Awareness of Israel’s agtech sector is growing, particularly in the wake of large deals such as the $65 million capital raise by Kaiima, an Israeli biotech firm last October, according to Nitza Kardish, chief executive, Trendlines, an Israeli early stage investment firm.
The deal attracted commitments from some heavy-weight investors including Hong Kong tycoon Li Ka-shing, through his investment firm Horizon Ventures, and the World Bank’s International Finance Corp.
But it is still an uphill struggle to attract investment, said Kardish.
“The current investment options for agtech firms are not sufficient. We still only have very few venture capitalists firms for agri in Israel and abroad,” she said.
This is not a function of Israel’s location, or distance away from the agtech hub on the west coast of the US however, argues Tal Bareket, chief executive, MiRobot, a robotic milking company. He doesn’t think that American agtech start-ups have it any easier.
“Israel has many start-ups but agtech is not the easiest sector to raise initial capital,” he said adding that it is not a major sector of interest for investors.
“In Israel, the internet, software and infrastructure for communications are the popular sectors.”
The agtech sector is also quite capital intensive, he added; MiRobot requires $8 million to complete its current project, and the time frame is long. “It’s not a sector for investors who want a quick return,” said Bareket.
However, there have been several success stories in recent months and there is a lot more opportunity on the horizon, according to Kardish.
“The potential for big data and precision agriculture is huge in Israel,” she said. “This is due to the connection – through the tech ecosphere – between the advanced IT sector and the sophisticated end users in the farming and agri sectors. The dialogue between the agtech sector and the agricultural sector is advanced and farmers are keen to incorporate tech innovation into their businesses. I think in two to three years, these sectors will experience a peak.”
There are also other avenues to raising funding that are growing traction. Crowd funding is an increasingly viable method of raising capital, according to several agri investment professionals.
And Edenshield, a non-toxic pesticide producer, is currently raising £1 million in Series A capital through OurCrowd, an Israeli fundraising platform.
“OurCrowd has links with angel investors in the US and it was an angel investor who supplied our first investment,” said Yaniv Kitron, chief executive, Edenshield. “We’ve also been on a roadshow with them in the US, which was useful in gaining introductions with investors over there. We found that angel investors were most interested in our project.”
Trendlines is also hoping to attract some government capital to the sector in public-private partnerships with its investors base that are mainly family offices from the US and Israel.
“The Israeli government sees the importance in supporting the country’s agtech sector, where many venture capitalists believe it is too risky to invest, and we have a strong partnership with them,” said Kardish.
This partnership involves the government matching each seed investment made by Trendlines and its investors. The government also plays a role in assessing the viability of each portfolio investment. After a two year time line, Trendlines will prepares these companies for their Series A capital raising round. Edenshield is one such company.
Trendlines was the first agtech incubator in Israel, according to Kardish.