Agtech in the South

Agtech in the South 

Why “AgTech in the South”

The Southeast is blessed with attributes that make “agtech” investing a regional specialty. The historical agricultural economy of the Carolinas, Georgia, and Tennessee has been updated with a layer of research-university science (plant biology, animal science, materials science) and a world-class cluster of global agrochemical and life-science multinational companies in RTP. This combination is rare for tech hubs. Nonetheless, there are relatively few agtech-focused investors here. Why, and what opportunities does that give southeastern angel investors?

LeVert Ventures

In last week’s Venture in the South episode, Paul welcomed Hannah Webb. Hannah is, despite her protestation, an agtech investing expert, with over 12 years of biosciences business development experience spanning crop protection, animal health, and human therapeutics, including time at Boragen (crop-health boron chemistry) where she helped structure a joint venture and capital raise, and earlier work at Sumitomo on fungicide resistance. She holds an MBA (Technology, Entrepreneurship & Commercialization) from NC State.

LeVert Ventures, based in Research Triangle Park, NC, is one of the few funds dedicated to early-stage agtech investing, working under the broad agtech thesis of companies increasing crop resiliency and food security. This leads to investments in precision agriculture, animal tech, some controlled environment agriculture (CEA), and biological crop protection. You can learn more about LeVert Ventures’ fund and investing activity here, and on the show.

Why the South?

Hannah and LeVert invest nationally, but see some particular attributes of the southeast that make it a logical place to base their fund and investing activity. Hannah laid out six key attractions that make the southeast a particularly attractive place for agtech investing.

1. Science and IP – primarily from the world-leading universities here as the foundation for some of the smartest tech around.
2. Concentration of agtech strategics – a cluster of global multinationals, giving startups a faster path to creating products potential acquirors and distributors really want.
3. Testing partners, CROs and pharma networks – to help validate these technologies and markets more rapidly.
4. Talent – from 1-3.
5. Capital efficiency – all at less expense for facilities, taxes, regulations, and more than in other hubs, giving greater capital efficiency.
6. Entry valuation – all at entry valuations that are more rational and reasonable than elsewhere, giving investors a chance to make positive returns – not at all guaranteed in general.

At VentureSouth, we are generalists, but our members have invested in several agtech companies. After our initial investment in AgTI (LeVert’s original ad-tech accelerator), these investments have encompassed farm intelligence (FarmShots, acquired by Syngenta), controlled agriculture (Babylon Microfarms and AmplifiedAg), new crop production (Plantd), and new farm-focused business models (Seal the Seasons and Phinite). These companies share and benefit from the key attractions Hannah described.

Who else invests in agtech in the south?

Aside from LeVert and VentureSouth, who else is an agtech investor in the south?

It’s always dangerous to conclude that there are no investors for something just because they are hard to find. But our impression is that agtech investors are particularly hard to find in the region (and also at our capital stage). They are not totally absent, so we’ve included a few examples below. But overall it seems to us there is a clear gap.

Other nearby angel groups (excluding where VentureSouth and other angel groups have co-invested on the same agtech investment):

• Wolfpack Investor Network (NC State’s alumni angel network) has several agtech investments, reflecting the university’s particular expertise, including Advanced Animal Diagnostics, Improved Nature (a plant-based meat alternative company), and Natrx (a nature resilience technology).
• Ariel Savannah Angels invested in Edison Rubber, which upcycles sunflower seeds into rubber.

Corporate VCs:

• Syngenta Group Ventures: the corporate venture arm of Syngenta, whose North America hub sits in RTP. One of the longest-running ag CVC units, with recent activity including a $75M Series D in Sound Agriculture and a Series D round in drone company PrecisionHawk.
• Alexandria Venture Investments: primarily a life-sciences CVC investor, but it invests in agtech alongside biopharma, diagnostics, and research tools.

Ag-tech specific (or heavily) funds nearby:

• Innova Memphis: Investing its sixth ag-focused fund, using a “farm-centric” model in partnership with AgLaunch, a Tennessee-based accelerator and farmer network, and backed by a consortium of farm credit banks. Local portfolio includes Agritx (improving hatch rates by improving the egg microbiome in Statesville, NC) and multiple companies in Tennessee.
• Cultivation Capital: Based in Missouri, with an office in Greenville, Cultivation Capital has a line in agtech. Local example Ecobot digitizes environmental permitting and wetland delineation for construction projects. A stretch on all the definitions (southeast, agtech) but we’ll allow it.

Undoubtedly we have missed some examples, but if you made it this far then we’ll assume you agree that this capital gap is real and especially acute.

VentureSouth’s FarmShots Exit to Syngenta

FarmShots is one of the most fun exit stories from the VentureSouth portfolio and illustrates some of Hannah’s attractions.

VentureSouth members invested in the RTP-based company in September 2016, inspired by founder Josh Miller’s technical skills (and Duke education - #1 and #4) and FarmShots’ high-resolution satellite and drone imagery technology, which analyzed light absorption patterns to flag plant health issues — cutting field-scouting time by as much as 90%. FarmShots had raised a modest $1.1M seed round from local investors including VentureSouth, Piedmont Angel Network, and The Angel Roundtable.

Syngenta announced it acquired FarmShots in February 2018 — the first publicly disclosed agtech acquisition of that year by a major strategic (and emphasizing #2). Financial terms weren't disclosed, but the deal “definitely hit our return targets.” FarmShots was folded into Syngenta's AgriEdge Excelsior digital farm-management platform.

Josh went on to found Gradient Health, a recurring guest and portfolio company on this show (covered across multiple episodes, most recently Episode 247’s AI deep-dive). Always gratifying to see a full-circle story!

So should angel groups do agtech?

This remains an open question. There are industry-specific angel groups in life sciences, “space,” sustainability and energy generation, and more, but not (as far as we know) in agtech. The ACA’s Angel Funders report does split out “agriculture/food” as a top 10 industry for angels, but without a lot of fanfare about agtech investing. But perhaps for now it is enough to say that if you are going to invest in agtech, it seems like “in the south” is a sensible place to try?