Editors Note: Joseph Regan is a managing partner at Bioenterprise Capital, a Canadian VC firm investing in agriculture technology. He was recently a panelist on Making the Case for AgTech in the Portfolio at the Global AgInvesting Conference in New York.
If you’re searching for opportunities in AgTech, you may want to start looking north. According to the Canadian Venture Capital Association, Canadian agri-businesses attracted a total of CAD $38 million in venture capital in 2014, placing the sector fourth in overall VC rankings. That same year, Canada ranked fifth in global agricultural exports, with sales totaling $43.6 billion.
This might not seem particularly surprising—the agriculture industry has always been strong in Canada given its natural resources. But now, companies are becoming increasingly focused on the bio-revolution that’s transforming how the world produces not just food, but industrial materials, pharmaceuticals, and fuels.
The industry today encompasses more than Prairie wheat, PEI potatoes, and maple syrup sales. It’s also about building bio-cars from ag-based fibres, composites and foams; creating naturally derived pharmaceuticals and functional foods that help fight disease; cutting carbon emissions by finding valuable uses for agricultural wastes; and boosting agricultural productivity.
While Canadian AgTech startups (and established companies) cover the full spectrum of the space, the country has developed strengths in the areas of inputs, bio-products, bio-energy, IT, food technologies, and crop science.
A year of headline-grabbing deals
In a year that saw a global explosion of investments in AgTech, Canadian companies enjoyed more than their share of bang.
Winnipeg’s Farmers Edge shook hands on a deal with Kleiner Perkins last November to expand their plug-and-play solutions for optimizing crop inputs and maximizing yields. The financing will also help this global leader in precision agriculture and big data to expand further into global markets.
Last September, Quebec’s Agrisoma Biosciences Inc. attracted CAD$8 million in Series A financing to commercialize the world’s first non-food oil crop. “Resonance Carinata” oil is uniquely suited for biofuel production, while the meal that remains after the oil has been extracted can now be marketed as an animal feed, thanks to recent regulatory approval.
That same month, Vancouver’s Enterra Feed Corporation secured CAD $5 million in financing from the British investment firm Wheatsheaf. The influx of dollars will allow Enterra to continue developing a proprietary process that transforms food waste into valuable commodities: protein, natural oils, and nutrient-rich fertilizer.
The summer saw Plantform Corporation enter into a joint venture with Brazil’s PharmaPraxis to produce biosimilar and biobetter drugs using their patented system that transforms tobacco plants into miniature pharmaceutical factories.
And earlier this month, Mirexus Biotechnologies Inc. secured US $3.5 million in equity financing to bring their novel PhytospherixTM nanomaterial to nutrition, cosmetic and biomedical markets.
Innovation from the ground up
The Canadian government poured CAD $602 million into agriculture and agri-food research and development in 2012-2013. And, in the last two decades, the Canadian government has focused more closely on R&D investment in agriculture than the United States.
As a result, Canada’s large network of universities and research centers has been producing world-class AgTech research. Canadian research in agriculture, fisheries, and forestry ranks second in the world, according to a 2012 report on the state of science and technology in Canada.
With money flowing into agriculture, agriculture R&D technology has been gestating, and now there’s pent up supply with not enough capital for commercialization. This is across the board in AgTech.
Some prominent examples of R&D pairing with capital include: Ontario’s New Energy Farms licensing its planting technology to Syngenta for commercialization in Brazil; AbCelex Technologies Inc. partnering with a leading Irish poultry producer to develop disease-fighting antibodies for poultry; Solgear Bioplastics Inc. teaming up with Ex-Tech plastics to bring the company’s bioplastics to U.S. markets.
Funding gap for AgTech
Although Canada has a slew of innovation ripe for commercializing due to its robust R&D pipeline, much of it remains underfunded.
Government funding focuses mainly on research and start-up phases, while the majority of investors and lenders favor well-established companies. That leaves a big gap in the middle.
Until recently, only two Canadian VC funds—Avrio Capital and Bioenterprise Capital—existed to fund emerging and expanding companies in the bio-products and agri-food space.
Now that picture is starting to change. According to a 2013 Bank of Montreal report, private spending in the agricultural sector has grown at twice the national rate over the past decade.
In February, Canadian early-stage investor AVAC Ltd. and Finistere launched a new arm focused on AgTech, Verdex Capital. However, additional Canadian VC players aren’t expected to enter the market, because the barriers to entry (VC track record and deep expertise in ag) may be prohibitive.
The fundamentals are lining up for new companies and technologies in the agriculture sector. Export Development Canada’s forecasts continued growth in AgTech, and notable players, like Kleiner Perkins, have been pulling the trigger on deals. We expect many more Canadian up-and-comers to attract international attention and for investors to seize these opportunities.
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