From Hi-Tech to Agtech: Israel’s VC Pioneer Hillel Milo Discusses New Fund

April 11, 2016

Hillel Milo is one of the pioneers of the venture capital industry in Israel. After working in the metal, energy and electronics industries during his early career, he became a high-tech venture capital investor in the late 1980s.

He co-founded Walden Israel, one of Israel’s first venture capital funds in the early 1990s,  Clal Venture Capital in 1995, where he was CEO until 2002, and Infinity VC in 1997.

Then in 2007, he turned his attention away from hi-tech towards natural resources co-founding AquAgro Fund, a $50 million fund that invested in nine food and agriculture, water and energy companies.

The fund has made three exits to date, and the firm is now raising its second fund, targeting between $100 million and $200 million and focusing more closely on agriculture. AgFunderNews caught up with Milo to hear more about the fund and his transition to the world of ag.

Why did you decide to transition over to agtech from hi-tech?

Not out of boredom. After four traditional tech funds which yielded multiple exits, I decided to look into future growth markets outside hi-tech. After a few months, I came to the conclusion that the world’s very basic but growing needs — water, food and energy — represent a huge opportunity because they are scarce resources. Facing a given amount of arable land and water, it is clear that we have to develop new technologies and products to produce more with the same amount of land and water. I looked in-depth into what Israel has to offer in these fields and came to the conclusion that we can repeat what we did as a VC in the tech industry with food and agriculture:  to make Israel the second most significant tech hub after the US.

Having been one of the pioneers of Israel’s VC industry, I wanted to do another pioneering step and establish a new field for VC in Israel with AquAgro Fund.

What is your investment thesis for agtech?

When considering an investment in agtech and looking ahead to our next fund AA II, we look for late stage, revenue-making companies which address a major market need. Defined as “must have”, the solution has to be a “game changer”, the company must have a strong intellectual property and know-how, and good management and partners. We have chosen to invest at this stage because we see a serious gap in expansion capital for food and agriculture technology companies and also to reduce risk and shorten the time to exit.

What was your first successful investment in agtech?

It has to be Evogene, a NASDAQ listed company, which we exited a couple of years ago after being in the portfolio for four years. This is considered a “home-run.”  We have a lot of respect for the management and employees of the company for their achievements in a challenging and complex field.

What is your ideal exit?

Firstly, we are grateful for any successful exit. You need the financial markets to align with your company, even with the best performing company, to have an IPO, which is a combination of a large financial round and a potential exit. After the lockup period, if the markets are still aligned with you, one can sell with a good multiple. One can’t “order” an acquisition. There needs to be a meeting of a buyer and a seller and at the right price, so it’s another kind of alignment with a smaller probability of it happening.

The optimal exit would be an acquisition on the tail of an IPO process with a high pre-money valuation which creates an extra motivation for the acquirer to offer a good price to stop the IPO. And they pay cash.

You’re now launching your second fund. How will it differ from the first fund and why?

It will differ firstly in its complete focus on food and agtech and water, and the second a focus on late-stager companies. We are targeting between $100 million and $200 million, and will invest $10 million to $15 million per deal. The team will be enlarged by two additional partners with experience in the global food and ag markets. Also, we added two senior advisors with C-level experience in the food and ag industry with significant exits.

How does your investor base differ from that which you had in your hi-tech funds?

In Aquagro Fund I the investor base was almost purely family offices because that was a pioneering fund and so was not suitable for institutions. In my previous four hi-tech funds, the investor base was fund-of-funds, pension funds, large banks, other institutions, and strategic investors.

In our next Fund AA II, we’ll have a combination of institutions, strategic investors, and family offices globally.

Have news or tips? Email [email protected]

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