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Agtech funds and where it’s investing

AVAC and Bioenterprise investments point to amazing opportunities to participate in technology that will revolutionize farming

The dollars are big, and they’re quickly getting bigger. An influx of capital is pouring into innovations all along the food value chain, from logistics and food processing to primary production. According to Agfunder, an online equity crowdfunding platform for agricultural technology, interest is accelerating, with 2014’s whole-year total of $2.36 billion getting matched in barely the first six months of 2015.

Momentum is building with interest from some big names. Last May, for instance, Google Inc.’s venture capital arm invested $15 million in Farmers Business Network Inc., a computer platform to gather and apply data collected on farm.

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Previously, agricultural funds had focused on land purchases and they left any product and business development to established ag companies and individuals. Now these newly emerged agtech funds are gathering and applying dollars to help venture capital and other companies bring innovations to market.

As well, other larger funds in past sometimes invested in ag technology, but not exclusively, and the multinational ag companies had their own venture capital branches. Now, larger well-known funds are working with these specialty agtech funds, and their staffs are specialized in agriculture and food.

Today, in North America six agtech venture capital funds exist. Half are in Canada, and it seems Canadian companies are aggressively pursu­ing and creating new technology.

Agfunder says Canadian tech companies captured seven of the top 20 international investments in 2014, and the world is beginning to take notice. During the first half of 2015, the investments were mostly from California.

Two of those funds are offshoots of well-known and well-established government-supported innovation centres, namely AVAC in Alberta and Bioenterprise in Ontario.

Both AVAC and Bioenterprise are continuing with their original mandate of giving advice on business planning and on financial and marketing strategy development. They also assist with investment preparation, linking companies, resources and ideas, as well as sourcing a variety of capital funding.

However, recently they’ve both taken the leap into investment funds. By setting up funds to invest in ag technology, both groups can take innovation up a level to larger companies and bigger, more complicated ideas.

Bioenterprise Capital fund is intended to be $100 million and is starting to make investments. Verdex Capital and Finistere Ventures’ FVI fund should reach the $150-million target and has already made purchases. Other funds, investment companies, and large companies, like Bayer, are investing in these funds.

This is venture capitalism aimed at agricultural technology, and there’s a much higher expectation these investments will make high returns.

Mark Carlson is vice-president in charge of investments for AVAC and he is also managing partner of AVAC’s agtech investment group Verdex Capital Inc., which was spun out of AVAC as a venture capital fund specializing in technology applied to agriculture and food. Country Guide met Carlson in his Edmonton office, with the conversation spanning from the farm he grew up on near Taber, Alta., to Silicon Valley to Africa.

Carlson began by saying that for these funds, the goal is of course to make money, but there’s also some higher-level thinking at play. Developing technologies in Canada and bringing them to market here should keep us ahead of other countries and help us manage our agricultural resources. “It’s going to drive innovation in new ways,” says Carlson.

Agtech funds are actively seeking the best technology in the world, Carlson says. He believes it’s a race they must win. After all, according to the United Nations Food and Agriculture Organization, the world must produce 100 per cent more food by 2050, and 70 per cent of the increased production must come from efficiency-enhancing agricultural technologies.

There’s a self-interested angle too. Although the innovations may not necessarily come from Canada, having Agtech funds based here should enable our industry to adopt them faster and better

“It’ll give us the close-up details to analyze and apply new technology for Canadian agriculture first,” agrees Michelle Kienitz, Bioenterprise’s manager of strategic partnerships. “The resulting influx of innovation into this country should help give our farmers a competitive edge globally.”

The trick is to weed out the second-string or the also-ran ideas from the truly great opportunities.

Focus also gets put on the team. Often companies will have the science, but the management team has to understand and get through rigorous regulations, plus have a diverse talent set.

“We not only invest in the idea, we invest in the team,” says Carlson.

Where the Agtech funds are investing

To date, AVAC has invested over $139 million in companies and farmers adding value to farm products produced in Alberta since 1997.

Bioenterprise is there too. “Acting as coach and catalyst, we work with companies at all stages, from startups to emerging and well-established businesses,” Kienitz says.

Could the trends that these Agtech fund managers watch be a window into future developments?

In general, Carlson is seeing Agtech funds and companies deploying capital toward ways to increase on-farm margins with genetics, precision agriculture, more efficient use of water, and human resources. “If it helps yield and feed conversion, we can sell that into the marketplace,” says Carlson.

There’s also a trend toward creating systems to help farmers manage more safety and compliance data. “Farms are going to need to be more efficient,” says Carlson, “… and to manage labour more efficiently.”

However, the dream technology will manage data. Creating a platform for on-farm decision support tools will catapult the industry ahead, says Carlson.

Investors are looking for a good platform that isn’t linked to one ag supply company and that would integrate a group of data capabilities — GPS, soil sampling, weather data, and marketing among others — for on-the-go decision-making. “The big six ag companies and the machinery companies are all looking for ways to do this,” says Carlson.

Precision agriculture has already seen quite significant investment, including the Kleiner Perkins Caufield & Byers 2014 purchase of Winnipeg-based Farmer’s Edge. This will continue to be a big part of the portfolio of agtech funds. After all, venture capitalist companies generally know and love software and data.

The Agtech funds are investing in food safety, delivery systems and decreasing waste all along the value chain. There’s also interest in ways to reuse waste and water.”

Kienitz says they’re seeing more technologies from other industries being applied to agriculture. “Pathways into agriculture aren’t always direct,” says Kienitz. “Everyone tends to think of ag last.”

But don’t forget the unexpected. About a dozen weedtech and hemp companies captured a smoking $23 million in total funding for 2014. The largest slice went to GrowLife ($12.1M), which produces cultivation technology for growers, and Agfunder points out that a company called Eaze has raised $1.5M for its marijuana drone delivery service.

Cool ideas

Sensors and satellites

The big story from the precision farming expo in Washington state was around sensing. The remote sensing panel had the largest turnout packing the hall with nearly 150 attendees. “We can’t avoid the fact that the whole drone thing has made everyone more aware of the potential benefits of high-quality sensing, be it from devices on site, in the air or from space,” says Jeff Lorton, Precision Farming Expo organizer.

Carlson agrees and Verdex has invested into CropX, an ag-analytics company from Tel Aviv. CropX has developed an adaptive irrigation service, which automatically optimizes irrigation by controlling irrigation based on sensors.

Food e-commerce

From grocery deliveries to grocery flyer apps, technology is morphing the retail food industry. Verdex has invested in Shopwell, a free website and mobile app that scans and tells the ingredients of products on the grocery store shelf. Consumers can learn about the health benefits of foods, find healthier alternatives for their nutrition goals and avoid allergens. Potentially this application is also a way for retail and processors to get a handle on consumers’ shopping habits.

Sustainable protein

Really? It might seem hard for some readers to swallow but there’s momentum behind insect farming, with flour, snacks and animal feed made from insects like crickets and mealworms. High in protein, healthy, sustainable and made in Norwood, Ontario.

Keeping it clean

Antibacterial apps and other solutions are cleaning up the food industry. Toronto-based Agri-Neo’s first product Neo-Pure is an organic, non-toxic, biodegradable sanitizer that reduces post-harvest microbial pathogens on raw foods. This product can be especially useful for loads of raw edible seeds, like hemp or sunflower seeds, instead of relying on random samples to see if a whole load is safe.

Sensors and satellites

Taking drone technology a little higher, satellite imagery is now being used to monitor crops from space. Like drones, they give more than a picture. They include soil and canopy temperatures, soil moisture, crop health and moisture indices, and yield indices. There’s also some discussion about linking this data with on-the-ground sensors.

One company, Planetary Resources, is deploying 10 small satellites in a constellation to gather and process data from “any acre on the planet” and is billing this technology as a way to remote check crop insurance claims.

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Senior Business Editor

Maggie Van Camp

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