Finistere Plants Investment Seed in Ireland With $24M Agtech Fund
Ireland’s top agricultural exports are beef and dairy products. Arama Kukutai believes that in coming years, Ireland will send the United States and the rest of the world something different: innovative agricultural technologies that help make farms more productive and profitable.
To that end, Kukutai’s venture capital firm, Finistere Ventures, is joining with the Ireland Strategic Investment Fund to launch a new 20 million euro ($24 million) fund that will invest in emerging agtech startups in Ireland.
Though Finistere splits its operations between San Diego and Palo Alto, CA, the firm has been expanding its reach globally. In addition to deals made in Europe and Israel in recent years, the firm has also created an agtech fund dedicated to Australia and New Zealand, says Kukutai, a partner at the firm.
The idea for an Ireland-focused fund stems from discussions with Ireland government officials about investing in Finistere’s main agtech fund. Those officials oversee the Ireland Strategic Investment Fund, an 8.5 billion euro fund (roughly $10 billion) that has a statutory mandate to make investments that support economic activity in Ireland. Kukutai says the talks covered research and development activity in Ireland, as well as investment in food and agricultural technologies.
“Few of our deals came from that part of world, but it intrigued us,” he says.
Much of the economic development in Ireland has come from multinational companies in pharmaceuticals and technology that have set up outposts in the country for its lower tax rates or its proximity to the rest of Europe. Their presence is reflected in the country’s economy. Pharmaceuticals are Ireland’s top export.
Early-stage companies in Ireland can find their initial footing with the help of Enterprise Ireland, a government agency that supports startups. Last year, Enterprise Ireland invested 31.5 million euros in 101 startups working in fields such as life sciences and financial technology. A handful of Ireland-based accelerators also invest in startups. Since 2007, the Dublin-based National Digital Resource Centre says it has worked with 226 companies that have gone on to raise more than 152 million euros in follow-on investment. But neither Enterprise Ireland nor NDRC make many agtech investments. NDRC lists just one agtech software company in its portfolio: Contomply, whose software digitizes the manual record-keeping aspects of the animal feed industry.
Agtech funding is scarce because agtech investment requires a more patient approach, Kukutai says. Developing and testing agtech is constrained by the growing season. When startups are finally ready to bring a new technology to the market, it’s difficult to get a foothold in distribution networks dominated by large, well-established companies, he says. Just getting a product into those channels can take two to three years.
“But if you can do that, agricultural technology is massively scalable,” Kukutai says. “We expect any great technology that we invest in through that fund, there’s a very good chance that that company will have a point of presence, or even customers, in the U.S.”
More investors are coming around to Kukutai’s line of thinking. Venture capital investment in agtech has picked up in recent years, growing by 80 percent since 2012, according to a report released last fall by Boston Consulting Group and online agtech investment marketplace AgFunder. The report found that big data analytics was attracting the most investment dollars, followed by technologies in food security and traceability. Biological products are also attracting VC interest. AgFunder’s own analysis of 2016 agtech investment found that VC deals last year dropped 30 percent from 2015. But the report also found that seed-stage deals are attracting more investment, and increasingly these companies are based in countries other than the U.S.
To date, Finistere’s agtech investments include indoor farming startup Plenty, a South San Francisco, CA-based company that recently closed a $200 million Series B funding round to build a global network of sites, and ZeaKal, a San Diego agbio company researching ways make photosynthesis more efficient. Last year, the firm joined with Kinston, NC-based International Farming Corporation to form the agtech investment fund Willow Hill Ventures.
Kukutai says Ireland’s experience in dairy makes the country fertile ground for developing animal health technologies. He adds that innovations in fintech and other technological fields could be adapted for agricultural applications. The Ireland Agtech Fund will make seed-stage investments in agtech companies, as well as Series A investments and follow-on funding. Kukutai adds that some of those investments could be made with other venture capital firms, or in conjunction with Finistere’s main fund. That $150 million fund closed in 2015, drawing investment from companies such as Bayer CropScience. The Ireland Strategic Investment Fund is now also pumping $23.7 million into that fund.
With the launch of the new Ireland fund, Finistere will open a satellite office in Dublin. Kukutai says he expects the fund will make its first investment by the end of this year.