EXCLUSIVE: SP Ventures adds World Bank in third close, exits fintech startup Brain Ag

February 22, 2021

It’s a big week for LatAm’s agrifoodtech fund, SP Ventures. The Brazil-based outfit has closed its third fund, AgVentures II, led by the International Finance Corporation, which is a member of the World Bank. The fund will close on around $50 million to $75 million, surpassing the $30 million goal it initially set.

Adding a financial titan like the World Bank to the table doesn’t come easy, but it’s worth the weight that it brings, according to SP Ventures founding partner Francisco Jardim.

“We started talking to them around 18 to 24 months ago. It is a very long process with rigorous due diligence,” Jardim told AFN. “Several visits to Brazil, visits to portfolio companies, we went to DC to present. Finally, after a very long time, we passed their investment committee process.”

In August 2020, SP Ventures announced the first close of the fund at roughly $16.34 million (90 million reals). It attracted big backers including BASF, Syngenta Ventures, and FoF Capira, which has anchor investors including Bill Gates, Paul Allen, and the Ford Foundation.

In December 2020, it announced the second close with French animal nutrition company Adisseo and Florida’s Mosaic, one of the largest miners of phosphate and potash.

Founded in 2007, SP Ventures focuses on Series A-stage deals across a variety of segments with check sizes landing around $100,000 to $6 million. Having the World Bank onboard has opened up a number of new investment strategy possibilities for SP Ventures.

“We want to bring co-investment opportunities and we want to bring investors that will be able to supply financial solutions be it equity or debt to companies in the ecosystem and our portfolio at later stages, Series B through D,” Jardim explains. “With the World Bank sitting on our investment committee as an observer it will really increase the proposition we bring to our portfolio in terms of additional potential follow-on capital.”

The VC is technology- and sector-agnostic but taking a heavy-handed ESG and impact approach to selecting investments, which fit well with the World Bank’s objectives.

“The World Bank has very rigorous ESG and impact demand and restrictions. We passed through their methodologies and implemented some of their methodologies as well. It really elevated our game. They signaled to us a few things that we could be doing better,” Jardim explains.

To that end, startups that have the ability to improve productivity on existing farmland, reduce deforestation, and improve resource use while limiting the application of chemical inputs will be of particular interest.

Its investments to date cover a broad range, from livestock management to vertical farming to smart sensing. Biological crop inputs, fintech, marketplaces, e-commerce, and digital technologies focused on bringing more efficiency to the value chain are particular areas of interest. 

Deal flow hasn’t been a problem for SP Ventures, which views itself as one of the leading agrifoodtech VCs in LatAm. Now, with the World Bank on board, there may be even more opportunities.

“If you see the World Bank and IFC as an anchor investor, it really opens a lot of doors. It brings a lot of institutional credibility and access to a lot more investors and entrepreneurs that perhaps we wouldn’t have had otherwise.”

A fintech exit for Brain Ag

SP Ventures also announced an exit from one of its portfolio companies, Brain Ag, which uses data science to support agricultural credit decision-making. It works with any entity that has credit exposure to farmers such as transportation companies and ag retailers. 

Although SP Ventures would not comment on the buyer, sources close to the deal name major credit and financial services company Experian as the buyer.

“This is a direct validation that the ag fintech transformation is happening in LatAm. This is the third fintech acquisition in less than a year,” according to Jardim. “And this was north of 80% IRR for us and our funds”

Brain Ag is hoping to apply a more data-centric and tech-savvy approach to measuring farmers’ financial health when they attempt to buy inputs and services.

“When it comes to a working capital perspective, farmers are one of the most stretched in the economy. They have to buy seeds and inputs but will harvest many months down the line when they’ll actually sell the product,” Jardim explains.

“What we noticed was that the guy at the end of the value chain like the retailer or distributor ends up making a lot of decisions about credit based on what they are hearing from their salesman, colleagues, and clients regarding whether farmers are paying their debts or having financial problems. There was very little technology to back these things up.”

SP Ventures and Brain Ag are capturing available data sources to not only verify a farmers’ financial health but to track certain ESG measures, too. This includes verifying whether a farmer has violated any labor rights laws or environmental restrictions.

By scoring these metrics and crossing them with other sources of available information, Brain Ag provides a rapidly available risk profile score.

Fintech will continue to be a strong area of interest for SP Ventures, which views the sector as playing a much broader role in agrifoodtech.

“This is so important because as farmers have access to credit and cheap, easy to raise capital, what in fact is happening is that you’re empowering people to make their proprietary decisions as to what technologies they are going to buy,” Jardim says.

“Many times they would only buy what they can afford. The moment that financing is taken care of, the only thing that makes sense is what will increase productivity for them. That’s a very strong source of empowerment.”

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