Carrot Ventures, a Calgary-based company creation firm launched by venture capital company AVAC, has closed $15 million for a new fund intended to help seed Canadian AgTech ventures.
The fund’s limited partners include AVAC and Farm Credit Canada (FCC), an agricultural lender. Each organization has invested $7.5 million into the new fund.
“The Carrot company formation model provides a way to accelerate from start-up to market leadership very quickly.”
– Warren Bergen, AVAC
Unlike most venture funds, which invest in existing businesses, Carrot Ventures plans to create its own companies from scratch. Carrot will source the technology, recruit a CEO, form the company, and lead the first round of investment in that company.
In an emailed statement to BetaKit, AVAC president Warren Bergen said though AVAC has historically invested in early-stage companies, it is rare to see a company with “great tech and a great founder or CEO.” AVAC launched Carrot Ventures in 2020 to solve this challenge.
“The Carrot company formation model provides a way to accelerate from start-up to market leadership very quickly,” Bergen added.
Canada is home to a number of AgTech startups that have raised significant rounds of funding in recent years. Vancouver-based Semios, which has developed a platform for crop data and pest control management, raised $100 million CAD in private equity. All the major investors in that round were based outside of Canada. Terramera, another Canadian AgTech company, raised $59.5 million in its last round of funding. The investors that led that round are both based in the United States.
Despite the high activity of foreign investors in Canada’s AgTech sector, several Canadian investment groups, such as Forage Capital, District Ventures, and Build Ventures have also looked to increasingly focus on the sector.
In addition to foreign investors, federal and provincial governments also play a big role in funding Canadian AgTech companies. Recently, Sustainable Development Technology Canada provided a grant to Regina-based Precision AI. In 2020, the Saskatchewan government announced plans to invest $15 million in a privately managed VC fund that focuses on agtech.
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Sean O’Connor, fund manager of Saskatchewan’s Conexus Venture Capital Fund, has highlighted that a lack of access to private capital is the main challenge for Canadian AgTech companies.
Carrot Ventures’ goal is to offer holders of AgTech intellectual property a new way to commercialize their IP and to offer other AgTech investors a stream of startups in which to invest. The overarching goal is to address systemic challenges faced by AgTech startups by helping create companies from the ground up.
Carrot Ventures is currently working on its first deal. Bergen told BetaKit Carrot Ventures has sourced the technology and CEO, but the term sheet has not yet been issued.
Bergen acknowledged that although Canada has great tech, the firm plans to look outside of the country in some cases to find good leaders. Its first company, which has not yet been disclosed, has a CEO from Atlanta, Georgia.
Carrot Ventures plans to invest $1 million on average per company and will invest in the first funding round of each company. Approximately half of the fund is being saved for follow-on investments. Bergen told BetaKit the fund is expected to run for 10 years, with several extension years planned.
“Carrot Ventures is an innovative approach to AgTech commercialization in Canada,” said Rebbecca Clarke, FCC vice president and treasurer. “AVAC has developed a great team of experienced investment professionals and is a long-recognized venture investor in the technology space. We recognize the value of the Carrot Ventures model and the positive impact this fund can have on AgTech innovation.”