“It’s been a bit of an experiment,” Rob Leclerc, co-founder of AgFunder, the online fundraising platform for the agriculture sector, tells Agri Investor.
Since closing its first deal in April, an $800,000 fundraise for agdata platform OnFarm, AgFunder has raised a total of $10.7 million across seven deals, mostly in the agriculture technology sector. The largest deal of the year was a $7 million capital raise for aWhere, a weather data company. And there are still two live deals hoping to raise nearly $3 million between them in the next 60 days.
AgFunder’s remit is set to expand in 2015 and will include larger, later stage investment opportunities and also possibly some farmland offerings, according to Leclerc. Of the $1.5 billion of deal flow that came across Leclerc’s desk during the year, 35 percent was agtech so there are plenty of other opportunities in the pipeline, he added.
But to move successfully into other agri pastures, AgFunder will probably have to expand its investor base beyond the 1,000 investors representing $1.7 billion of investable capital registered with the platform, because most of the investors are focused on technology, admits Leclerc.
What else has Leclerc learned about his investor base? That demand is not always as it seems.
“We don’t know when or why a company will get funded or not,” said Leclerc. “The demand for our products – the companies listed – has been very interesting because one company might get hundreds of visits to its profile page on the website, but then receive very little actual investment demand after their campaign goes live.”
The company does poll some of its investors at various stages during the investment process to get a better idea of where demand and allocations to agri lie. And it will use this feedback to curate more companies in popular subsectors, said Leclerc.
Next year the platform will embark on a partnership with broker dealers Wealth Forge and be able to start charging fees for its services. Leclerc himself is currently studying to take his broker dealer exams as part of a longer-term plan for AgFunder to become a broker dealer in its own right.
“At some stage next year we will look to get our own broker dealer licence,” says Leclerc. But this could go even further, he adds.
“We have also stepped back and thought ‘what’s the big picture?’ Because we see this as potentially a precursor to becoming an agri-focused investment bank. When I think about the role an investment bank might play: a broker dealer is the infrastructure that connects capital to investment opportunities in a process that is traditionally very relationship-based. But this is changing as information becomes more freely-traded and we could move to a marketplace based on broadcasting information like AgFunder does. It is early days for the globalisation of the private capital markets.”
The process for launching an offering on AgFunder is quite simple. It starts with a private preview of a company where typically a company will pick up a lead investor and with them set the terms for the wider offering. This also starts the due diligence process. The next stage is a webinar. These are typically attended by around 85 people ranging from venture capital investors, private equity workers, family offices, high net worth individuals, press, research analysts, potential end customers of the product in question, strategic partners and more. It’s a real mix, but this is what makes these webinars so useful, argues Leclerc.
“The Q&A part of the webinars are very insightful because, while VC investors will usually have the same questions they ask every company, we also have potential customers dialling in and asking questions a VC might never think of. We have also had PhD scientists asking questions which adds to the whole suite of independently-minded questions during webinars. I do love that about that stage of the process.”
Leclerc also polls participants of each webinar to help provide a better guide to demand and allocations.
After the webinar, the company will continue discussions directly with potential investors over email or face-to-face meetings.
The typical timeline of about 120 days may have to be extended at some stage to accommodate larger, later stage deals, adds Leclerc, however.
“Although we do like the idea of having the countdown with a start and end date, we have learned that the due diligence process might need more time and currently we can provide a discretionary extension if needed.”
What else has Leclerc learned? “That we need quadruple backups of software and databases!” To this end Leclerc is hiring two engineers to work on algorithms that will help record investor preferences and activity to help show them the deals they would most likely be interested in, or “precision marketing” as Leclerc calls it. The platform is also likely to add at least another three people during 2015.
AgFunder was established in December 2013 to help “solve the problem that the investment market is highly sub-optimal and relationship-based”, Leclerc told Agri Investor in April. “The problem we are solving is bringing both sides together,” he said at the time.