FCC major player in ag venture capital

Source: www.producer.com

In 2017 the Barton report said Canada has a massive opportunity to boost exports of agricultural commodities, agri-food and seafood.

The most memorable part of the report, from the Minister of Finance’s Advisory Council on Economic Growth, set a target of adding $30 billion to Canada’s agriculture and agri-food exports by 2027.

But there was another notable paragraph in the report, about venture capital for ag innovation.

Related stories in this special report:

“Encourage Canada’s leading banks and institutional investors to establish funds providing fast-growing small- and midsize-enterprises with patient capital in the form of minority equity stakes or equity-like loans,” the report said. “Complement these efforts by enabling agfood hubs to access the financial expertise of institutions such as Farm Credit Canada, the Business Development Bank of Canada and Export Development Canada.”

Leaders at Farm Credit Canada noticed the paragraph and took action.

FCC decided it could play the role of a catalyst, to encourage more investment in ag and agri-food technology, said Rebbecca Clarke, FCC vice-president and treasurer.

“It (the report) really highlighted the need for more venture capital devoted to Canadian ag innovation,” Clarke said.

Ag tech entrepreneurs need cash to get their business off the ground.

If, for instance, a small company has a novel bio-fungicide, it would need money for field testing, refining the product, market research, regulatory compliance and a long list of other activities.

“Those start-up companies really need equity. They’re not in a position for debt,” Clarke said.

The venture capital community in Canada is relatively small and only a fraction of venture capital activity has been dedicated to agri-food, she added.

“There was a more pronounced gap, of capital, for that seed and early stage (of companies).”

To fill the void, FCC expanded its venture capital program.

It’s made a number of investments in Canadian venture capital funds that specialize in agriculture, including a major announcement last May.

It invested $100 million in Forage Capital, a Calgary venture capital firm, to create the Agriculture and Food Business Solutions Fund.

It was created to “provide companies with the stability and flexibility they need to rebuild their business models during challenging times,” FCC said in a release.

FCC has invested in other venture capital funds that focus on ag and agri-food, including:

  • $20 million in District Ventures Capital. It’s run by businessperson Arlene Dickinson, formerly of the TV show Dragons’ Den, who specializes in the food and health sector.
  • $12 million into The Ag Capital Canada Fund. It was launched last March and focuses on Canadian innovation, invention and technological advancement in ag.
  • $20 million to the InvestEco Sustainable Food Fund.

FCC has intensified its commitment to ag venture capital, but it’s actually been in the VC space for two decades.

In the early 2000s, FCC made direct investments in ag and agri-food companies. But around 2006 some of its investment experts formed Avrio Capital, which funded innovative ag and food firms. Avrio was the first ag and food venture capital fund in Canada.

In 2019 FCC launched Avrio Sub Debt Fund III, a $100 million fund to support growth-stage companies and mature operations in the ag and agri-food sector.