Monsanto Growth Ventures (MGV) has invested in Microsoft Ventures Brazil’s startup accelerator fund BR STARTUPS FIP, which invests across digital technologies and will now target agriculture technology startups. The fund is targeting $92 million and has also received commitments from Qualcomm Ventures, the VC arm of the chip maker.
The fund was established to help develop Brazil’s startup ecosystem; venture capital firms in Brazil have little appetite for angel or seed stage investments, preferring to invest in companies that have revenues and are about to become profitable, John Hamer, managing partner at MGV told AgFunderNews.
“Typical Brazilian VCs look more like growth equity investors and that’s why Microsoft has developed this strategy of incubation with partners,” he said. “I’ve been impressed with the growth of the Brazilian startup ecosystem over the years and have met some very interesting companies on trips there. It’s also a key market for Monsanto with all the soy and corn grown there, so we’ve been looking for the right way to participate in that market. We drew the conclusion that working with partners like Microsoft and Qualcomm was a better approach than putting a team there.”
Monsanto has an established team in Brazil led by Rodrigo Santos, and its digital ag platform Climate Crop is present in the market too, so MGV’s involvement in the fund will be a joint effort with these teams, added Hamer.
While there’s opportunity for US digital ag providers to export their technologies to Brazil, the country has unique dynamics that could make locally-grown businesses more appropriate.
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The average age of the Brazilian farmer is lower with 32% farmers under the age of 45 compared to just 14% in the US. Many Brazilian growers have vertically integrated businesses with processing, biodiesel, animal feeds operations linked to production, creating a different dynamic and demands for agtech products, according to Hamer.
Brazil also houses some of the world’s largest farms. The average size is not informative, according to FAO, as two-thirds of farms are under 100 hectares (247 acres) but there are also 4.8 million farms are over 350k hectares (864k acres) in size. Only 1% of farms are larger than 1k hectares (2.5k acres), but they occupy nearly 50% of all agricultural land, according to 1992 data from FAO. US farms average around 440 acres (178 hectares) by comparison.
Franklin Luzes, head of Microsoft Ventures Brazil, was not reachable for comment when we went to press, but it’s understood that the fund will partner with incubators and accelerators in Brazil to source companies and that the companies it brings on will be given some physical office space in Microsoft’s offices in Sao Paulo. These offices are incidentally the same as Monsanto’s in the city. It already has two investments in Acelera Partners and Aceleratech, which have more than 60 investments combined, according to MSW Capital, the fund’s manager. Investments will be anywhere from a few hundred thousand dollars to $1 million.
Would Monsanto do something similar in another part of the world? Potentially, if they can find suitable partners.
“It depends on the availability of experienced investment partners; we’re a small team at MGV that can leverage the assets of a global corporation. As we begin to work in different parts of the world, we will have to see what the right approach to stimulating entrepreneurship is,” said Hamer.
Are you an agtech startup based in Brazil or South America more broadly? If so, get in touch! [email protected].