Investor lines blur in LatAm’s young agtech markets

The relatively early stage of development of Latin America’s burgeoning agtech markets makes traditional distinctions between venture capital, corporate and private equity investors less relevant in the region, according the authors of a report.

Ingrid Fung, an associate at California-based Finistere Ventures, told Agri Investor the overlap between accelerator venture stages of investing is particularly high in the region.

“There’s a lot of corporate VCs that are active there and funds that we would normally classify as private equity funds by Pitchbook’s definition that were active in the venture capital, early stage investment market in Latin America,” she said. “If we had included those backing statuses and filtered through them, we would have lost a lot of deal activity that was relevant.”

In the report, Finistere wrote that the overall market remains underfunded relative to the size of the region’s agricultural economy, but deal activity has grown at a “remarkably healthy” pace from $5 million in two deals in 2010 to $120 million across 35 investments last year.

Co-author Jennifer Place, also an associate at Finistere, told Agri Investor the agtech markets of Argentina and Brazil are by far the region’s most mature, despite only being active for no more than five years and funding coming mainly from local investors.

Fung added that although Latin American markets face unique challenges, the region’s status as a stronghold for biologicals and microbial research is helping to shift investors’ attention beyond precision ag and imagery.

“The universities in Colombia, Brazil and Argentina are very, very strong on microbial research because their producers have been dealing with microbial issues due to the climate for a long time,” Fung said. “They [investors] are anticipating pretty interesting solutions coming out of their research ecosystem.”

According to Place, many investors in Latin American agtech have focused on transferring proven technologies into regional markets.

As seen in the US, an initial focus on extracting data from the farm and utilizing imaging and precision-farming technologies came before moves into fintech, which can prove challenging for international companies operating in Latin America, said Place.

Fung added that Finistere’s regional partners anecdotally report increased levels of interest in Latin American agtech from US corporate and private equity investors.

Breakthrough exit

A landmark exit came late last year with the announcement that drought resistant inputs provider Bioceres would pursue a listing on the US NASDAQ exchange through a reverse merger with special purpose acquisition vehicle Union Acquisition Corp, said Place.

Though it had many of the characteristics of ventures typically backed by VC investors in the US, Bioceres was funded largely by local private wealth sources, corporate investors including Monsanto and YPF and local ag-focused investment groups, she added.

Agrify, an ag inputs marketplace whose Series A attracted investments from Syngenta Ventures and Bunge Ventures, for example, is currently targeting US investors for its Series B, according to Place. Latin American agtech startups that are able to attract foreign investors can benefit from efficiencies created by lower local labor and research and developments costs.

“The dollars invested often go a longer way. They might have an outpost and local presence in the US for creating a sales pipeline or having more of the C-suite team members in the US to tap into the US investor base and US customer base,” she said.