Agriculture Tech the New Facebook?

Venture capitalism can sometimes seem like a bunch of 20-somethings with fashionable facial hair, T-shirts, jeans and hot iPhone apps that hold the promise of a big payout. Farmland, livestock and food crops, however, might be the last thing the investment sector makes you think of.

But Arama Kukutai, a New Zealand farmer’s son and a managing director of Finistere Ventures, a life science venture capital firm, will tell you that agriculture is one of the investing world’s best-kept secrets.

“Agriculture has become a hot area for investors interested in both a hedge against inflation in stagnant bond markets and a sector with fundamental attractiveness given the global, long-term demand for increases in food, energy and industrial outputs,” he says.

San Diego-based Finistere Ventures, who is heavily involved with the Ag Innovation Showcase hosted by BRDG Park, Danforth Center and Larta, is raising a $150 million fund to invest in agricultural technology within the food, energy and sustainability sectors.

Much of the investment revolves around one simple fact: The world’s population is growing fast and agriculture is struggling to find ways to keep up with the rising demand for food.

“Our piece of the puzzle is figuring out what technologies are going to come along next that are going to add to agricultural productivity and what the world is going to need to feed itself,” says Kukutai.

A New Silicon Valley?
Kukutai believes agricultural technology is building up into something that will garner the attention of investors worldwide over the next couple of years.

“There’s a Silicon Valley moment that’s going to happen here,” says Kukutai. “When investors say they don’t understand agriculture, I say, you understand the fiscal cliff. Well, this is the calorie cliff. This one’s real—we didn’t make this one up.”

Investment managers are catching on as well, says Kukutai. The majority of investors in Finistere’s new fund are family offices, which he says view the sector as both a moneymaking proposition and an opportunity to do good—so-called impact investing.

“In most long-term or legacy wealth holders’ equation, owning real estate has always been part of the portfolio mix, and this is another form of real estate,” he says. “It’s not only to hedge against inflation. When you understand what’s going on with food production and demand, there’s also the recognition that this is inherently an area where if you invest, it’s for the good of the planet.”

Finistere welcomes strategic corporate investors into its new fund, says Kukutai, because they can help figure out how to accelerate a new company’s technology progress. They bring their immense technical capabilities to bear, which would be far too expensive for a start-up to replicate. In return, they get a strategic benefit from getting a first look at new technologies.

Finistere’s investments range from seed capital of $1 million to help develop early-stage concepts to as much as $10 million. It may invest alongside a strategic corporate investor or another venture group. Family offices invest both in the fund and sometimes directly in a company, says Kukutai.

Agricultural technology is a different way to think about investing in one of the more fundamental industries in the world, says Kukutai, adding, half jokingly, “Agriculture is becoming the breakout sector—5,000 years in the making.”

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