Kleiner Perkins Caufield & Byers (KPCB), the long-standing US venture capital firm commonly associated with the internet boom and life sciences, is increasingly turning its eye towards agriculture technology.
Founded in 1972, the firm is one of the largest, most established venture capital firms in Silicon Valley and has always focused on investing in “disruptive” technologies, including huge successes during the 1990s internet revolution such as Netscape, Google and Amazon.
The firm added sustainability as a focus area 10 years ago, and since then has come across an increasing number of agtech opportunities. It most recently invested into Farmers Edge, the data management solutions platform for farmers.
“We don’t have a specific mandate to invest in agriculture but we are finding that technology is disrupting a number of different industries and sustainability is playing an increasingly important role,” Brook Porter, partner in KPCB’s Green Growth Fund, told Agri Investor. “Agriculture is really primed for disruption.”
KPCB looks at three main sectors within agtech: agdata and precision agriculture, alternatives to chemical pesticides and fertilisers, and seed technology and breeding.
Farmers Edge fits into the first category and was one of a vast collection of agdata service providers the firm could have invested in – from satellite imagery to on-the-ground data collection to cloud computing – that enable farmers to make better decisions, according to Porter.
“There are a host of different companies offering agdata services with interesting angles on how to help farmers,” he said. “But at the end of the day, farmers have a limited bandwidth and have to make several key decisions each year based on input from trusted advisors. They can be very sceptical about technology and it is difficult to change their behaviour.”
This means that some technologies “fall apart at the farmer”, said Porter. “They have the system and hardware but when they find it doesn’t quite work as easily as they’ve been told they often abandon the whole thing.”
Farmers Edge’s service, however, includes “boots-on-the-ground agronomists” that help farmers implement technology solutions and give agronomic advice alongside the technology, argued Porter.
“As a truly independent company, Farmers Edge also has a fundamental advantage over some of the biggest agribusinesses that are not always trusted by the farming community,” he added.
There are some risks within the agdata sector too as farmers increasingly express concerns about data privacy. The sector is also likely to come under scrutiny from regulators.
“Data privacy is a big concern that is top of mind but analogous to any emerging trend today; you can compare to social networks like Facebook and LinkedIn in that as soon as consumers get value out of sharing data, they are often willing to do so,” said Porter.
Another area that Porter is particularly excited about is the production of chemical-free inputs. But again there are only some companies that offer an appealing investment opportunity and KPCB is likely to lean towards synthetic biological solutions – the production of molecules – to tap this opportunity, according to Porter.
“There is growing consumer demand for organic food and increased calls for the reduction in use of pesticides and other carcinogenic chemicals,” said Porter. “Lots of companies have gone after solving this problem but solutions today are often bespoke and limited in their application. There are challenges in scaling up certain biologicals businesses around plant extracts, for example. Synthetic biology is a promising area, however, which I think can potentially yield very cost effective and scalable solutions.”
In seed technology and breeding, the Green Growth Fund has already invested in Kaiima, a next-generation seed and breeding technology company.
The fund closed on $764 million in 2008. It is still making investments and has another year left of deployment. Investments tend to be around $30 million into each deal but the fund does do some smaller, earlier-stage deals too, according to Porter.
The team can spend three to nine months in a space to fully understand the supply chain and peers.
Most of KPCB’s investors have been with the firm for a long time. Those in the Green Growth Fund include the University of Michigan, the David & Lucile Packard Foundation and Schmidt Family Office, according to Private Equity International.