If you’re in-tune with the Valley, watching investment trends and looking for new opportunities, chances are you’ve started looking into Ag.
In February in Palo Alto at the From Farms to Foodies, a “power breakfast” organized by Cleantech Group, Silicon Valley Bank, and Wilson Sonsini Goodrich & Rosati, big-ag was the big-talk. In the presence of some of the space’s most influential leaders—folks from Monsanto, Khosla Ventures, Climate Corp and others—the audience heard the resounding message: the world of ag investment is becoming greener.
With almost 90 industry leaders in the audience, including BASF Ventures, Dow Agro Sciences, Blue River Technologies, Silicon Valley VCs, sustainability funds, family offices and angels, the forum’s listeners were as qualified as the speakers. On the panel’s side of the stage sat Ryan Kottenstette of VC Khosla Ventures, John Hamer of Monsanto Ventures, Henrick Skov Laursen of Grundfos, Lance Donny of OnFarm and I.
The CleanTech Group opened the discussion with convincing data showing a positive trend for food and ag tech. Having tracked deals since 2009, they found that venture capital interest in agriculture and food sustainability has increased over the last five years. Now, it has reached $277 million over 57 deals.
The big news in agtech from 2013 was Monsanto’s nearly $1 billion acquisition of Climate Corporation, a company comfortably nestled in the portfolio of Khosla Ventures. With Monsanto and Khosla Ventures reps in the same room, everyone waited for someone to address the transaction that changed the way many investors see ag.
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Moderator Kerry Cebul wasted no time asking for elaboration: “Khosla’s funding of Climate Corporation and Monsanto’s subsequent acquisition thrust the opportunity of Ag cleantech into the spotlight,” he said. ‘While other investors and the general public are beginning to understand the nature of this opportunity, your respective bets on Climate Corp reflect a huge belief in the power and potential of big data to transform the industry.”
Addressing this question, panelist John Hamer noted that Monsanto hadn’t heard of Climate Corp until January of 2013. Regardless of the unknown name, Hamer reported that many of Monsanto’s customers and employees were already using Climate Corp’s services.
The original intention was a simple partnership. Monsanto wanted to better understand what happens once the seed go into the ground, and Climate Corp wanted to benefit from Monsanto’s network. But as the two companies started to work more closely, the companies’ cultural similarities showed there could be a bigger collaboration. “You’d walk into Climate Corps office,” said Hamer, “and there were pictures of farmers on the walls, just like at Monsanto.”
Many on the outside of the deal viewed the acquisition as an aggressive play by Monsanto for world domination. But, Hamer told a different story.
“Everyone agreed that Climate Corp would remain its own company and we wanted to keep an arms length relationship,” he said. “But since the acquisition, Climate Corp has pulled in Precision Planting (which Monsanto acquired for $40m in early 2012) and Monsanto’s Integrated Farming Systems.”
Monsanto estimates that the big-data market will grow to $20 billion by the year 2020. Now that Monsanto has upped the ante, how will other big players in agriculture like BASF, Syngenta, Dow, DuPont, Pioneer, John Deere, and Case respond? Will they sit on the fence or will they try to roll their own? Or, will they look to acquire the next generation of startups, including OnFarm, 640Labs, FarmLogs, AgSmarts, and HydoBio?
If acquisitions become the name of the game, there could be some very attractive exit opportunities for some of the new entrants in the space. Though the exits may not be quite as huge as Climate Corp’s—which has been operating since 2006, and had over $110 million in funding before the deal—there is undoubtedly the chance for small ag companies to make some big deals.
FEATURED PHOTO: John Lemieux/Flickr