Agriculture and food-related companies make up a global industry, but when it comes to seeding startups in the sector, agricultural technologies face a relative funding famine.
AgTech Accelerator, a new startup program launched Thursday in Research Triangle Park, NC, is trying to address funding issues facing agtech companies, while also providing some of the business support and infrastructure that these young companies need to grow. The accelerator is starting with an $11.5 million investment from global agribusiness companies and life science investors, and includes partnerships with leading academic institutions across the country. John Dombrosky, CEO of the new accelerator, says that investment could balloon to more than $30 million by the end of this year as AgTech Accelerator adds new partners.
U.S.-based agtech startups attracted $2.2 billion in 2015 investments, according to AgFunder, an investment platform that connects investors with agriculture technologies. Globally, AgFunder tallied $4.6 billion invested in 526 deals. While that sum was nearly double the agtech investment from 2014, it’s still small potatoes compared with tech and biotech investments. Last year, software accounted for $23.6 billion invested in 1,736 deals in the U.S., according to the annual MoneyTree Report, which PricewaterhouseCoopers and the National Venture Capital Association compile using Thomson Reuters data. Meanwhile, biotech generated $7.4 billion invested in 475 U.S. deals, according to MoneyTree data.
Dombrosky says the relative dearth of capital in agtech leaves a lot of promising technologies sitting on the shelf. “In ag, it’s probably as hard, or maybe even harder to build early-stage technologies,” he says.
AgTech Accelerator plans to work with technologies coming from seven universities it has identified as partners: Duke University; NC State University; the University of North Carolina at Chapel Hill; Pennsylvania State University; Purdue University; University of California, Davis; and Washington State University. Dombrosky won’t be scoping out licensing opportunities from these schools. Instead, he says AgTech Accelerator will develop relationships with university researchers to keep tabs on their research. Dombrosky says AgTech Accelerator will look for the commercial opportunities that university researchers might not see. Those opportunities could include taking a technology being developed for one particular crop and applying it to another, or adapting a human health technology for use in animals. When AgTech Accelerator identifies a commercial path, that technology will join the accelerator.
Despite its name, AgTech Accelerator won’t function the same way that many tech-startup accelerators do. Many people think of accelerators as programs that enroll a class of entrepreneurs who are placed on a path to grow their startups in size and value over a period of months, Dombrosky says. Upon graduation from the accelerator, these startups are typically ready to raise money (if they’re not already).
Agriculture doesn’t have any programs that operate this way, and AgTech Accelerator won’t try to emulate that model, Dombrosky says. Instead, AgTech Accelerator will operate much like Accelerator Corp., a venture capital-backed firm that invests in and supports life sciences startups and is now also a partner to the new agtech effort. Accelerator launched in Seattle in 2003 and expanded to New York in 2014, offering a model of identifying and financing promising life-science technologies. Dombrosky says AgTech Accelerator will address the specialized needs of agtech companies, providing the office, laboratory, and greenhouse space suited to agricultural R&D, while also providing management to handle the business side of the technology. Unlike most IT accelerators, AgTech Accelerator won’t have a set time for companies to develop and graduate.
AgTech Accelerator is taking a broad view of the kinds of technologies it will work with. Dombrosky says that the technologies could be in IT, if the technology has an agricultural application. But the accelerator could also work with new biotechnologies, such as gene-editing technology. He adds that some of the research into areas such as the microbiome require new digital tools, which means that there will be overlap between disciplines.
By nurturing connections with both universities and industry, Dombrosky says, AgTech Accelerator might even be able to spot ways that university research might fit with work already underway at its industry partners, Syngenta (NYSE: SYT) and Bayer. Those potential partnerships are not limited to technologies generated from agricultural research. While some of the universities were selected because of their prominence in agriculture research, Dombrosky says Purdue owes its inclusion to the strength of both its agriculture and engineering schools; engineering research from Purdue could find applications in agriculture. “We’re twisting disciplines that otherwise wouldn’t be twisted together,” he says.
Dombrosky describes himself as a finance guy who “fell in love with the idea of technology being in food.” He left Thomson Reuters in 2007 to join Syngenta, where he held executive and management positions for the Swiss agribusiness giant involving licensing, and mergers and acquisitions. While there, he says he noticed signs that agricultural innovation was following the same path that biopharma took 10 to 15 years ago, as new product candidates started coming from small startups rather than the internal R&D arms of the big ag players. In 2012, he started talking with Joel Marcus, CEO of Alexandria Real Estate Equities (NYSE: ARE), who saw the same trends. When Alexandria decided to move forward with AgTech Accelerator, Dombrosky was hired as CEO. Alexandria Ventures, the investment arm of the real estate investment trust, is the lead investor in the accelerator.
Working with Dombrosky is chief scientific officer Jeff Rosichan, a veteran of Dow AgroSciences. The accelerator also has a scientific advisory board that will work with companies in the accelerator. Dombrosky says that AgTech Accelerator already has a pipeline of companies awaiting investment decisions. Founders and universities will have equity stakes in the companies that are formed, and the companies will need to meet milestones, he says. If the accelerator works, agtech startups that graduate will be better positioned to raise larger sums of money, the way that startups in tech and biotech do.
Right now, AgTech Accelerator operates from Alexandria office and lab space in RTP. As the accelerator grows, Dombrosky says it will have the opportunity to become a part of the new agtech-focused development that Alexandria is planning in RTP.
AgTech Accelerator isn’t finished adding partners, from both industry and academia. Dombrosky expects that two more industry partners will be added by the end of the year, which in turn could boost the financial commitment to as much as $34 million. As the accelerator grows and adds companies in coming years, it will pursue additional rounds of investment support.
The accelerator plans to add as many as eight more university partners, particularly schools that have animal health expertise. But Dombrosky says the accelerator won’t grow beyond 15 university partners. The smaller academic partner pool will enable the accelerator to develop the deep, long-term relationships that Dombrosky says are necessary to identify and nurture technologies. Consequently, AgTech Accelerator will have the time to do advance work on business plans, intellectual property, and funding diligence.
“By the time they come in house, we’ve done all that work and more than would have been done in an incubator program,” Dombrosky says.