By Lilian Schaer for Bioenterprise Canada
The path from idea to successful product on the market is not a straight or easy one for most entrepreneurs in Canada’s agri-tech sector. It can be difficult to find support for unproven technologies, and unlike many other sectors, agriculture’s opportunities for product testing and trial opportunities are closely tied to the nature’s annual cycles, making for a longer and slower road to product validation and commercialization.
That’s where venture capital investor Verdex Capital decided to apply an innovative approach in creating a unique pathway for commercializing agri-tech: Carrot Ventures Fund I, L.P., more commonly known as Carrot Ventures.
Backed by Verdex Capital and Farm Credit Canada, Carrot is a $15 million venture fund that forms new companies around vetted, venture-scale technologies – in place of the more common approach of simply investing in existing businesses. This includes carefully selecting the leadership team to head each company and leading the first round of financing to ensure the new companies are properly launched.
“If you are an inventor of a technology and looking for co-founders to help you commercialize, or if your company has stranded agtech assets, we’re an alternative that can help you get value from your intellectual property,” says Martin Vetter, CEO of Verdex Capital and Founding Partner at Carrot Ventures. “We recognized there was a gap in the funding ecosystem, and Carrot Ventures is a new approach that’s based on an innovative company formation business model.”
Since its launch in 2021, Carrot has added two portfolio companies: Susterre Technologies, which uses ultra-high pressure fluid jet technology for planting crops without disturbing the soil through tillage, and Cellar Insights, a remote monitoring and intelligence platform for managing potato storage.
Susterre was originally founded by an Ontario company called I-Cubed Industry Innovators, which today remains a partner alongside Carrot and Susterre CEO Michael Cully. Its technology makes it easier for farmers to adopt environmentally friendly no-till and cover crop practices, which boost soil health while minimizing erosion.
These regenerative farming practices, however, can make it difficult for conventional planting equipment to cut through compacted soil and plant residue remaining on the field from the previous year’s crop to actually plant the corn, soybean and other seeds.
Since closing its first funding round in January 2022, Susterre has designed and delivered four commercial grade units which have been used for field testing, and successfully completed 20 different trials in Ontario and across five U.S. states.
“When we founded the company, we had one patent filed and now, as we’ve invented new improvements to the technology, we have three patent filings,” says Cully. “In 2024, we will be converting from pure testing to active commercialization and trying to sell units for delivery for the 2025 planting season with an initial focus on the U.S. corn belt.”
According to Cully, the biggest benefit for farmers is a noticeable six to 12 per cent yield bump when using the technology. The system can deliver seed to the proper soil depth in almost any field condition, and cuts through even damp crop residue, which gives farmers more time to get crops planted. In addition, the fluid that cuts through the soil doesn’t have to be just water; it can also be a starter fertilizer that, because it is injected right into the soil, won’t run off and will bring nutrients directly to the plants’ root systems.
“This is good for the environment and farm sustainability, generating corn growers in the U.S. for example a benefit of $150 USD an acre,” Cully says. “And for each year we keep growers using these regenerative, no-till practices, we reduce carbon dioxide emissions by 17.5%.”
According to Cully, the Carrot approach meant ready access to experienced advisors, a mature corporate governance model and professional support with the organizational elements of founding a company, such as shareholder agreements – all things investors look for when deciding whether or not to put their money into a new venture.
In five years, the goal is to be a $40 – $50 million business in North America, but Cully is also eyeing expansion into Brazil, another leading global corn and soybean producer, as well as opportunities in the fresh produce sector.
Terry Sydoryk is the CEO of Cellar Insights, a company co-founded by a sixth-generation New Brunswick potato grower who was looking for ways to use technology to minimize losses while the crop is in storage awaiting market.
“Potatoes stored in perfect conditions lose three to five per cent of their volume during their time in storage; in facilities where environmental conditions like temperature, humidity and carbon dioxide levels aren’t optimal, those losses can rise to 10 to 12 per cent,” notes Sydoryk, adding that global storage losses for potatoes are estimated at $20 billion, with other root vegetables facing similar problems.
Cellar’s smart remote monitoring system combines sensor technologies that monitor the environmental conditions inside the storage facility with a predictive algorithm to alert growers to emerging storage problems. This lets them take corrective action to avoid problems, minimizing lost crop revenue as well as reducing food waste.
Since partnering with Carrot, the company has formalized its business plan, initiated fundraising and placed their technology into 20 different storage facilities in New Brunswick and Alberta as part of a product trial. Carrot has also helped with upfront legal support, initial market due diligence, and back office administrative support.
“Working with Carrot has accelerated company formation, and helped with the early company formation and legal requirements along with IP agreements that are critical,” Sydoryk adds. “People need help cracking the market when they have a good idea, and having someone to help you make connections and guide you through the early stages and beyond is invaluable.”
More information about Carrot Ventures is available at https://carrotventures.com/.
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