The agtech market is ripe for dealflow, according to Aki Georgacacos, a senior managing director at Canadian agtech venture firm Avrio Capital, adding that the firm will begin target data collection and analytics companies outside the crop input and yield increase sectors.
After a C$108 million ($84.2 million; €74.7 million) early final close on the firm’s third food and agtech focused fund in February, a little short of its C$125 million target, Georgacacos told Agri Investor that overall agtech start-up valuations are becoming more attractive.
Georgacacos said an explosion in investor interest and the number of agtech start-ups had lead to rising company valuations in 2015 but conditions for increased dealflow are improving.
“I think we’re now seeing a reset in valuations,” said Georgacacos. “Valuations are coming back into line and that’s leading to an increase in investment and M&A activity.”
Georgacacos said he expects Avrio to close on multiple acquisitions in a relatively short time as it moves decisively into the market.
“We’re looking at several deals across multiple sub-sectors. With a final close behind us, we are now fully in investment mode,” he said.
So far, the fund’s only portfolio company is Bioamber, a sustainable chemicals company turning plant matter into a variety of products, including some of the chemicals needed to make biodegradable plastics. Investments from the previous fund include precision irrigation and agri companies Hortau and Farmers Edge.
Georgacacos said the group will widen the type of agtech and data companies it looks at. Big data and precision agri could build returns in livestock nutrition and health monitoring, as well as food safety and supply chain monitoring, he said.
“Avrio sees considerable opportunity in natural and organic foods,” he added. “We see a lot of concern over food safety and nutrition that I think agtech can help address.”
The fund is less enthusiastic about downstream technologies Georgacacos said are less likely to contribute to fundamental efficiencies along agri value chains, like online purchase and delivery applications:
“We’re less bullish on e-commerce. You [are unlikely to] see Avrio making investments [applying] e-commerce to the food sector.”
Although opportunities have shifted between various sub-sectors since Avrio closed its first fund in 2006, the firm’s strategy of acquiring growth-stage agtech companies remains the same, Georgacacos said.
“We’re not deviating from our initial strategy of seeking out opportunities to invest in different stages of agtech with the opportunity to address specific and unmet market needs,” he said.
Avrio’s Fund II is fully deployed, but maintains some capacity for follow-on investments, Agri Investor reported in February. Fund III closed on C$108 million in February short of its C$125 million target, and investors include Farm Credit Canada, HarbourVest Partners and Export Development Canada, according to PEI Research and Analytics. Fund I closed on $75 million in 2006 and Fund II closed on $91 million in 2011. The firm has deployed more than C$200 million across 50 portfolio companies, according to its website.