11% of H1 Canadian VC investments go to agri: CVCA

Protectionism and increased scrutiny of foreign investment into the US encourage investors to look at Canada, as appetite for direct institutional investment also grows.

The Canadian Venture Capital and Private Equity Association says agriculture-related businesses accounted for more than 10 percent of Canadian venture capital investment in the first half of 2019.

The CVCA said in its market overview report that the C$243 million ($183.7 million; €166.5 million) invested through 20 agribusiness deals, constituted 11 percent of Canadian venture capital activity for the first half of the year. CCVA’s definition of agribusiness includes both traditional and technology-focused investments.

While the overall venture capital market in Canada has seen a consistent expansion over the past five years, agriculture’s role in it has been flat, CVCA vice-president for research and industry advancement Darrell Pinto told Agri Investor.

“Roughly between 6 to 10 percent is the sweet spot for agriculture in terms of share of total dollars from venture capital,” said Pinto.

He highlighted a C$58 million financing round for Winnipeg-headquartered precision agriculture company Farmer’s Edge in 2016, as the market’s one agriculture-related “mega-deal” within recent memory.

Many Canadian venture capital firms invest across industries, Pinto explained, adding that one firm standing out for its focus on ag is Calgary-headquartered Avrio Capital.

The entire Canadian VC market is only about 10 percent of the size of its US counterpart, according to Pinto, who described the asset class as having developed gradually over the past 20 years.

Recently, he added, protectionism and increased scrutiny of foreign investment in the United States has helped encourage growth, with more international LPs beginning to explore Canada’s venture capital market, often through funds.

“They are looking around for dealflow everywhere in the world, as well as here,” said Pinto. “It seems there is this international diversion that is happening as a result of what is happening politically in the United States.”

Another recent change in Canada’s venture capital market Pinto highlighted was an evolution of approach among Canadian institutions. Whereas the C$400 million Canada Pension Plan Investment Board, for example, has traditionally made its venture capital investments through funds, Pinto explained, recently it has shifted partially towards a direct-investment approach similar to its activity in other asset classes, including ag.

“It’s a signal that institutions are seeing greater returns in this asset class [venture capital], both directly or indirectly through funds,” said Pinto.

Vancouver, British Columbia-headquartered Terramera – a company with offerings designed to enhance the performance of both conventional and natural crop protection products – announced Tuesday it had secured $45 million in a Series B round led by Ospraie Ag Science and Seed2Growth.