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Funds for agricultural innovation

Partnership aims to send the message that agtech is a great place to invest

Investment in a broad range of agriculture and food sectors, including the agri-environmental field, are planned.

Developing an “innovation ecosystem” across Canada and increasing the nation’s competitiveness in the global agriculture and agri-food industry are the goals of a new partnership between Bioenterprise Corporation and Farm Credit Canada (FCC).

Dave Smardon. photo: Supplied

“FCC is the Canadian standard for financial support and banking in agriculture and agri-food in the country,” says Dave Smardon, president and CEO of Bioenterprise. “They have connections that span the entire value chain, so this is a perfect partnership for us.”

Partners in investing

Based in Guelph, Ont., Bioenterprise is a non-profit commercialization accelerator working in the agtech space. FCC is the Crown corporation that provides financing and business services to 100,000 customers including farmers, agri-food and agri-businesses across the country.

The initial contract, which runs from January 2020 to the end of March 2021, is worth more than $1 million, and was announced in late January.

Smardon says his organization was looking for a partner to take a proactive approach to encouraging innovation in the sector. FCC, in its turn, had just revisited some of its strategies in the fall of 2018 and was looking for opportunities to refresh its venture capital program.

Rebecca Clarke. photo: Supplied

“There’s a real need for agtech innovation,” says Rebbecca Clarke, vice-president and treasurer of FCC. “We had made investments in agricultural venture capital funds in Canada previously, and wanted to support entrepreneurial innovation at all stages of the business life cycle.”

FCC is looking to invest not only in agtech, but also in a broad spectrum of sub-sectors in agriculture and food, particularly in the agri-environmental sphere.

With this partnership, FCC wants to support a more national presence for the services that Bioenterprise provides, particularly in Quebec and the Prairies. Clarke says the objective is to help 50 or more companies in these regions.

“We want to provide areas that are currently underserved with commercial accelerator services,” she says, noting that FCC’s mission is to support a strong and stable Canadian agri-food sector. Part of that mission is to spark more investment in agtech.

“At the end of the day, we’re creating a collaborative approach to innovation,” Clarke says.

Across the globe

Global venture capital (VC) investments in agriculture and food technology have expanded exponentially over the past five years.

According to AgFunder, these kinds of investments increased five-fold from 2012 to 2018 to a total of $20.8 billion. In 2019, food tech experienced its first downturn since 2016, taking a 7.6 per cent hit to $12 billion. Agtech, however, enjoyed a modest uptick of $100 million to $7.6 billion.

AgFunder is a California-based venture capital fund that has been producing an annual report on global investing in the ag- and food-tech sectors for the past six years.

In AgFunder terms, food tech encompasses in-store restaurant and retail, online restaurants, e-grocery, restaurant marketplaces, home and cooking. Agtech includes ag biotech, farm management software, farm robotics and equipment, bioenergy and biomaterials, novel farming, agribusiness marketplaces, midstream (traceability, processing technology and logistics) and innovative food.

The new megatrend

Regional interest in agtech remained robust in 2019. Europe posted a 94 per cent increase in funding over 2018 and Latin America accounted for $1.4 billion with 40 per cent more deals than in 2018. Africa also doubled investments. Canada came in seventh of the top 20 countries, with just more than $500 million.

“Food tech and agtech are no longer the red-headed stepchild of the VC world as sustainability becomes a 21st century megatrend,” according to the report.

The report also stated that agtech investments are increasingly being made by more generalist investors, rather than specialty funds. It noted the addition of SoftBank and Temasek as additions to top investors.

Smardon agreed that many more companies that weren’t traditionally interested in agriculture and food technology are now jumping in, including Microsoft, IBM and SAS.

Back in Canada

For Smardon, the idea is to take strategies that have been successful for the 2,500 innovations that have come to market under Bioenterprise’s watch since 2005 and apply them across the country through the FCC agreement.

Bioenterprise partners with locally based non-profits to deliver mentoring, business and financial advice, networking and other services mainly to small and medium-sized enterprises. It already has agreements in the Maritimes, Ontario and B.C.

In the Maritimes, InnovaCorp in Halifax is an early-stage venture capital organization that funds entrepreneurs in IT, clean tech, ocean tech and life sciences. The Quebec partnership is with EcoFuel, a Montreal-based clean tech venture capital fund that also provides mentoring, business training and networking services.

“There are a number of critical components to moving a product or service from the bench to the marketplace,” Smardon says, noting that the work Bioenterprise does with its clients can take as little as a few months and as much as two years.

Having the FCC as a national partner will not only lift the prospects of Bioenterprise and the businesses it supports, it will also send strong signals to private investors that agtech is a good place to make money.

“Investor interest takes a long time to change, but with the intelligence and credibility that FCC brings, it’s only going to help attract more investors to the table,” Smardon says.

The window of opportunity is not that large and competition is fierce, he says, so it’s important to move quickly in order to encourage the “innovation ecosystem” that will boost Canada’s prospects in the future.

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