OTPP gives agtech sector another reason for optimism

The Canadian pension’s venture capital arm made its first agtech investment in June, as it used its direct investment mandate to enter the alternative protein space.

Ontario Teachers’ Pension Plan’s venture capital arm, Teachers Innovation Platform, has been plugging away nicely for the Canadian pension since its launch in 2019, amassing a portfolio worth C$3.7 billion ($3 billion; €2.5 billion).

The late-stage venture capital and growth equity strategy is classified as a distinct asset class by OTPP and was among the best performing segments in its portfolio in 2020, delivering a 16.3 percent return as it outperformed stalwarts such as real assets, infrastructure and credit.

The innovation platform invested in its first food technology company earlier this month when it co-led a $226 million Series B for plant-based food development start-up Motif FoodWorks, which uses precision fermentation and pioneering material science tech to solve sensory and nutritional challenges in its sector. TIP’s other investments to date have included Elon Musk’s Space X, autonomous driving tech company Pony.ai and overseas study platform ApplyBoard.

The resemblance between OTPP’s approach to tapping into the agtech space and that which has been pursued by CPP Investments through its Climate Change Opportunities strategy – also launched in 2019 – is uncanny.

Both are in-house units that favour direct investments over fund placements – TIP wants to ideally hit an 80 percent directs and 20 percent funds split over time. Both divisions have a mandate to invest in disruptive technology companies; they are intended to protect the pensions from climate change related risks and policy shocks, and both want to secure exposure to emerging sectors.

Small wonder, then, that both Canadian pensions decided alternative plant-based protein was the right place to make their inaugural agtech investment; CPP Investments’ climate change strategy made its debut investment through a $50m direct placement  into alternative dairy start-up Perfect Day in 2020.

“Ontario Teachers’ has significant investment experience in natural resources and farmland – part of TIP’s rationale exploring food and agtech came from perspectives gained from Teachers’ experience in these areas,” Teachers’ Innovation Platform North America managing director Rick Prostko told Agri Investor.

“Teachers’ is committed to a net-zero carbon future and is interested in supporting emerging companies with platforms and technologies that accelerate this reality. We’re proud to invest in companies like Motif, which bring more plant-based foods to plates worldwide by making them better-tasting and more nutritious,” Prostko said.

Not only are these VC units and their underlying goals a boon to the alternative protein sector – which has seen deal value double every year since 2018, when it was worth $500 million, rising to $2.3 billion in 2020 according to AgFunder data – it is good news for the agtech sector as whole.

Whether start-ups are pioneering biological pesticides, land-based aquaculture, carbon sequestration, enhanced seed technology or indoor farming, they’re typically capable of satisfying a handful – if not all – of the environmental and emerging market protections and investment exposure institutional LPs are clamoring for.

At a time when more and more LPs are either dipping their toes into or expanding their direct and co-investment capabilities, CPP Investments and OTPP are unlikely to be the only pensions carving out in-house VC units with appetite for agtech.

That gives the sector a very good reason for optimism.