Emmertech, the AgTech fund Conexus Venture Capital launched last year, has secured an additional $15 million CAD in its final closing, bringing its total fund size to $60 million.
The final number surpasses Emmertech’s goal of $55 million, as the venture firm aims to fuel early-stage investment in the AgTech sector and make Canada a “dominant” player on the global stage.
Emmertech’s goal for having a lineup of agricultural-focused investors is to broker partnership opportunities for its portfolio companies.
“It was just very obvious, the gap for Emmertech’s style and cheque size within the AgTech ecosystem was desperately needed,” said Emmertech managing director Kyle Scott, who joined the fund to help run it, and Conexus Venture Capital, in August.
In an interview with BetaKit, Scott lamented a lack of “sophisticated investors” playing in the Canadian AgTech space and emphasized the need for more investors that understand the sector’s needs.
“What ends up happening is you either have sort of generalist venture capital firms investing in AgTech companies and bringing a playbook that maybe works for traditional B2B or B2C SaaS companies … that just doesn’t work in agriculture,” said Scott. “Or you see a lack of capital flowing through to early-stage companies, and so [companies] stay quite regionalized.”
“What we’re trying to do is identify those opportunities and remove that friction by injecting capital at an earlier stage to create some really dominant global agriculture players right here at home,” he added.
One way Emmertech is bringing a specialized approach to AgTech investing is through its limited partners (LPs). The fund is primarily backed by what it calls “agriculture stakeholders,” including farmers, agribusiness owners, ag-focused insurance companies, and several credit unions that are anchored in agricultural communities.
Government of Saskatchewan agency Innovation Saskatchewan is the anchor investor in Emmertech, having contributed $15 million. Other investors include undisclosed credit unions in New Brunswick, Ontario, Saskatchewan, Alberta, and British Columbia.
Mosaic, a global leader in the crop nutrient industry, led the final close for Emmertech alongside Canada’s largest grain handler, Viterra, and Prospera Credit Union.
Emmertech’s goal for having a lineup of agricultural-focused investors is to broker partnership opportunities for its portfolio companies.
The fund currently has two portfolio companies, having started investing after its initial close of $45 million in August. Emmertech’s investments to date include crop management startup Ukko Agro and fertilizer-focused Lucent Biosciences. The firm is expecting to close its third deal shortly.
Emmertech aims to invest in seed-stage companies with the $15 million of the fund from Innovation Saskatchewan set aside for Saskatchewan-based AgTech companies and companies coming out of Conexus’s Agtech Accelerator, also launched last year.
Emmertech is the second fund Conexus Venture Capital has launched. The firm was created in 2019 by Regina-based Conexus Credit Union and Managing Director Sean O’Connor. The first, $32 million fund, invests specifically in Saskatchewan startups. Its portfolio includes 7Shifts, Coconut Software, SalonScale, and Callia.
With a thesis that spans Canada, Emmertech plans to make initial investments of $1 million to $5 million, with about 25 to 30 percent of the fund reserved for follow on.
“I think we have an incredible amount of opportunity, and a lot of macro tailwinds behind the industry,” said Scott. “The proof’s in the pudding with the quality of opportunities and the quantity of opportunities that we’re seeing right now to deploy that capital.”
With supply chain issues and the climate change crises as ongoing and major concerns on a global scale, AgTech presents a sizable investment opportunity.
In 2020, the agricultural system in Canada contributed $139.3 billion (around 7.4 percent) of the country’s gross domestic product (GDP). According to government numbers, one out of every nine jobs in Canada came from agriculture two years ago.
On a global scale, the food market brought in $8 trillion USD two years ago, with reports expecting that to reach $9.1 billion USD within the next three years.
With a hearty agriculture system, Canada is already home to some notable AgTech startups, including Semios, which secured $100 million in August for its global network of IoT sensors for crops.
Another is Vancouver-based ag- and cleantech startup Terramera, which is on a path to create “the world’s largest regenerative agriculture initiative” by helping Canadian farms limit carbon dioxide. In 2020, the startup revealed plans to create a new $730 million global centre focused on the effort.
AgTech investors in Canada remained limited, however. In addition to Emmertech, women-focused investment firm The51 launched its Food & AgTech Fund recently, with hopes to secure $30 million. Other investors in the space include AVAC Group, SVG Ventures Thrive, and the Canadian Technology Accelerator’s Agtech program.
Given agriculture’s importance to the Canadian economy, why the limited number of AgTech investors? Scott says it’s likely due to the fact that most capital flows ton and comes from, major urban centres, and as Canadian tech ecosystems like Saskatchewan and Alberta have grown so has the opportunity to invest in AgTech.
“You have to be in those jurisdictions and deploying capital in those jurisdictions to successfully invest in and build agriculture companies,” said Scott. “Right now, it’s just not the case.”
“Why [investing in AgTech] is so important is Canada is seen as a global leader in agriculture, and we need to continue to be seen as a global leader in agriculture,” Scott added.
Photo by Paz Arando on Unsplash