Spruce Capital’s Malaysian Life Sciences Capital Fund II has recently started investing in agtech. Ganesh Kishore, chief executive and co-managing partner of Malaysian Life Sciences Capital Fund, who has over 30 years of experience in agriculture technology, shares his views on the sector.
When did MLS Capital first start investing in the agriculture sector?
MLS Capital Fund I was formed in November 2006 and invested in 12 portfolio companies. Seven of them are listed on Nasdaq or the New York Stock Exchange.
Fund II was formed in early 2014 and we just closed the first round of financing in January 2015.
What specifically within the agri space is the firm interested in?
Our interest in the agri space is spread across a wide range of areas, almost everything. We are interested in improving the productivity and the consistency of the productivity, with respect to drought management.
Adding value to agricultural waste is another focus area of ours, taking agricultural waste and transforming it to fuels and adding value to the food and feed side of the business as well.
Basically, any technologies that can improve the soil efficiency and land productivity, turn wastes into value-added assets and boost the sustainability of agricultural production will be an interest of our fund.
Although we’re not interested in medical devices or pharmaceuticals, all other aspects of biosciences which impact human food needs and environmental needs will be of interest to us.
What is the difference between Fund I and Fund II?
Fund II started investing in January this year and we have been evaluating deal flow and picking the right targets.
To date, we have made three investments: Provivi, a bio-based pest control provider, GreenLight Biosciences, which makes renewable chemicals, and Consumer Physics, an Israeli start-up that builds a pocket spectrometer for smart phones.
Compare to Fund I, which invested in agriculture in broadly, Fund II is very much focused just on bio-greentech companies.
The investor bases for the two funds are different. Fund I invested in Malaysia-centric companies which means it had to have a degree of relevance to Malaysia. Fund I purely attracted financial investors and they are all Malaysian investors. Fund II attracts global institutional investors.
Fund II has a few returning investors from Fund I including the anchor investor in the previous fund and some Malaysian investors who do business in the agriculture space.
The investor base for Fund II is evenly divided between industrial institutional investors or business investors and financial investors, ones that invest for the return purposes.
Malaysia has lots of natural resources, and investors want to maintain production. However, the country imports lots of rice, soybeans and corns in order to grow livestock, which makes sustainability and food security long-term concerns.
What is Fund II’s investment strategy?
Fund II is about accessing technologies globally and will invest in the US, Europe, Australia, China, India and Japan. We are looking for technologies that are not common, or the ones that are won’t be commercialised any time soon but can be customised to local regions.
The plan next is to raise more capital for Fund II and make one or two more acquisitions with the new fund by the end of the year.
What do you think of the competition coming from big Western agtech VC funds?
There are not that many people in the bio-greentech space and we don’t look like firms like Finistere or Google Ventures as competitors.
The ecosystem in the bio-greentech space is much smaller compared to agtech in general, and we partner with pretty much all the companies [in this space] in order to build the business.
We are considered as one of the marquee investors in the industry with a good track record and we bring companies from concept to reality.
There is going to be increasing consumption in the bio-green space because the emergence of the middle class, especially in Asia, and economic growth requires lots of food and energy. We are focused on the macro trends and want to make sure our [portfolio] companies fit into these macro trends.