Agtech fund targets $10m from farmers

AgTech Growers Alliance looks to bridge the cultural gap between tech developers and agri producers.

A new alliance wants to bridge the gap between agtech inventors and the people who use their products by getting farmers to invest in a $10 million early-stage fund. AgTech Growers Alliance (AGA), formed out of agri consultancy AgTech Insight, wants to eliminate the barriers to farmers’ uptake of new technology, by bringing in users of agtech products in as investors and advisors.

“We’re really trying to get growers more involved, because we think the success of this industry hinges on their buy-in,” AGA director of business development and strategy, Seana Hull, told Agri Investor.

Hull said the fund will primarily target early-stage companies, with the objective of improving prototypes based on feedback from its network of growers, and building go-to-market strategies around those products.

“Venture capital is great at helping technologies scale, and we’re not going to be competing for those deals,” said Hull. “It’s the early stage, sort of high risk, idea, prototype, early market that we’re focused on.”

AGA chief executive Aaron Magenheim told Agri Investor that agtech products often fail because their designers simply do not understand the day to day factors that affect how farmers use their products.

“Understanding the market is a huge existing barrier that companies have to get through and have not figured out how to get through in most cases,” said Magenheim.

Agtech Growers Alliance launched this month in the hopes of beginning deployment in the second half of the year.

“This isn’t a traditional sort of LP investor base so we’ll have to spend a lot of time recruiting growers as investors,” said Hull.  “In the first half of [2016] we’d like to get $5m so we can start putting the money out there. In the second half we’ll focus on the other $5m for an aggregate $10m fund.”

The benefit for growers, said Magenheim, is an opportunity to reinvest their profits in something beyond farming operations.

“Most of these people put 90 percent of their money or more back into their own business,” he said. “They’re interested in finding different ways to diversify what they’re doing. And this is [an investment] where they can use their years of knowledge and ability in agriculture.”

AGA’s management speaks confidently about their ability to achieve high success rates from their strategy, but the journey from prototype to market is fraught with risk. And a farmer investing in products he or she is also relying on to increase production is not a huge shift in that risk.

Still, Magenheim says farmers are interested in the opportunity to invest.

“Growers are risk takers. That’s what they do on a day to day basis,” says Magenheim. “The second they put out money and put seeds in the ground they’re taking a risk that the weather’s going to cooperate, that everything’s going to work out.”

AGA is still solidifying the details of its investment structure, said Magenheim. But the group expects to offer a 7-year investment horizon.