Venture alternatives

Big data and precision ag have been attracting VC attention. But what of other agri-related opportunities for the venture set?

When thinking about venture capital investment in agribusiness, most people understandably tend to focus on ‘big data’ plays, precision technologies and the like. Not only do VCs have a long history of investing in and around TMT trends, but last year’s $1 billion deal for agri data provider Climate Corporation caused a number of VCs to take agtech seriously if they hadn’t before – the company raised nearly $109 million from 17 investors across four rounds before selling to Monsanto, according to venture database Crunchbase.

But at least one VC source has complained to me that the precision ag and big data sub-sectors have become overcrowded and stressed the need to find new opportunities at better valuations. A recent trip to San Francisco made clear that not everyone feels that way – indeed many firms are just starting to explore those sectors – but it did make me think about where else venture capitalists could play an important role and benefit from the agriculture story. As another VC source put it, referencing a Wayne Gretzky quote that seems to resonate with fund managers: “it’s about where the puck will be and not where it is now”.

In much the same way family offices can be pioneers in agri and a great source of capital for start-up projects focused on primary production – the topic of last week’s letter – I wonder if the venture capital industry’s experience in backing start-ups could potentially be applied to developing agri projects.

Many forms of primary production might not yield the returns that many VCs want – which is 25 percent plus, according to one agri fund manager. But there are ways to invest in more than just primary production – the whole value chain of agricultural production provides ample opportunity for innovation – that access macro trends in food demand, including food safety and traceability. Trends that hit our headlines this week.

Food safety and sustainability are also issues that fit well with the characteristics of venture capital firms, according to Rohit Shukla, chief executive of the Larta Institute, an organisation focused on incubating and commercialising technology start-ups.

“Venture folks are primarily opportunistic and when looking at the demographics of world population and organic and nutritional produce consumption, are seeing an enormous amount of economic activity now even if they were seen as niche areas before,” he told me. “Sustainably grown produce is a movement that has grown regardless of interest from the investment community previously.”

What’s your view? Where can/should venture capital play a bigger role in agriculture and agribusiness development? Do get in touch at Louisa.b@peimedia.com or use our snazzy form to submit a story idea