Earlier this month, California-based Finistere Ventures announced the launch of The Ireland AgTech Fund (IAF), a€20 million ($) investment vehicle backed by state-backed Ireland Strategic Investment Fund (ISIF).
We caught up with the new head of Finistere’s Dublin office, Kieran Furlong, at Dublin’s Silicon Docks, a once underutilized industrial area that is now the European headquarters for Google, Facebook, Accenture, and Twitter, to find out how the IAF will work with startups and how Finistere will adjust its usual modus operandi to fit the Irish landscape.
How is this fund going to operate differently to the US Finistere fund in terms of when you meet with companies and how closely you work with them.
We’re really trying to replicate as much as possible what we already do at Finistere. We’re typically looking to come into a company around the A round, when we’re talking millions as opposed to hundreds of thousands raised. And I think in Ireland it still remains to be seen. We are going to look for opportunities like that, but we may have to go a little further upstream into earlier stage companies just because it’s a more nascent sector here. We see great potential: great research, really promising startups, but the majority of them are younger than what we see in the US. The good news is that already there is a fairly robust seed funding ecosystem in Ireland. We may see things coming out of the accelerators here and out of Enterprise Ireland that will be ready.
There is great research in Teagasc [Ireland’s agriculture and food development authority, which funds research in the country], in the Science Foundation Ireland research centers so one of the things that we will be doing a little bit differently is doing a little more proactive digging in the research institutions, looking for some really sparkling ideas. We may still only enter when they emerge, but we can give some of those folks a nudge.
AgFunder Co-Investment Fund III is now open for investment. Closing June 15, Spots are limited.
What is the availability of growth stage funding? Are you looking to fill the B/C space as well?
I would say the vast majority of opportunities I’m looking at right now are seed round or A round. There aren’t many companies at those later stages yet, but we obviously will want to follow on with companies that we invest in early and are doing well. So we’ll be there for the growth phase as well.
In launching the IAF, Finistere mentioned the idea of looking for Irish companies that are synergistic with your existing portfolio, can you explain the mechanics of that?
First of all, in Ireland you’ve got some different flavors of agriculture from what the major focus is on in North America. Here in Ireland its all about grass, it’s livestock, it’s pasture farming, and dairy. Ireland is unique in that it has a cost advantage in the production of dairy products, yet the way they do it actually gives them a premium product that is higher quality. It is not often you get that double whammy of being able to make stuff cheaper and the stuff that we make is premium. That is pretty unique and it allows for new technologies and experimentation we think.
Our other portfolio companies may have been focused on the crop markets in the United States. There may well be a case of a portfolio company that has been focused on soy and corn in North America, but they haven’t really looked at pasture to employ their technology and we’re going to be able to connect those companies to the research agencies, to farmers, and to processors who might be able to use that technology.
There seems to be a very stark cultural difference around failing fast, around raising money, around working off of revenue vs fundraising here in Ireland compared to the US. How do you think about navigating that?
There are definitely differences and some of them can be a positive thing. Sometimes it can be a negative thing for the company’s own growth. One of the first conversations I have with entrepreneurs when I meet with them is ‘What kind of business are you trying to build? What kind of funding are you looking for, if any?’
Venture capital comes with a set of expectations, not least of which is a timeframe. Are you comfortable with that? Do you understand that?’ The first part is having that open and honest conversation with the entrepreneurs. The last thing you want to do is have venture capital being shoved into a business that doesn’t want or need it. Yes, there is some caution around taking outside investor money and that can slow the growth of companies. So really it is about finding the right opportunity, the right technology where additional capital, additional expertise, additional connectivity in the broader world of agriculture and agtech in particular, allows the company to grow faster. That’s what we’re looking for.
Are you going to be doing some educating around the concept of venture?
Absolutely. I’m already having some of those conversations. For example, I met with a really promising app technology company here. The first conversation was ‘Thanks but no thanks, we don’t want any venture capitalists. We don’t need any outside equity.’ And then the entrepreneur heard what we were about and what the IAF was going to be and wanted to talk again.
That’s one direction it can go. It can also go in another direction where I realize that a CEO is building a company that has regional v. global ambitions. They would prefer to grow organically and they want to retain control.
Absolutely it is a different culture from Silicon Valley and the rest of the US for startups. But it’s kind of a halfway house compared to continental Europe.
We often talk about the EU as one big market, but it doesn’t really behave like that. Do you feel like spreading technologies around the EU is going to be harder and more expensive than doing so in the US?
Absolutely it will be harder and more expensive. But that also means that there is a prize there that has gone untouched by companies that look at it and say that it’s too hard. So I think there is potential there for startup companies. We’re sitting here right now in Silicon Dock and if you walk around and listen you’re going to hear voices from all over Europe. A lot of these big Silicon Valley giants have big European offices here. They’re doing localization of content, they have sales and customer service for their various European markets. So I think if there’s anywhere you can do that, it is here in Ireland.
But no doubt it’s going to be difficult. We’ll have to contend with EU regulations, which are the same across the board, but then there are national regulations, and even regional ones beneath that, which will be different. But a lot of the companies I’m talking to who are looking at the European market know this and they know that they are going to have to adapt their product to meet those requirements.
Do you think that means that we shouldn’t be as suspicious of “me-too” companies as we might be in the US? Do you think we’ll see some duplicates?
I think so. There has been some track record of that on the social media side where there have been copy-cat companies who will start something and tailor it to the local language for starters and then the local market. Often those are businesses where it is winner-take-all and ‘he who gets biggest first wins’. In the agtech world, we don’t see as many of those opportunities and we’re not really that interested. We want to see a competitive technology that will stand on its own anywhere in the world.