Why Uber-backer Tao Capital invested in Granular alongside Andreessen and Khosla

July 23, 2015

Granular, arguably AgTech’s most developed farm management software, has raised $18.7 million in Series B financing in a round led by new investor and Californian family office Tao Capital Partners. Tao is known for being an investor in Uber, Tesla and SolarCity, and was joined in the round by other new investors Emory Investment Management, Fall Line Capital, and H. Barton Asset Management.

The fifth food and agriculture investment for Tao, Granular has been backed by Khosla Ventures, Andreessen Horowitz and Google for over 18 months, and the VC firms returned to invest in the Series B round. Granular has now raised a total of $25.2 million.

Of course, investing alongside the VC giants appealed to Tao from the get-go, but it was also Granular’s advisory board — including University of Illinois professor and director of the TIAA-CREF Center for Farmland Research Bruce Sherrick  — and its farmer network that drew the family office in.

“The most compelling thing for us, in addition to the dynamics of the industry and combination of farm management and data analytics, is that Granular has a tremendous group of people behind it. The software is all about the intellectual capital of the people involved,” said Christopher Olin, partner at Tao and son-in-law of Nick Pritzker, co-founder of Tao Capital and ex-chief executive of Hyatt Hotel Corp, the Pritzker family’s hotel chain since the 1950s.

From the initial stages, Granular has worked with a group of 10 large farming operations as it developed its platform, consulting them on usability, functionality and really working out how to best serve their needs, and the alignment between Granular and these large-scale farmers is impressive, according to Olin.

“These folks have really transformed their farms into businesses which they are trying to run like professional companies,” he told AgFunderNews. “Granular has generated enough trust with these thought leaders in the farming industry that this is now basically a partnership. The farmers have taken a risk on Granular and its team, and Granular are betting on them. It’s an interesting symbiotic relationship.”

The software company, one of very few enterprise resource planning systems (ERP) for agriculture according to Olin, helps farmers manage their day-to-day operations through a mobile app available to all farm workers, and through tracking their budgets and finances. Granular also collects data from farming machinery and helps farmers analyse it to make decisions.

“The first thing that struck us when we were introduced to Granular was the fact that while there are so many industries that have benefited from ERP systems, they didn’t exist for agri,” said Olin. “That was so surprising to us that Granular just made sense to us straight away.”

In the opinion of both Olin and John O’Farrell, partner at Andreessen Horowitz, Granular does not have any competitors. But there are other start-ups and operating companies offering a similar service. They include Conservis, FarmLogs and OnFarm, although some are positioned for smaller farming operations, argues Olin. Granular, by comparison, is targeting the Farming 500; the biggest farming operations in the US.

“We are well on our way toward the first step of getting the best 500 producers in North America on the Granular platform and this funding will accelerate our progress,” said Sid Gorham, Granular’s co-founder and chief executive in a statement. Granular will use the latest funding to expand its team of software and data science experts and to deploy farming industry experts near its customers nationwide.

So how does Granular fit in with Tao’s other food and agriculture investments and its overall investment thesis?

“While we have no one person looking at food and agri, our thesis is clearly that the world needs to be smarter about its impact on the environment and get more for less if we are to feed more mouths with fewer resources. With Granular it’s obviously just about efficiency. Granular will reduce resource use as farmers are able to focus more on profitability.”

Tao’s other agriculture-related investments include food tech company Hampton Creek, The Kitchen, Midwestern Bioag and Metabiota.

And how does Tao find deals in the sector?

“We are not going to build a team with ag experts but rather be outbound-focused and a find expert networks to talk to for new ideas. I don’t know that we will actively go and look at other deals, although experts like Bruce Sherrick and other family offices are tremendous resource for us.”

Tao Capital Partners was established one and a half years ago after the Pritzker family decided to split its assets in order for the various family members to pursue their different interests. The family office is a long term investor, not interested in flipping deals and is focused on solving major problems in the world. It has investments in technology, healthcare, food and agriculture, consumer and real estate.


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