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Kleiner Perkins Exits Farmers Edge as ‘Canada’s Warren Buffet’ Buys Stake – exclusive

December 20, 2016

Fairfax Financial, the investment company of Prem Watsa, has invested in Canadian digital precision agriculture company Farmers Edge, injecting new capital into the company as well as buying Kleiner Perkins Caufield & Byers’ stock. The deal, which is Farmers Edge’s largest to-date, also involved a partial selldown by Canadian VC Avrio Ventures.

The transaction is an exit for Kleiner Perkins, which first invested in the company in November 2014 out of its Green Growth Fund. Financials on the exit and return metrics were not available.

Who is Fairfax Financial?

Prem Watsa is a household name in Canada where he’s often referred to as the Canadian Warren Buffet. Fairfax Financial has diversified holdings across the property, casualty, and insurance industries. In recent months it’s focused particularly on building up its insurance portfolio and this week announced plans to acquire Allied World for $4.9 billion. Fairfax has a growing portfolio of agricultural investments too, but it was the potential link to the insurance industry that promoted the company’s interest in Farmers Edge, according to Wade Barnes, CEO of Farmers Edge.

“We see ourselves on a path to something larger than pure digital agronomy,” Barnes told AgFunderNews. “There are a lot of other things that are connected to the information and data that’s derived from the farm including global crop insurance, financial services, and grain marketing. And that’s where there’s a real opportunity for disruption.”

“The valuable information we provide farmers is exactly the same information I would want if I were to write a crop insurance policy, and the same info a bank would want to know,” he continued. “It could even allow farms to potentially pre-price crops and allow grain companies to monitor fields and understand if they’re being treated fairly.”

Maturing business

The exit of Kleiner Perkins marks a turning point for the Farmers Edge investor base as the 320 staff-strong company matures, according to Barnes. The last two rounds of funding have not come from typical venture investors but real estate firm Osmington and Japanese trading house Mitsui & Co.

Further, this week’s investment from Fairfax coincided with a move to make all shares in the business common shares, which is unlikely to be an attractive proposition for venture capital firms that typically want to purchase preferred stock, according to Barnes.

With the proceeds of the deal, Farmers Edge is going to invest into further international growth — the company is currently present in five countries globally — and into building out new products using machine learning and deeper analytics.

Creating connectivity

Until now, Farmers Edge has focused on collecting the best data from the farm regardless of the location and connectivity available. This “digitization” of the farm involves installing a weather station for every 2,500 acres and connecting Farmers Edge sensors to farm machinery. In the Matto Grosso of Brazil where farmers have no access to cellular coverage, the company is now deploying mesh networks to connect its devices to one another for transferring data.

While there is an upfront cost to Farmers Edge in installing these networks, the business provides a long-term solution for the local farmers, according to Barnes.

“We are a bit more hands-on than ‘no-touch’ digital platform providers, but this makes us able to do what others can’t where there’s no connectivity; once farmers are using it and they’ve embedded it in their operations, we are a long-term solution for them,” he said.

Farmers Edge is particularly adding value to Brazilian farmers when it comes to enabling the variable rate application of inputs such as fertilizer, which are required in such large quantities that the savings are huge, he added.

Machine learning motivation

While Farmers Edge will always have a boots-on-the-ground component to its business, the company is starting to focus more on developing the machine learning capabilities of its software to start providing more predictive analytics to farmers.

The company has three new products to this end. Nitrogen Manager aims to predict when a field needs more nitrogen applied. Crop Manager aims to predict disease and help farmers optimize the timing of input applications. Machine Manager aims to alert farmers about issues with their equipment and help them to optimize equipment to their operations.

“Farmers, regardless of where they are in the world, will usually follow the leader when it comes to equipment without making any strong, scientific, field-based decisions on their own, so we’re hoping to match the right equipment to their operations with our machine health predictive analytics product,” said Barnes.

In some senses, Farmers Edge is moving in the opposite direction to some of its competitors such as The Climate Corp, which started by modeling large public data sets and weather data but recently announced plans to launch a sensor network. Farmers Edge has focused more on optimizing data collection from a variety of sources including drones, machinery and its own ‘Can-Plug’ sensor, before focusing more on higher touch data analytics, modeling, and machine learning.

The Farmers Edge approach

Barnes is confident this is the best approach to take.

“All Silicon Valley investors want agtech to be what they’ve known, which is no-touch and 100% digital, but the reality is that to do decision ag properly, you need to ensure you have the best information flowing into the platform,” said Barnes. “To make the machine learning sing and get accurate predictive analytics, you need to know what the localized weather is, what fertilizer went on and when, and other boots-on-the-ground type information.”

“If you’re building a house and don’t have enough wood, putting 50 more carpenters on the job won’t help.”

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