another 50 or so were still undergoing initial analysis, and up to 20 were under active discussion.

For them, the real work is just beginning. In fact, Radicle refers to it as their 3:1 process, promising to help an idea make three years worth of progress in just one year.

Carlson nods his head. Moving quickly and attracting the right skills is crucial in the entrepreneurial world. Every day in that world, he says, the race is well and truly on. “Time is the enemy.”

The path to $500K

Kirk Haney at Radicle Accelerator Fund is sitting on top of $15 million, and his job is to dole that out, $500,000 at a time, to entrepreneurs who have great ideas and a reasonable shot at becoming commercial successes.

Who gets the money?

Can you articulate your idea?” Radicle’s Kirk Haney wants to know. In fact, of all the success factors in the sidebar below, he says, this is often the most telling.
photo: Supplied

“There’s a lot more to it than a good idea,” Haney says.

Of course, a good idea is essential. In fact, it has to be a big idea too. Best is if your idea will target a market that generates at least a total $1 billion in annual revenue, split among the various companies already active in it (or, if it’s a product for a market that doesn’t exist yet, a similarly large dollar amount).

That $1 billion threshold may not be as big as you think, though, especially because it’s a global total.

If you were going to stay within the U.S., for example, it would mean about $7 per acre for the combined American corn and soybean crop.

At least as important, however, is what Haney thinks of you as an entrepreneur. This, he says, is where some of his deepest insights come into play.

Much of his screening process boils down to questions that can be answered with a fairly easy yes or no. For instance, do you have expertise in the area, do you understand the market, and do you know how to build and run a company. Do you also know how to communicate with professional investors, and do you understand the terminology they use?

If your evaluation form doesn’t show a tick in each of those boxes, it doesn’t absolutely mean you’ll go home without the cash. Radicle can team you up with other experts who can fill in your gaps. But it can mean you’re facing something more of an uphill slope.

Even more important, however, are Radicle’s other assessments. Radicle will want to know what kind of person you are. It won’t matter if you dress in three-piece suits or if you wear coveralls, but it will matter if you can demonstrate that you are a good person to work with, that you are coachable, and that you know how to commit to a project.

Early in the evaluation process as well, you can expect Haney to ask you to tell him about a project or a venture where you have created success. Have you failed, he’ll also ask, and what did you learn from it?

All the while, however, Haney will have his ears open for what can be the most important test of all.

“Can you articulate your idea?” Haney will be wanting to know. “Can you tell the story of the problem you’re solving, about the customer you’re serving, about the disruptive nature of what you’re developing, and what it will mean to everyone at the table?”

Finding the right entrepreneur is the top consideration, Haney says. “Often the difference between the technology that gets to the market and the one that doesn’t is actually about the person, not the technology.”

About the author

Editor

Tom Button is editor of Country Guide magazine.

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