Jun. 23, 2016
DuPont and Bayer AG have teamed up to invest in a new fund that will back agricultural technology startups, becoming the latest companies to pile into the multibillion-dollar industry as farm profits shrink.
The two chemical and seed companies along with venture capital firm Finistere Ventures and two others have launched a $15 million accelerator fund, called Radicle, that will back early-stage agricultural-tech companies, the fund said in a statement on Wednesday.
Of the $15 million, $6 million has been initially committed but the fund did not identify which companies would receive the monies.
While small in size, it marks the first time DuPont’s investment arm has taken a stake in the ag-tech arena since launching in 2003, according to fund officials.
DuPont and Bayer did not respond to calls for comment.
The companies are joining a burgeoning industry of ag-tech investors hoping to profit from ever more sophisticated tools in the food supply chain, from plant genomics and seed traits, to drones and weather sensors for crops.
For seed and chemical companies, such ventures can bring access to new research that may complement – or fill gaps – in their product pipelines.
For venture capital firms – some of which have bought up land in recent years – it is also a way to try to ease the economic sting of falling farmland values.
Returns on commodity farmland have declined as grain prices have dropped for the past three years due to global oversupplies. Corn futures are down about 40 percent from three years ago due to large global harvests.
For startups, reaching out to funds can help them gain access to cash for research and new product testing without having to sell the whole company.
“There’s nothing like commodity prices halving to focus your mind on how else you can make money,” said Finistere partner Arama Kukutai said in a recent interview.
Finistere has invested in companies including CropX, which is working on irrigation, and ZeaKal, which is trying to boost soybean yields.
In April, the firm partnered with farmland owner International Farming Corporation (IFC) to launch a different ag-tech fund. In that case, tech companies can test their products out of the lab and in the real world, said Kukutai.
The other members in the Radicle fund include OurCrowd, an Israeli venture capital firm, and California-based private equity firm Cloud Break Advisors.
Wednesday’s launch comes after Bayer, Syngenta AG and other investors last month rolled out an $11.5 million fund called AgTech Accelerator to start new agricultural technology businesses and help keep them running.
On Monday, Kellogg Co launched a corporate venture group called Eighteen94 Capital (1894), and announced plans to invest $100 million in food and food-related tech startups. Kellogg follows similar moves by rival consumer packaged goods companies General Mills Inc and the Campbell Soup Co
While the sector holds promise, blockbuster products are few and far between, and the ag-tech space is increasingly crowded, say critics and analysts.
Finding customers can be tough, too. Farmers and some agribusiness customers have been reluctant to pay for data services, particularly with farm income down by half since its 2013 high.
But that has not cooled investor interest. So far this year, the pace of investments in agriculture technology startups is about on par with a record $4.6 billion in 2015, said Rob Leclerc, chief executive officer of AgFunder, an online food and agriculture investment platform.
That is double the amount seeded by venture capitalists and others in 2014.
“A lot of people are gravitating to technology because they see this as a better way to institutionalize an investment in food and agriculture,” Leclerc said.
Concerns about how to feed a growing global population and uncertainty over food supplies amid shifting weather patterns have spurred investor appetite.
Corporate asset managers and large farmers are increasingly finding that “to really make land an attractive return basis, you have to leverage technology,” Kukutai said.