Scotts Miracle-Gro Company’s $50 million venture capital fund will target software related to indoor agriculture environment management and analytics.
The Marysville, Ohio-headquartered consumer lawn and garden products provider partnered with venture capital firm Touchdown Ventures in June to launch 1868 Ventures, a corporate venture unit focused on plant genetics, natural fertilizer and input alternatives and technology related to controlled environment ag.
“I think the venture-backable opportunities are most likely to be in software that controls the indoor environment, that may automate it or may analyze how different conditions affect the crop,” Touchdown principal Selina Troesch Munster told Agri Investor. “That is an area that is interesting for venture investment. Whether or not it is ready for venture investment in terms of product development is yet to be seen.”
1868 will focus its investments on early and growth stage companies that are generating revenue and are active in markets where New York Stock Exchange-listed Scotts is a logical customer or partner. Investments will focus largely in North America and range between $250,0000 and $2.5 million, with reserves available for potential follow-on investments.
Munster explained that 1868 is designed to service both Scotts core lawn care and nutrients business, as well as Hawthorne Gardening Company. Hawthorne was established in 2014 and is a business-to-business distributor focused on provision of products related to the indoor cultivation of cannabis and other crops.
Touchdown was also founded in 2014 and focuses exclusively on vehicles where capital is provided directly by a corporation. Its dozen clients are active in industries ranging from retail and healthcare to telecommunications and material science. Munster said Touchdown functions similarly to an investment advisor in that it operates funds and makes recommendations to investment committees it has helped establish.
In addition to 1868, Touchdown’s other vehicle with a connection to food and agriculture is eighteen94 Capital, a venture capital arm of Kellogg Company with investments including moringa-derived products provider Kuli Kuli.
Munster said that in establishing venture units, corporations are generally motivated by a desire to inform corporate strategy, find a way to accommodate smaller investments and signal their interest in innovation to young potential employees.
“In food, in terms of the adoption of venture capital as a tool, it is becoming almost table stakes at this point,” said Munster. “Most of the industry is recognizing that it is an important way to identify new brands and ingredients and to support the agricultural ecosystem a little further away from the consumer.”
Corporate venture market observers and participants told sister publication Venture Capital Journal in February 2019 that they expected at least 20 percent of such units to close in the event of an economic downturn.
Munster said although there have been instances of corporations choosing to slow the pace of investment from their VC units in the aftermath of pandemic-related volatility, it is too soon to say how long-lasting or widespread any pullback is likely to be.
“We’re seeing similar behavior as we see in institutional investors in the sense that there has been a lot of focus on our portfolio companies and making sure those companies are set up to survive and succeed, addressing each one and making sure it is getting the attention it needs in these challenging circumstances,” Munster added.