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Paine Schwartz raising growth equity fund – exclusive

The New York-headquartered agribusiness specialists are seeking between $300m and $400m for a vehicle targeting earlier-stage growth equity investments across agribusiness sectors.

Paine Schwartz Partners is raising a fund dedicated to earlier-stage opportunities across the food and agribusiness value chain, according to market sources and a presentation delivered at the Agri Investor Forum in Australia last month.

Market sources told Agri Investor that Paine hopes to raise between $300 million and $400 million for a strategy targeting smaller companies seeking capital to expand distribution networks or offerings.

A Paine representative declined to comment.

“Paine Schwartz believes they have seen enough dealflow, particularly in the growth equity phase, and that those equity checks require less capital than what they need to deploy from their main fund,” a source told Agri Investor, referencing Paine’s Fund IV, which exceeded its $800 million target before closing on $893 million in early 2015. “They think it was an opportunity to leverage their existing platform.”

While sources say the fund is likely to leverage Paine’s existing focus and pursue investments across the entire agribusiness value chain, the personnel associated with the new effort have suggested that agtech will also be of greater focus for the new fund than in the firm’s previous efforts.

In a company overview in a presentation given at the Agri Investor Forum last month in Australia, three executives are listed under the heading of “Growth Equity Fund”: Dr. Steve Padgette, Spencer Swayze and Robert Berendes. Padgette and Swayze are identified as partners and Berendes is labeled as an operating director.

Padgette, a former Monsanto executive credited with playing a role in developing the most widely-used biotechnology trait used in agriculture, joined Paine as an operating director in November. Padgette went on to become a partner in January, according to his LinkedIn profile.

While his initial role is described in the profile as focused on advising Paine’s portfolio companies, his role as partner is described simply as “Growth Equity investing in the Food and Agriculture space”.

Swayze joined Paine as partner in January, according to his LinkedIn profile. Before joining Paine, Swayze spent three years as the director of natural resource investments at the University of Texas Investment Management Company (UTIMCO), according to the profile.

A second source told Agri Investor that Padgette and Swayze have joined Paine as part of the firm’s effort to develop a “more aggressive” strategy, with agtech as a particular focus.

“Steve and Spencer have very similar interests,” the second source said, highlighting each executive’s experience in agtech.

The source stressed that while they were not aware that a final decision had been made about how to structure the Growth Equity Fund, it could include a partnership with an existing venture capital firm active in the agtech market.

“There’s been a fair amount of discussion going on in the whole industry about whether there is a growing gap in the marketplace between venture capital and private equity,” the source explained. “The concomitant question, of course, is: if there is such a gap, is there an opportunity for VCs and traditional private equity players to collaborate to exploit them? It’s still an early-stage set of discussions.”

A third source echoed that the Growth Equity Fund would consider agtech investments, albeit within a wider focus on earlier-stage investments across the value chain.

“They’re saying it’s a focus,” the third source said. “The challenge is a lot of the agtech is still venture, it’s not yet growth, but I know their intent is to invest in agtech. The question is going to be: are there enough growth tech opportunities for them to invest in?”