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Raising Capital Was Engender’s Biggest Challenge to Date as New Zealand Looks to Boost Agtech Industry

June 15, 2016

New Zealand-based Engender Technologies, a company that has developed a laser-based method for sexing livestock sperm, last week raised a $4.5 million Series A round of funding with a group of investors including Pacific Channel, New Zealand Venture Investment Fund, ICE Angels, Enterprise Angels, AngelHQ, and Arc Angels.

Also participating in the round were major companies in the artificial insemination industry, large-scale dairy farmers, and veterinarians. This recent funding comes roughly one year after the company raised a $700k seed round.

The new capital will be used to develop a laboratory prototype instrument to use in trials and a commercial prototype chip. Some of the funding will also go toward securing additional commercial intellectual property rights.

“We wanted to build quite a broad base of investors because we are keen to work with our investors to get them to add value to our business beyond capital,” Brent Ogilvie, interim managing director for Engender, tells AgFunderNews.

Engender’s Technology uses lasers to perform a variety of functions that result in effectively sorting sperm by sex. This will provide artificial insemination companies with greater control over the sex of the offspring that is born. With the global artificial insemination market valued at $2.4 billion, this potentially groundbreaking technology could make major waves across the industry.

The technology originated at the University of Auckland where Cather Simpson, an associate professor in the chemical sciences department, developed the science behind it. Simpson serves as the startup’s founding scientist and chief science officer.

The company uses light in a number of ways, from orienting sperm cells, looking inside them, and separating them based on whether they bear an X chromosome or a Y chromosome. A final pulse of light is used to nudge a selected sperm cell into its sex-specific group.

Having control over whether the calf will be born a male or female is extremely attractive to artificial insemination businesses and dairy farmers. Female calves, called heifers, can be slotted into the production scheme, while male calves, called bulls, offer less utility to dairy farmers. In many cases, bull calves are sold for beef either as veal or at a more mature age.

According to Engender’s projections, if the technology completes a successful commercial rollout, it could boost the New Zealand GDP by 0.2 percent.

Of course, Engender isn’t the only company trying to improve control over sexing in artificial insemination. Ogilvie acknowledges that there will almost always be competitors working on similar problems, but he doesn’t appear worried about sharing the market.

“It’s also fair to say that this has been, so far, a very difficult problem to crack and a number of people have tried over a number of years.”

Two of the major hurdles facing this challenge have been preserving the sperm’s fertility during the sorting process and making the process affordable.

“We have a process that is intrinsically gentle on the cells and this means we don’t expect to have any impact on the fertilization rate for cows, which is currently an issue in the industry,” says Ogilvie. The company also believes its technology can be brought to market with low capital and low operating costs.

“So, we appear to have a technology that will have a competitive edge and we look forward to taking that to market with our partners,” said Ogilvie.

Raising capital has been the company’s biggest challenge to date.

New Zealand is not a new player in the agriculture technology scene, but according to Peter Wren-Hilton, founder at New Zealand-based agtech outreach platform Wharf 42, the humble nature of New Zealanders has kept some of the country’s innovations in the limelight.

“Kiwis are so modest about our achievements and I think it is just one of our traits because we are so far from any major population center,” Wren-Hilton told AgFunderNews. “The joke is that we have 4.5 million people and 65 million sheep. That just about sums up the country. We’re basically a massive farm.”

Wharf42 works with agtech companies in New Zealand and the local government to encourage domestic agtech startups to go offshore earlier than they perhaps normally would to seek funding and exposure for their businesses.

As an example of this modesty, Wren-Hilton notes that during its presentation at the June 2016 SV Forum SVForum’s World Cup Tech Competition in Silicon Valley, Cather Simpson made no mention of Engender’s recent multi-million dollar funding from a broad range of investors.

“Some of the tech we have is really excellent, but like Engender ,we are so modest about it that we rarely take it off our shores. That’s something we are trying to change,” said Wren-Hilton.

The transition from agtech focusing on large machinery to things like robotics, sensors, and drones is well-suited for the island nation, he added.

“Big machinery was the thing for about 10 to 15 years, but there wasn’t a lot of capital to participate in that in New Zealand, so the country didn’t have a big footprint around big machine manufacturing design like the bigger capital markets in North America,” explains Wren-Hilton.

Ogilvie agrees that New Zealand is currently a competitive player in the agtech market, noting that roughly 70 percent of its exports are bio-based like meat, dairy, and lamb.

“I think New Zealand investors understand that the country is an economy built on biology. This has been supported through tech and New Zealand is a very good place to develop those technologies because of the soft infrastructure here,” he explains.

Wren-Hilton also points out that due to the pervasiveness of agriculture in New Zealand, seeing how technology may apply to the business is less of a jump than in countries where farming may be an afterthought. By his account, farmers in the country tend to have a more open mindset towards technology adoption and are willing to try new things.

“Agriculture is such a core part of New Zealand’s DNA in terms of our economy. A lot of our technologists and scientists do have farming backgrounds, so the people building the technology also have a potential business or family interest in a farm or dairy,” he explains. “There isn’t the separation between ag on the one side and tech on the other side. There’s a more homogenous link between the sectors.”

Have experience with New Zealand’s agtech sector? Are you a startup, farmer, or venture capitalist familiar with the region? Get in touch: [email protected].

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