Q & A with AgFunder CEO, Robert Leclerc
FarmCap interview series
Robert Leclerc is the CEO of AgFunder, a crowdfunding platform serving agricultural tech startups. He is a former VC with a PhD in Computational Biology, and a deep background in agricultural investment and analysis.
“When it comes to agtech, farmers have an information arbitrage advantage over other investors.”
Q (Rob Millis): Agricultural technology is certainly not a new market, but startup finance and startup culture are new to the sector. Why do you think it’s taken 20 years for the startup world to discover agtech?
A (Robert Leclerc): I think it’s a confluence of factors. First, it’s only been in the last few years that tech has started to look out of the Valley and into other industries. As Marc Andreessen has coined the term ‘Software is eating the world’. The most exciting advances involve high resolution satellite imagery, drones, big data, mobile, artificial intelligence, and these technologies were typically not advanced enough to be taken outside of niche industries. Mobile is also playing a huge role because most farmers are not going to be sitting in front of a computer all day, but they will be out in the field. We needed interfaces that could adapt to their needs.
Finally, there’s been major opportunities to leverage technology to scale agriculture operations, and with agriculture being as profitable as it has been in the past 10 years it’s driving professionalization in the industry. Today you can run a large 3,000 acre farm with a few people, that would have been impossible 20-30 years ago.
Q: It seems to me that coastal bias and population density have created an inefficient market, undervaluing companies and rewarding intrepid investors. As venture capital moves more deeply into agtech, how can companies protect themselves and get the best value for their shares?
A: We created AgFunder to help level the playing field and bridge the geographical boundaries faced by agriculture companies, and I think this can really help companies situated outside of Silicon Valley or New York to get exposure and recognition. Once a company gets into a marketplace situation they’re in a better position to get multiple offers of interest.
Q: As an emerging market, there are also fewer tech startups for investors to choose from, which can create huge inefficiency for buyers as well. What are the unique risks to early stage investors in agtech?
A: When it comes to agtech, farmers have an information arbitrage advantage over other investors because they can play around with different technologies and can quickly separate the wheat from the chaff. For investors looking at an agtech company it is important to understand what the customers think of the product. With AgFunder we’re excited about the idea of having a diversity of investors independently analyzing each opportunity, and leveraging that diversity to make better investment decisions and add more value for the company.
Q: Who are the players in early stage agtech? Which funds or angels stand out to you?
A: Farmlogs and BlueRiver Technology have been big standouts that have captured a lot of attention from traditional VCs. OnFarm, which just raised $800,000 on AgFunder was a finalist for IBM Global Entrepreneur of the Year and they have an excellent opportunity in the big data space. AgSmarts is another precision agriculture company that I would keep an eye on, as well as 640Labs, which has built some nice technology and has a formidable team. I would also keep an eye on Rowbots, which was started by some geniuses who are developing self automated robots which can snake through fields and apply fertilizer.
On the fund side, Finistere, OpenPrairie, and Cultivian all stand out and have had an agtech focus for a long time, and are currently raising new funds. Invested Development is a seed stage fund that has been extremely active; they’re building up a really nice portfolio for themselves. Omnivore capital is an Indian based agtech firm, and they are really interesting because India has a huge farming population and a lot of talented developers. Outside of the pure agtech players, Khosla Ventures has probably been the most active VC in the Valley, followed closely by Kleiner Perkins. A couple of other firms including Google Ventures and Li-Ka-Shing’s firm Horizons Ventures have also recently made some interesting investments.
Q: Apart from simply serving a particular market, how does AgFunder differ from AngelList, SeedInvest or Crowdfunder?
A: Platforms are disrupting the traditional world of finance (1) when they are bridging a funding gap in the market in the early stage or (2) when they’re opening up an asset class to new or a broader range of investors. Platforms like AngelList, SeedInvest, and Crowdfunder have been disrupting the finance world by bridging the gap for early stage finance and providing opportunities many angel investors would have otherwise not encountered. While this is true for early stage companies on AgFunder, we also see an opportunity to bridge the later stage funding gap and provide a platform for institutional investors, who may not otherwise have access to dealflow, to gain exposure to the space. Thus, whereas other platforms will complete with traditional VCs for deals, we are emerging as a marketplace for both private and institutional investors. This is evidenced by our member investors which include major food and ag funds, silicon valley VCs, and over $1.3 billion in warehoused deal flow.
Q: What are your core criteria for a company raising funds through AgFunder?
A: Rather than trying to pick the winners, which is the investors job, we see ourselves as providing a low pass filter for opportunities so that investors are not inundated with noise. We start with investment ready opportunities, companies need to have the documents ready that investors would need for a due diligence. If you’re still kicking around an idea it’s probably not the best time to come to us. During our vetting process we look at the strength of the team, their experience, and their work product if they’ve already developed something. We like to see that the team has been able to raise capital, whether that means raising capital in a previous round or bringing a credible investor to the table for the current round. Where possible we also like to see traction and social proof. It’s great if companies have been able to attract media attention because they’re going to need to draw on those tools and that experience when they do a fundraising on AgFunder. Companies need to treat this like an IPO road show. If they’re expecting to post their profile and pick up a check in three months they’re mistaken. Fundraising is still hard work.
Q: AgFunder is raising funds through the platform as well. Can you tell us where that stands and how you are using AgFunder to facilitate your own fundraising?
A: We don’t exclude ourselves from our own selection criteria, and one of the most important metrics to show investors is traction. As a company, you also want to start raising capital under momentum. We just closed our first campaign with OnFarm in just over 30 days which was a huge milestone for us, and we just launched our second campaign with Kuli Kuli and have several other companies that we’ll be bringing on over the next 2-4 weeks. Don’t be surprised to see us go live with our own campaign after that!
Q: What do you think the agtech market will look like in five years?
A: Monsanto’s $1 billion acquisition of Climate Corporation, and $250 million acquisition of Precision Planting sent a strong message to the rest of the industry that software and data were going to play an integral part of the industry moving forward. This represented a wholesale import of Silicon Valley DNA into Monsanto’s organization, and I think this gives them a huge competitive advantage over their peers. Right now you have maybe a dozen big ag firms such as Syngenta, BASF, Dow, John Deere, etc, all which have very little software background in their DNA, and if they’re going to get in the game, they’ll all have to compete for the same small pool of companies. I think the leaders in this space in five years will come out handsomely.
Looking beyond software and big data, as farms seek to leverage technology to achieve economies of scale I think we’re going to see interesting things with drones, unmanned vehicles and robotics. Software and artificial intelligence is getting to a point where we can apply the factory model and bring all of this equipment outside to work in a dynamic environment that wouldn’t have been possible before. What’s particularly interesting is that agriculture provides a very attractive alpha setting to perfect these technologies before we bring them out into the rest of the world where they’ll need to interface with human beings. Who knows, in 20 years time John Deere could be the leader in robotics because they were able to redeploy the IP they developed on the farm.
Rob Leclerc will appear in the May 5 edition of Forbes Magazine and is speaking at the Global AgInvesting Conference on May 1. He has five graduate degrees, including a PhD in Ecology and Evolutionary Biology from Yale. His published research in Nature journals has been widely cited, he is a judge for the National Ag Innovation Prize, and he carries agricultural VC experience from his time at SeedRock Capital.
____________________________
DISCLOSURES: At the time of publication, I did not own a stake in any company mentioned here; I now have investments in Agfunder and their funds.
