Institutional investors are increasingly interested in agtech investments, according to Ron Meeusen, managing partner at Cultivian Sandbox Ventures, the US venture capital firm dedicated to food and agriculture technology.
“But whether that interest is high enough for institutions to actually commit is still an open question,” Meeusen told Agri Investor.
Meeusen raised his first fund — Cultivian Ventures LP — in December 2008 when the markets around him and his partner, Andrew Ziolkowski, “were crashing in flames”. The 10-year typical VC fund is fully invested and has already exited two out of nine investments through a sale and an IPO.
Cultivian has now partnered with Sandbox Industries, the venture firm established by ex-Monsanto employees, launching Cultivian Sandbox last May. The 10-year fund is currently on $90 million and still open. It recently invested $2 million into AbCelex, the Canadian animal feed technology firm.
When Meeusen first starting speaking to institutional investors they were mildly interested but the sector was too unproven for most of them. For this reason the majority of demand for both of Cultivian’s funds has come from high net worth individuals and family offices. More recently, impact investors have also started paying attention to the positive effect these technologies can have on a greater scale.
The biggest barrier to institutional capital is the conservative nature of consultancy firms, which Meeusen describes as gatekeepers.
“Many of the institutions we speak to rely heavily on these advisory groups and most of them tend to be conservative,” he said. “They like to see a 10-year history and don’t want to invest before Fund III or IV. While interest is growing I think they still need to get comfortable.”
When Cultivian launched, the agtech sector was also overlooked by much of the venture community, said Meeusen. Even after the first fund proved successful, the market still did not pick up, much to his surprise. “But what did happen was that around 54 funds wanted to co-invest with us,” he said.
“I think part of the reason for the market’s slow pick up is the memory of the clean tech fund play five to six years ago. Several funds jumped in with both feet, very aggressively and made some mistakes. So with that in mind many players were more cautious when getting into ag and food tech.”
Other firms did start to appear, including Sandbox. Khosla Ventures was another early player in the sector, albeit from a more general venture capital place.
The slow pick up is not for a lack of deals; Meeusen’s team sees about 50-60 different agtech companies every month. “There are an impressive number of deals and opportunities in this sector and quite candidly more than we can handle,” said Meeusen. The wealth of opportunity is part of the reason Cultivian partnered with Sandbox on the second fund, to get extra manpower.
Meeusen is now intrigued to see what other players enter into the agtech sector and has noticed a trend for universities to form regional initiatives to foster and incubate agtech companies.