Avrio Sees 5X Return from Farmers Edge Sell-Down

March 27, 2017

Earlier this year Fairfax Financial, the holding company of Canadian billionaire Prem Watsa, invested an undisclosed amount in digital precision and data management agtech company Farmers Edge.

Through the transaction, Fairfax Financial not only committed fresh capital to the company, but bought out, or bought down venture capital firms that had been key in Farmers Edge’s previous funding rounds that have raised C$74 million for the company to date.

Among those bought out was Kleiner Perkins Caufield & Byers, which made its first investment in Farmers Edge in 2014, and later in January 2016, co-led a C$58 million round in the company through its Green Growth Fund along with Mitsui & Co. and Osmington Inc.

However, more impressive is the buy-down of Calgary-based Avrio Capital which was made possible through the recent recapitalization. One of the pioneer investors in Farmers Edge, Avrio Capital sold down the majority of its stake in the company, realizing a return on capital of “just under 5X,” Aki Georgacacos, managing partner with Avrio, told PE Hub Canada.

Launched in 2005 by agronomists Wade Barnes and Curtis MacKinnon, Farmers Edge has leveraged the potential to transform agricultural production using Variable Rate Technology (VRT) to increase yields, efficiency, and sustainability for the long-term – becoming the largest independent agricultural network of precision agriculture and independent data management solutions in the world.

Geogacacos states that stepping back from Farmers Edge brings “mixed emotions.” However, looking forward, Farmers is envisioning a future in which it enhances its data capabilities – a move that would enable the company to expand “beyond precision agriculture” to a platform that can create “more actionable intelligence for farmers.” To achieve this goal, Avrio realizes that Farmers Edge will need partnerships with investors that are more than financial backers.

Avrio has, however, decided to retain a residual stake in the company to enable the firm to engage in any possible IPOs in Farmers Edge future.

Avrio

Founded in 2002, Avrio is one of Canada’s longest-functioning venture capital firms, and the first in the country to establish agriculture and food as viable investment asset classes. Since its launch, the firm has committed more than C$200 million across nearly 60 agriculture and food technology companies including Hortau, Brookside, Wolf Trax Inc. (whose sale in 2014 garnered Avrio a 138 percent return), and Farmers Edge.

“The adoption of technology along the agricultural value chain is occurring at an unprecedented pace,” said Georgacacos in a company statement. “Food security, wellness, sustainability, and the digitization of the farm are just a few of the macro themes creating a new class of agtech companies that are redefining the ways in which we feed the world.”

Little more than a year ago in early 2016, Avrio Capital announced the second closing of its third late stage ag and food tech venture fund, Avrio Ventures Limited Partnership III, and the establishment of Avrio Ventures Parallel Limited Partnership III, at a total corpus of $110 million, marking it as the firm’s largest fund to date.

The second closing follows the fund’s first closing in August 2014 which included the fund’s cornerstone investors, Farm Credit Canada and Export Development Canada. New investors to Fund III include HarbourVest Canada Growth Fund L.P., HarbourVest Canada Parallel Growth Fund L.P. and Fondaction, le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l’emploi, as well various family offices and incumbent limited partners, BDC Capital and Alberta Enterprise Corporation.

New Deployment

Pivoting away from its sell-down in Farmers Edge, Avrio made a new investment from its third fund in recent days – contributing to a US$6.5 million Series A raised by FarmLead that was led by a syndicate that Avrio helped gather that included, Monsanto, MaRS Investment Accelerator, and Serra Ventures.

Founded in 2013, FarmLead has established an online cash grain marketplace, where through its platform, grain buyers and sellers can connect automatically – listing, negotiating, and closing grain deals. Acting as what Tech Crunch calls, “an eBay for grains,” FarmLead’s platform enables farmers, buyers, and sellers to circumvent the challenges created by the traditionally highly localized and relationship-dependent grain market – democratizing and digitalizing the process, extending the users’ market reach, and generating higher return on investment. The funding from this round will help the company realize its goal of expanding into the U.S. market from its planned hub in Chicago.

“It’s all about customer acquisition and rapid development of the opportunity from FarmLead’s beachhead in Chicago,” said Georgacacos.

So far, Avrio Ventures III has deployed approximately one third of its corpus, but the fund expects to fully invest the balance of its capital within the coming 18 to 24 months.

 

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com.

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