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The Growing Agri-Technology Industry

Posted on November 16 2016 | Author: Dave Smardon

Fourteen years have gone by since Bioenterprise first opened its doors. Back then, we were a very modest, three person operation, focusing on what little agricultural innovation that could be found; innovation that had gone beyond the applied research phase. Agriculture was a commodity-minded industry – much more so than today. There was no such thing as “agri-technology” or “agri-tech” back then and the movement towards agri-investment was still years away.  Governments were still completely focused on supporting research and the very idea of agricultural or food targeted accelerators, incubators, and clusters, was somewhere off in the future.

I am struck by the incredible difference we see today, from such a short time ago. I joined Bioenterprise in the summer of 2005 and all of the above was still very much true. A decade later and agriculture has been brought out of the shadows and into the mainstream. The First and foremost factor supporting this shift is the exponential growth in start-ups. Bioenterprise tracks start-up activity in our Innovation Portfolio and in our global database of companies. We list nearly 2,000 companies in thirty countries and this number is growing more rapidly than ever.

Not surprising, the leaders in agricultural innovation are countries that had the vision to support agriculture and food innovation a decade ago. The Netherlands, France, Brazil and the United States have become hotbeds for entrepreneurial activity. Of course, Israel always punches well above its weight and their output of start-up companies in agriculture is truly amazing. Countries like France and Brazil have invested $400 million in support of agricultural innovation and commercialization – and did so seven years ago. Today, they are reaping the benefits of their investments. Countries like Canada, Australia, New Zealand and Ireland can certainly hold their own but one must recognize that they represent a second tier. This is to be expected because they have invested less and for a much shorter period of time. But governments do get it now! They have tasted the kool-aid and are rapidly making investments in commercialization programs.

In just the past five years in the United States, we have seen the creation of Yield Lab, Agri-Tech East, Radical, and a new incubator at UC Davis. In Europe, new agricultural incubators are being formed in Norway, Scotland, France, the Netherlands, and Denmark – just to name a few. Israel  has three! The United Kingdom established the Catalyst Fund and invested an additional £90 million to create agricultural innovation centres of excellence around the country. New Zealand and Ireland have recently established incubators – and I have barely touched the surface.  All of the aforementioned have an agricultural focus and the vast majority of these are, in some way, government supported.

In Canada, there are regional players like PEI BioAlliance, Innovacorp, and Ag-West Bio and then we have a national player in Bioenterprise. I think that it should be noted as a sidebar that British Columbia has assembled a commercialization eco-system to be admired and duplicated. (I look forward to discussing this in a future blog.)

As more and more accelerators and incubators spring up, some problems become very clear. First, many of them are regional players; basically economic development engines designed to build new businesses and attract others to their regions. The latter objective, (attracting businesses to a region) is incredibly difficult and should never be the burden of an accelerator or incubator.  It detracts from their most important objective; to build compelling and sustainable, new businesses.  Second, most are underfunded and lack the capacity and depth in resources to truly make a difference. Funding is often provided on a short-term basis and is subject to the whims of politicians and changes in government.  It is very difficult to build a critical mass of resources using that formula. The result is incubators that fall prey to the same dilemmas as the start-up companies they are trying to help. They end up being underfunded, under-resourced, and can only fade out of existence. They are not built for success. Third, agriculture and food are global industries. Start-up companies in these sectors require help on a much greater scale. They need access to markets, the experience of international executives and a global network that they can tap into for support. As a result, many of these commercialization groups will flounder.

Well, problems bring opportunities! Bioenterprise recently announced a strategic partnership with the Larta Institute in California. They are the only other agri-focused commercialization group with the history of success, pedigree, and breadth of resources similar to Bioenterprise. Together, we represent the largest agri-acceleration capacity in the world! And our organizations intend to capitalize on this unique position. While the details are still being ironed out, I think it can be said that this is only the beginning. It is through partnerships and collaborations between accelerators and incubators, regardless of their geography, that will provide the capacity and resources to truly make a difference… globally! And yes, the raison d’être for each of us can never be ignored but the leverage and global opportunities are so compelling.

As more and more commercialization organizations are created, there is a ground swell of new interest coming from multi-nationals and investors alike. Hopefully, more globally focused commercialization can present them with a smorgasbord of start-up companies and innovative technologies.

Yes, the landscape looks nothing like it did a decade ago, and the degree of change continues to accelerate. The future looks very bright indeed!


Dave Smardon
President & CEO 

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Investment in the Agri-Technologies Ecosystem

Posted on October 28 2015 | Author: Dave Smardon

I recently returned from a Global Investor Conference in Montreux, Switzerland. It was quite the eye-opener. Participating were large family offices, fund of fund organizations and institutional investors like pension funds and endowments. What was particularly noteworthy was the growing interest in agricultural technologies, food security, and water security. One could make the argument that up to 2 years ago, very few investment organizations were paying close attention to these areas.  Much has changed in a fairly short period of time and it is not hard to understand why.

One of the presentations at the conference was from the U.K. government. The U.K. is committing £70 million for the creation of the Agri-Tech Catalyst Fund and a further  £90 million targeting the support for creation and commercialization of agricultural innovation. The U. K. is not the only country that has trained its sights on agriculture. The Netherlands, France, Brazil, Ireland and New Zealand have each launched similar programs to support their own home grown agri-tech companies. Word on the street is that Germany will be next.  Add to this the fact that the European Economic Commission has designated agriculture, food, and water as key targets for their European programs to support research, development and commercialization. Countries like these are taking steps that they perceive will position them as future global leaders in the development and commercialization of new and innovative agriculture, food, and water technologies.  Some of this government funding must be matched with private capital and is often matched at conditions that are most favorable to the private investors. 

In the U.K., funds can be invested in new venture capital and private equity funds as long as there is a critical mass of private capital and the recipients are willing to establish a local U.K. office. No doubt they will be able to attract investment firms that see the U.K. as a viable source of capital, investment deals and a logical place for an office. Once again, New Zealand, Singapore, and others are taking the same approach. Offer up some capital, match it with the private sector, and domicile it locally. Admittedly, its not a bad strategy to build and grow your investment eco-system and benefit the targeted sector; agriculture.

So as I return home to Canada, I cannot help but wonder where are we in this race. Historically, Canada has been a global leader in agriculture commodity production and our governments have funded an enormous amount of agricultural R&D.  But where are we with respect to our investment in agriculture, food and water technologies, and specifically as a catalyst in driving our investment eco-system. Canada’s agricultural revenues as a percentage of GDP rank way higher than many of the countries previously mentioned. And yet, we have no such focus on our agri-tech eco-system.  Furthermore, while other countries have recognized the dire need to attract investment capital into this sector and have developed aggressive programs to do so, Canada has not. This is worrisome!  If we are to maintain our leadership position in agriculture, we need to focus on agri-technology and implement programs that will position Canada as future leaders.

Dave Smardon
President & CEO

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Commercialization from Coast to Coast

Posted on August 21 2014 | Author: Dave Smardon

On June 20, 2014, the Office of the Prime Minister, Stephen Harper, announced the fifteen organizations selected to receive funding from Industry Canada’s Canadian Accelerator and Incubator Program (CAIP). Under the program, selected incubators and accelerators can receive up to five million dollars per year.  The CAIP funding is part of the $400 million that the Federal Government had allocated to their Venture Capital Action Plan.

The Prime Minister’s Office provided the following quote at the announcement. “ It is critical for Canada’s small and medium-sized businesses to harness innovation and get their ideas to the marketplace so that they can grow, create jobs, and contribute to the economy. Accelerators and incubators have the experience, tools and know-how to help get small Canadian start-up businesses up and running. Our Government is pleased to be supporting private sector-led initiatives that further strengthen our venture capital market.”

Such support has been a long time coming. Over and over again we are reminded of the report from the 2012 Conference Board of Canada that listed Canada as a leader in research and innovation, but scored a “D” in commercialization of innovation. Canada was ranked 24th in the western world countries and was last of the G13 countries. While other countries have been plowing large sums of money into the support of incubators and accelerators, countries like The Netherlands, France, UK and Switzerland, Canada has been lagging behind. So, the news of the Canadian Accelerator and Incubator Program investment is most needed and therefore most welcomed.

Here at Bioenterprise, we are keenly interested in the agriculture, food and related sectors. In Canada, there has been very little support for agricultural commercialization on a national basis. In certain provinces like Ontario and Saskatchewan, efforts have been made to change this, but these are primarily provincially focused endeavours.  The new funding from the CAIP initiative ensures that this is about to change. (Bioenterprise is indeed, one of the fifteen organizations approved to receive such funding.) The importance of helping start-ups cannot be understated. They truly represent the future leaders of our economy. And, the importance of start-ups within the agriculture / food sectors are critical to Canada’s future prosperity. Why?

In Canada, agriculture and food represent 8% of GDP. That is 50% higher than in the United States and significantly higher than the European Union. The sector employs 2.1 million people, representing 1 in 8 jobs in the country.  It is THE largest sector in Canada. Furthermore, Canada is the sixth largest exporter of ag/food products in the world.  What makes this even more compelling is the fact that, globally, over the past ten years, the Food & Agribusiness category has delivered both the highest and the most consistent Compound Annual Growth Rate (8.7%) of any industry, outranking Financial Services (6.1%), Construction (6.8%), Telecommunications (3.1%), Energy (8.1%) and Healthcare (5.8%).

The importance of the CAIP investment to Canada’s agriculture sector is critical. This new funding will enable agriculture/ food based entrepreneurs and those engaged in the bioeconomy to capitalize on commercialization services that in the past might only have been available in Ontario and Saskatchewan. Now we will have a National commercialization engine that will assist companies from coast to coast.

It took time, but the future is certainly looking brighter for entrepreneurs!

Dave Smardon
President & CEO

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Making the Agri-Technology Investment Connection

Posted on February 18 2014 | Author: Dave Smardon

Having just returned from the European Family Office Conference in London, I am sometimes stricken by the lack of understanding and therefore interest that investors show in the agricultural sector.  For those of you not familiar with the term Family Office, it refers to the people or organizations that manage personal wealth on behalf of wealthy families. Most of the time, family offices represent substantial wealth in the hundreds of millions of dollars or more. Managing such wealth requires a great deal of investment experience and most often involves a rather conservative approach. Investment decisions are driven by opportunities that first and foremost, will preserve family wealth and then if the risks are acceptable, they will attempt to grow the wealth.  The most common investment targeted by family offices is real estate. It certainly meets the criteria of wealth preservation and growth with acceptable risk. Sometimes there is an almost philanthropic approach to certain investments, particularly recently surrounding food and water security, clean energy and health and welfare of the planet.  The media have helped to drive this interest, however, the links to agriculture, while clear, have not been made by these people.

Getting back to the agricultural sector, I remember that while growing up that as a normal everyday Canadian, I never questioned how my food got to the table. Oh, I knew about farms and farm animals like most people but I had no knowledge of the value chain or the technologies being used within the industry. In fact, what stands out in my mind was the TV commercial that espoused, “nothing runs like a Deere” (John Deere actually). So, I suppose I shouldn’t be so surprised by the lack of interest from these investors. If you don’t work within the agricultural sector, or are not exposed to it on a regular basis, then in all likelihood you are just not aware of it as a credible investment sector.

Several years ago, investors began looking seriously at acquiring farmland. As a form real estate investment, it met the family office criteria and it also delivered a “comfort factor” to the investors in that they were investing in food security. While it may have given the investors some philanthropic comfort, it really did little to help the planet. Then the farmland values went crazy, making farmland investment impractical in North America, Australia and parts of Europe.

I was a presenter at this conference in London. My topic was Investing in Agricultural Technology. My objective was to educate the audience.  The good news, what satisfied me the most, was the keen interest shown by so many investors after I had made my presentation. In fact, the interest continued over the next two days. It really highlighted the lack of education amongst the investment community regarding the agriculture sector, agricultural innovation, and how we can impact the planet and human health so dramatically.  We have to continue to build awareness of the issues, focus on the opportunities, and educate the investment community. If we do this, they WILL invest.

Dave Smardon
President & CEO

Image Credit: allaboutalpha.com

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The Future of Agri-Technologies

Posted on September 11 2013 | Author: Dave Smardon

The World Bank is predicting that our global population will top 9 billion by the year 2050 and these estimates have gone as high as 10.6 billion. We all know that there is only so much arable land on the planet and productivity gains per hector are dropping off, albeit gradually, but is this a harbinger of things to come?  So, how are we going to feed this growing population?

Of course, the issue is far more complex that just feeding a growing planet.  As the population grows, there is an increased migration from rural existence to urban life, particularly in the emerging markets, like India, China and Africa. This migration helps drive greater economic wealth within the urban areas and with this increased income comes a dietary change that is more focused on the consumption of protein. Yes, it seems that everyone wants to adopt a more North American diet. Just to make a point, currently, India’s middle class population is estimated to be 450 million people and growing, larger than the entire population of the United States and Canada combined.  The International Food Policy Research Institute predicts that protein consumption will nearly double across Africa and Asia by 2050.  Another way to state this problem is that there will be 40% more mouths to feed and 70% more calories required. Regardless of how you interpret the numbers, it seems likely that our world is going to experience very significant challenges to food production, competition for protein and affordability. 

While the “food driver’ is most obvious, one cannot ignore other underlying factors such as anticipated future water scarcity, climate change, human health drivers (diet related) and the dramatic affect that petroleum prices exert on agricultural input costs.  We cannot address each of these in this blog, but that in no way diminishes the critical impact that these factors will have on the human population. All of these typically result in producing even greater adverse affects on what is already considered a huge global problem.

But, there is a trend that is looming large within the agriculture community.  It is called agricultural technology or agri-tech and it is the most likely solution to drive greater efficiencies and production increases across the globe.

Take for example, crop inputs, which include the likes of fertilizers, herbicides, pesticides and fungicides. Today, the research, development and commercialization have fallen into the hands of young entrepreneurial firms. With patents in hand and field trials completed, these upstarts are ready to make their mark in the world. From, naturally derived pesticides, organic fungicides and non-petroleum-based fertilizers, these companies have become the “gold” that is being sought by venture capital firms and corporates alike.

Similarly, crop genetics and plant breeding have experienced the same evolution. Crops that are resistant to viruses, fungi and bacteria and those that have built in tolerances for temperature, drought and salinity have sprouted from university research centers, where new companies have been formed. Corporate investors are gobbling them up to expand their product platforms and build sustainable product lines for the future.

This conversation is not complete without the mention of precision agriculture or precision farming. Today, precision agriculture is about whole farm management with the objective to optimize returns on inputs while preserving resources. It relies on new technologies like satellite imagery, state-of-the-art sensors, information technology, and geospatial tools. It is also aided by farmers’ ability to locate their precise position in a field by using satellite-positioning systems like the GPS.

Precision agriculture also provides farmers and suppliers with a wealth of information to build up farm records / historical data, improve traceability, improve decision-making and it is the leading trend driving new investments in “big data”.

All of these are examples of innovations in agri-tech and they will play an integral role in driving global increases in agricultural production.  Who knows, the future Microsofts and Apple Computers may actually be agricultural firms designing innovative technologies that will help feed the planet.

Dave Smardon
President & CEO

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Kudos to the Harper Government's Position on Venture Capital

Posted on February 13 2013 | Author: Dave Smardon

Back in the spring of 2012, Harper’s announced budget included a provision of up to $400 million in funding; funding that was to bolster the Canadian venture capital community. Since that announcement, things went terribly quiet over the summer and fall. Many of us were left anxiously awaiting the federal government’s follow on announcement as to exactly how this money was to be allocated. It turns out that the government did its homework over the summer. They contracted Mr. Sam Duboc, a well respected venture capitalist in Toronto and the founder of Edgestone Capital, to review the state-of-the-nation within the investment community and to subsequently make recommendations on how to best utilize the $400 million.

Mr. Duboc presided over numerous “think tanks” that were held across the country. In attendance were venture capitalists, fund-of-fund investors, private equity players and financial institutions. While the process has taken much longer than any of us expected, the recommendations were recently announced.

Without going into too much detail, the $400 million is to be dispersed across four basic areas. They are:

  1. Support for two National Fund-of–Funds organizations that will ultimately support both the creation of new and capitalization of existing, venture capital firms.
  2. Support for existing provincial fund-of-funds organizations provided they become national in scope. This in effect removes many of the strings that provinces typically require of investors, such as investing capital only in their provinces.
  3. Direct investment in a small number of leading venture capital firms to help attract new investment to these firms and to Canada
  4. Support for the venture infrastructure industry, which would include organizations such as incubators, accelerators and angel groups.

To build a sustainable venture industry will take time and much more than $400 million. But as a catalyst, this capital should help attract at least three to five times that amount into the Canadian investment sector. To build a sustainable venture industry, will take time and this is a great start.

While devil is always in the details, congratulations to Sam Duboc for keeping the implementation of these new programs under the management of the private sector and kudos to the Harper government for doing this right, allowing industry to fix the problem?

Click here for more infomation about the Prime Minister's announcement regarding the plan to strengthen venture capital investment in Canada.

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The State of Angel Investing

Posted on August 02 2011 | Author: Dave Smardon

I was talking to an entrepreneur (let's call him Bob) the other day about the challenges of starting up a technology business in Canada. Bob raised a number of issues from the Canadian tax system to the difficulty of finding good experienced people. However, it wasn’t long before the subject of venture capital took the spotlight. He said that raising capital was the greatest challenge facing entrepreneurs today. It is hard to argue this point. I remember the crazy Internet period from 1996 through 2000, when Canada had nearly 200 venture capital companies, and the vast majority were competing for early stage investments. They all had surpluses of capital and were anxious to invest it. Today, it’s hard to find any venture capital firm that actually has money to invest, and those that do have gravitated towards more mature companies and management buy-outs. So, who fills the investment space vacated by our once thriving venture capital sector? Well, regrettably the answer must be angels!

Angel investment groups have been around for many years, particularly in Toronto, Ottawa and Vancouver. For a long time, the criticism was that they rarely “pull the trigger” on an investment, spending more time in networking and schmoozing than reviewing investment opportunities. Furthermore, many of the angel groups were comprised of what we called “angel wannabees”, individuals who wanted to be perceived as angel investors, and professionals such a lawyers, accountants, bankers and real estate agents, all looking for future business. Of course, the poor entrepreneur who was presenting to these groups would be unaware that 75% of the room had no interest in investing at all, and in fact they had no capital to invest.

Within the last couple of years, Canada’s angel community seems to have grown and matured. Thanks to government support programs, formal angel groups are springing up all across the country. Many of these angel organizations are still learning how to manage and coordinate their angel investors, not an easy task. However, one would think that the increased angel activity would be good news for entrepreneurs like Bob. I asked Bob if he had approached angel groups. His response was a rather flippant “been there”, “done that” as he had presented to five separate angel organizations in the past six months. Bob described his experience as unfruitful, time consuming and frustrating. In some groups, Bob was able to have private conversations with angel members only to find that several of them were professionals looking to get business from Bob’s company. He also suggested that Canadian angel groups really don’t cooperate or co-invest very often, but rather, they tend to be somewhat self-centred as they invest only within their local geographies. 

Talking to Bob, it sounds like the more things change; the more they stay the same. Perhaps the angel investor community cannot fill the gap left by past venture capital firms. While we wait for our angel community to mature, the lack of investment capital for early stage technology companies continues with no apparent solution on the horizon.

Bob did get the capital for his company. He raised $2 million from investors in the United States.

For your further reading, you might find the NACO’s recent report Investment Activity by Canadian Angel Groups: 2010 Report of interest.

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