Animal health company Elanco led the $8.5 million round, which saw existing investors Bayer, Syngenta Ventures, Alexandria Venture Investments, ARCH Venture Partners, Flagship Ventures, Harris & Harris Group, Hatteras Venture Partners, Mountain Group Capital and Pappas Capital increase their commitments too.
AgTech Accelerator is still targeting a final close on $25 million to $30 million and hopes to bring in one or two more investors to close out in Q1 2017, according to John Dombrosky, CEO of the organization.
AgTech Accelerator is not your typical accelerator; in fact, Dombrosky admits it’s probably more like a venture development organization, according to our definition in the Guide to Startup Resources in Food and Agriculture.
Functioning more like Flagship Ventures than The Yield Lab, one of AgTech Accelerator’s key tenets is to commercialize technologies coming out of leading ag universities. It also aims to fund these businesses throughout their life cycle, either through its own fund or with its strategic partners.
However, it’s still a little early for this approach, and the investment vehicle is more likely to invest in entrepreneurs that have already formulated an early business plan, said Dombrosky.
“Agriculture has not had a lot of venture capital funding compared to other industries, so there hasn’t ben that incentive for ag faculty members to translate their discoveries into businesses,” he said. “We have begun to see some great traction with our university partners, but it will take some time for their thinking to evolve commercially.”
Dombrosky is keen to move ahead with making investments as soon as possible and has started to assess a few potential first deals.
“We are casting a pretty wide net in terms of deal flow and looking at a lot of different sectors from digital to biotech, and with Elanco coming in, that’s expanded our strategic participation into animal health,” he said. “The value chain is well known but organizations within it tend to live in their own windows and it’s a very siloed industry, so we love the idea of investing across those windows.”
Having said this, AgTech Accelerator is likely to look at on-farm technologies first, with the aim of increasing farmer efficiency, profitability and product marketability, said Dombrosky.
Personally, Dombrosky is particularly excited about the potential for software innovations to transform the industry, coming from Thomson Reuters where he built platforms for the company to improve workflow sequencing decisions and interactions with third party contractors like lawyers and investment bankers.
“I still think that ag has a long way to go in workflow-enabled decision making,” he said. “The space is frothy with a lack of barriers to entry, and that can impede the quality of products coming out, so there’s still a lot of opportunity to build a platform of value for farmers.”
Adoption of digital ag tools on the farm is still very much a challenge, he added, referring to it as a catch-22 situation when it comes to developing effective tools for farmers.
“We know that the digital and data workflow and agronomic management prize is huge; the value to offer farmers is gigantic, but currently it feels like we’ve built a bunch of storefronts that we know will be huge someday, but no-one is shopping there yet!”
Dombrosky still plans to put two business ideas in front of the AgTech Accelerator board before the end of the year.
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