VANCOUVER – Technological innovation is on the rise as a way to address the labour shortages facing agriculture and improve production practices, but getting the money to fund research and development activities is tough.
To give companies a chance to share their successes with emerging companies on the hunt for cash, the Vantec Angel Network Inc. hosted an information and networking session for local agritech companies on November 6.
A centrepiece of the afternoon event was a panel discussion with Tom Urban, founder of Agribusiness Advisors, a Vancouver company that has provided early stage financing to several agritech companies.
The panel included three of those companies: CubicFarm Systems Inc., a four-year-old vertical farming company spun out of the Benne family’s greenhouse business in Langley; Novobind Livestock Therapeutics Inc. of Vancouver, which focuses on technologies that reduce antimicrobial use in animals; and SemiosBio Technologies Inc., also of Vancouver, which has patented an automated monitoring system to reduce the use of chemical pest controls in orchards.
Semios has been the most successful of the three companies to date, securing $100 million in financing in September that will support expansion into new markets with its automated monitoring system, which can also track climatic conditions. It currently serves growers managing 120,000 acres, an area that’s set to grow in 2020.
“I founded the company in 2011 and the first three to four years were pretty much research years,” says Semios CEO Michael Gilbert. “Then we focused a lot on profitability. We were trying to see how fast could we grow and still become profitable. So trying to max out those two; often people pick one or the other.”
The company raised $28 million from investors and $20 million from grants and other sources prior to licensing its technology to growers for an annual fee of $100 to $300 per acre.
“One thing we did early on is we went right to the biggest, best customers in the world … in California and Washington,” explains Gilbert. “There’s lots of folks here in BC we could have gone after, but the big customers tell you everything you need to know about your business and that helped us learn a lot about the product really quickly.”
Profitability was key, so growers weren’t given free trials or discounts.
“People care more when they pay … and that allowed us to get to profitability much faster,” he says.
Urban says by showing customers the economic impact of their product, Semios fueled its own success.
“They were able to demonstrate a very specific value/economic proposition to the customer,” he notes.
Established record
The value of the enclosed vertical farming systems CubicFarms offers was clear to many of its early investors because the Benne family was respected across the continent for its greenhouse propagation systems and had an established record on the public markets through Bevo Agro Inc. (which last year evolved into cannabis producer Zenabis Global Inc.).
“Everyone else in the indoor ag space seems to be more coming at it from a business plan, let’s raise a bunch of capital and solve great problems with the sheer brute force of money,” explains CEO Dave Dinesen, who joined the company last year. “Our founders came at it from ‘We’re really good growers; we’re going to come at it from the grower’s standpoint.’”
Created in 2014, CubicFarms steadily grew with the assistance of four rounds of financing, each larger than the last until it secured a $100 million investment last year backed by an institutional investor and was spun out of Bevo.
“It was a combination of we know how to grow stuff, and we’ve got a competent management team that knows how to scale up, raise capital, execute, build a team,” says Dinesen, who adds that sales didn’t hurt.
While it has not released any financials since being spun out of Bevo last year, it has made major sales to growers in Canada and the US; the latter was worth nearly $4 million. It also sells produce under the Thriiv brand name through IGA, Kin’s Farm Market and other grocers.
“Once you get some sales, that really gives potential investors a lot of room,” he said, noting that having institutional backing has given it the standing needed to both grow its business and attract new investors. “Getting that strategic partner, to us, has really put gasoline on our fire.”
The next step for CubicFarms will be a listing on the TSX this winter, a step up from its current listing on the TSX-Venture exchange.
Different route
But if sales were critical to the growth of Semios and CubicFarms, Novobind took a different route. It didn’t want to sell anything, says founder and CEO Hamlet Abnousi. Rather, it focused on developing technology and reaping licensing fees from its discoveries, which target pathogens responsible for more than $29 billion in losses to chicken, shrimp and companion animals each year.
“We don’t want to actually get out there and sell stuff; we want to create technology and hand it over to people who can do that,” he says.
This focused the company on looking for talent that could match what it offered in research expertise.
“Strategically, we picked good areas to be in, then we looked back and said for us to be able to get there in one, two, three rounds of investment, who do we have to bring along?” says Abnousi. “We can’t afford a giant management team, so how do we bring an investor in who has reach, technical strategy, [subject] matter expertise that can enable what we want to do?”
Novobind has turned away five times the investment it received, says Abnousi, but he believes people are just as valuable. This past summer, Novobind received investment from Lallemand, a world leader in animal nutrition with which it will be partnering on research and development.
“Validation can come in the form of external partners it can come in terms of internal competence,” says Urban, who anticipates further expansion for the company.
The investments in the three companies dwarf the cash available to start-ups in BC, however. Kevin Harvey, portfolio manager with the investment capital branch of the BC Ministry of Jobs, Trade and Technology, painted a modest picture of the capital flowing to fledgling agriculture technology companies in BC.
Programs such as the province’s Small Business Venture Capital program have $38.5 million available, and Harvey says that’s managed to leverage $120 million into the BC venture capital ecosystem. A mere $3 million is available for agritech initiatives, however.
Companies funded through the program in the past include plant-based food processor Daiya Foods Inc., but there are plenty more looking for financing inside and outside the province. Several attended the Vantec networking session, including BarrelWise Technologies, which won the province’s Agritech Innovation Challenge this summer with a technology to improve management of barrel-aged wines; Plant Veda, which describes itself as “a plant-based mylk company on a mission to reduce climate change by shifting humans to plant-based diet;” and Susgrainable Health Foods, which upcycles spent mash from brewing operations into baked goods, flour and other ingredients.
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