It’s fall harvest now, and AgTech Accelerator has something new to show from the summer growing season: $8.5 million in additional funding that positions the accelerator to start planting investments in promising agriculture technologies from around the country.
The new funding brings the total financial backing for the Research Triangle Park, NC-based accelerator to $20 million. The accelerator launched in May with the goal of finding early-stage technologies at prominent universities that it can support and nurture into companies. At its start, the accelerator secured $11.5 million in financial backing, led by Alexandria Venture Investments, the investing arm of Alexandria Real Estate Equities (NYSE: ARE).
Elanco, the animal health division of Indianapolis-based Eli Lilly (NYSE: LLY) led the investment round announced today. Earlier investors Bayer, Syngenta Ventures, Alexandria Venture Investments, Arch Venture Partners, Flagship Ventures, Harris & Harris Group (NASDAQ: TINY), Hatteras Venture Partners, Mountain Group Capital, and Pappas Capital also participated in the round.
Elanco was connected to AgTech Accelerator through its parent company’s relationship with Accelerator Corporation, the sister organization that inspired the RTP program. Eli Lilly is one of the investors in Accelerator Corp., which nurtures early-stage life science startups from its sites in Seattle and New York. AgTech Accelerator CEO John Dombrosky says he did not need to do much convincing to bring Elanco on board because Eli Lilly had seen Accelerator Corp. discover and develop drug candidates for human health. “They get this model, they’ve seen it work in pharma,” he says.
Both accelerator programs aim to pick up the research and development void that’s left as larger companies cut back on their own internal discovery programs. Big pharma started those cutbacks in the late 1990s and early 2000s, which shifted drug discovery work to smaller and nimbler biotech startups, Dombrosky says. In recent years, those same trends have been happening with big ag companies. He points to a recent report from Boston Consulting Group and online agtech investment marketplace AgFunder, which found that just 10 percent of ag companies are pouring money into R&D for new breakthrough technologies. Instead, companies are using their capital to support their existing technologies and products. Dombrosky says those spending shifts open the door for the AgTech Accelerator to support the agtech innovation that the big companies no longer pursue on their own.
AgTech Accelerator won’t enroll classes of startups the way that many tech-oriented accelerator programs do. Instead, the accelerator is keeping tabs on technologies at seven universities that have signed on as partners: North Carolina State University, the University of North Carolina at Chapel Hill; Duke University; Pennsylvania State University; Purdue University; University of California, Davis; and Washington State University. Those technologies could be in areas such as crop protection, animal health, and precision agriculture, or they could span multiple parts of the ag and food industries.
Though AgTech Accelerator has eyed some technologies, it has made no deals so far. Dombrosky says the accelerator’s sweet spot will be an investment anywhere between a $1.5 million convertible note to a $3.5 million Series A round. Agtech Accelerator will build a company around the technology, turning to its university partners for resources such as greenhouse space. These startups could be based at the accelerator’s RTP space, though Dombrosky is open to building companies elsewhere if it makes more sense for the technology. The goal, he says, is to bring a technology far enough along to remove some of the business risks around it. If the accelerator is successful, these startups will grow to a point where the accelerator’s financial backers, or others, will be interested in making a larger investment.
AgTech Accelerator aims to bring its total fundraising to between $25 million and $30 million, Dombrosky says. After that, the accelerator will start to put that money to work. He expects the accelerator could make between two and four investments next year.
Photo courtesy of Flickr user U.S. Department of Agriculture via a Creative Commons license.