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University endowments offer key support to agtech

Fall Line Capital co-founder Eric O’Brien tells Agri Investor how university endowments became the main investors in the firm’s second vehicle, an evergreen fund that closed on $200m in 2016.

University endowments have emerged as key supporters of agricultural technology, according to a co-founder and managing director at Fall Line Capital, a California-headquartered firm that invests in farmland and related tech.

Eric O’Brien told Agri Investor that their focus on long-term investments and the fact that many are already familiar with farmland have helped attract university endowments to invest in ag tech. He said that university endowments were the “predominate” investors within the Fall Line Endurance Fund, the firm’s second vehicle. A July 2016 regulatory filing revealed that the fund had raised $200 million from nine investors.

“They found us,” O’Brien said, explaining that after closing its first fund, a traditional 10-year vehicle, on $127 million in 2013 with commitments from a combination of universities, funds of funds and family offices, Fall Line was approached by a university he declined to identify that was interested in expanding its direct relationship with the firm.

At the suggestion of the University, O’Brien said, Fall Line began assembling an evergreen investment structure for the partnership and was approached by a second unnamed university that often invests alongside the first. Both universities eventually committed to the Fall Line Endurance Fund, according to O’Brien.

‘Periodic fundraisings’

He said that the fund is structured so that after an LP makes a commitment, Fall Line will invest the capital within an agreed time frame. From a fundraising perspective, O’Brien said, it is similar to raising a new fund every three or four years, with committed capital supporting investments that go into a single pooled vehicle. LPs are given the opportunity to exit during those periodic fundraisings, according to O’Brien.

“We didn’t set out, necessarily, to create this LP base with this kind of evergreen structure. It was always an aspiration of ours, we just didn’t think it was going to happen for a while. Serendipity brought it all together and they’ve been tremendous partners since then.”

Fall Line’s strategy calls for investments in technologies with the potential to impact the firm’s farmland holdings. O’Brien said that, while the firm initially looked for those technologies to have that impact within five years, that time frame has stretched longer as the firm has moved to invest in more biotech-focused ventures that often have long development processes.

“We just didn’t think it was going to happen for a while. Serendipity brought it all together”
Eric O’Brien, Fall Line Capital

In December, Fall Line participated in a $12 million Series B funding round for Asilomar Bio, a San Francisco-headquartered company that uses chemistry, genomics and data science to produce compounds designed to improve agricultural yields. The firm’s other biotech investments have included Benson Hill Biosystems, Green Light Biosciences and Trace Genomics.

O’Brien said that he has been shocked at how proactively entrepreneurs in the sector have been coming to Fall Line, adding that the firm does very little outreach and that he devotes the bulk of his time to farmland investments.

“It just shows that the entrepreneurial community is hungry for investors who can add value,” O’Brien said. “Now that we’ve had a couple of years of run time and you’ve seen portfolios being created among the various investors, and you’ve seen some companies do well and accelerate and other companies fall by the wayside, people are beginning to get a proxy for track record.”