AgTech Investor Profile - Funding Analysis

AgTech Investor Profile, Part 1: The Yield Lab APAC on its matrix for success

By CM Tay

- Last updated on GMT

Increasing demand for food security and sustainable agriculture, as well as the adoption of modern technologies in farming practices, have seen APAC’s agtech sector attract attention from VCs and investors.
Increasing demand for food security and sustainable agriculture, as well as the adoption of modern technologies in farming practices, have seen APAC’s agtech sector attract attention from VCs and investors.

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Venture capitalist (VC) and investment funds are crucial to helping agtech start-ups scale and fulfil their potential. But what are they looking for and what qualities should fledging firms possess? In the first of our AgTech Investor Portfolio Profiles, we speak to The Yield Lab, with a particular focus on APAC.

The region, home to some of the world's most populous and agriculturally significant countries, is a hotbed for agri-tech innovations and investments. Certain APAC cities and countries, such as Singapore, Hong Kong, Shanghai, Bangalore and Sydney, have become prominent agri-tech hubs, attracting both start-ups and investors from around the world.

Increasing demand for food security and sustainable agriculture, as well as the adoption of modern technologies in farming practices, have seen APAC’s agtech sector attract attention from VCs and investors. Numerous agtech start-ups have emerged across the region, focusing on various aspects of agriculture like precision farming, smart irrigation, farm management software, supply chain optimisation and vertical farming.

Optimising yields

One example of such an investment fund is The Yield Lab, a network of early-stage agri-tech VC funds across APAC, Europe, North America and Latin America. The network identifies, engages with and invests in early-stage seed and Series A innovation across all aspects of agriculture in order to address pertinent global sustainability and food security issues.

According to Claire Pribula, co-founder and MD of the Singapore-based Yield Lab Asia Pacific (TYLAP) — which is structured as both a fund and an accelerator — the network seeks to increase agtech entrepreneurs’ chances of success by not only providing investment but also “relevant one-on-one science and industry-aligned subject matter mentorship while working in close collaboration with pertinent agriculture industry strategics”​ across its global network.

Speaking to AgTechNavigator​, Pribula outlined what early seed stage companies need to aide in their growth to commercialisation or the next stage of Series A investment, starting with access to a well-rounded network of 20- to 30-year experts in their field of innovation. “Most exits in agtech (unless consumer-focused) will be acquired or a trade sale.

“The sooner an entrepreneur can get their innovation in front of the appropriate strategic company or industry, the faster trials or pilots can happen. This leads to better insights for them, so they can finesse their innovation to match the reality of what it takes to get to an exit.”

The other important factors are understanding how to protect intellectual property to ensure one’s hard work is not infringed upon, and integrating an impact and sustainability matrix into an operations plan.

This matrix, Pribula said, must encompass “a strong understanding of what it will take to get to their end-goal, (including) the size of their near- and long-term addressable market, a global view of potential competitors in their field of focus, a realistic expectation of what it will take to capture that market, and how much capital is required to get through each stage of development”.

In good company

Presently, The Yield Lab has 85 portfolio companies globally, including Indian fintech company CreditAI, Singapore-based biotech firm Protenga and Israel-based start-up Biotic. Asked what key characteristics TYLAP looks for in a company when designating funds for Series A opportunities, Pribula said it selects innovations relevant to APAC’s specific issues, challenges and unique agri-food focus, and that have the ability to scale into multiple markets globally.

She added: “We look for innovation that will fill industry white space and have scalable impact. Our focus spans all the major categories, such as crop science and production, animal health — which includes aquaculture and livestock — precision agriculture, sustainability, supply chain traceability, and food ingredients.

“A Series A company should have proven innovation and the ability to monetise, and be able to start driving scalable revenue. Another important aspect is the size of the potential addressable market in the near and long term, and how difficult it would be for another innovator to recreate the company’s innovations.”

Equally important, she said, are the strength of a company’s founder(s) and team members, how its innovations can fill important white space in agri-food, and what long-term or transformational impact  they may have on the agriculture ecosystem.

“In addition to the due diligence we conduct, we involve the relevant knowledge experts of each science or subject to assess a company’s viability. This allows us to determine the right professionals to work with founders to assist in the validation and completion of their innovations, and aid in accelerating their growth towards commercialisation and thus, their highest valuation. This also serves to close the awareness gap.”

Foundations for founders’ relationships

Of course, before any of the above happens, TYLAP must first establish strong working relationships with company founders. This involves an intimate understanding of each company’s area of focus, science, industry and potential regional and global value. TYLAP then seeks to grant these companies access to field trials, pilots or experts based on their respective disciplines, in order to fill the gap. 

Access to capital, as well as to strategic businesses that can work with these young companies, form the added value TYLAP provides to founders and according to Pribula, the fund hopes to offer them comfort and confidence in doing so.

She said, “Being a founder can be very lonely and stressful if one is not surrounded by a network that is on their side and proactively looking for ways to help them advance. No matter when our founders reach out to us or which of our funds they’re involved with, once they’re in The Yield Lab’s ‘fraternity’, we remain ready should they need assistance.”

External potential and internal returns

Regarding which APAC agri-tech sectors TYLAP sees the most growth potential in, Pribula believes crop science, precision agriculture, modular innovation, aquaculture and animal health, sustainability (including regenerative agriculture, alternative crop innovation and seaweed /macro-algae innovation), food ingredients and supply chain hold the most promise. 

She added that among all APAC countries, Singapore already has a strategic focus on becoming 30% self-sufficient by 2030, with a focus on aquaculture, alternative proteins and controlled-environment agriculture. Countries with many emerging and rapidly growing agri-tech innovation include India, Indonesia, Thailand and Australia.

“A unique aspect of APAC agtech is the high population of small-holder farmers across South Asia and ASEAN, their importance in providing the majority of produce to the region, and even being responsible globally for a third of our produce. This has become a driver of value propositions that can help small-holder farmers thrive,”​ said Pribula.

In addition to working towards maximising this growth potential, The Yield Lab measures its fund value in terms of internal rate of return (IRR), which increases alongside the valuations of its portfolio companies.

Pribula revealed: “Of course, the IRR is unrealised until all companies exit. The average IRR of our funds is between 18% and 22% and we see valuations increase as our portfolio companies advance in their equity rounds, from Seed to Series A, Series B and so on.​ 

“We often function as the lead investor and help syndicate investors for equity rounds. In addition, all companies need to quantifiably measure their impact against UN SDGs (United Nations Sustainable Development Goals). These are rolled up to provide a measurable return for the fund in terms of social, environmental and financial impact — a triple bottom line regarding people, planet and profit.”

Continuous commitment

Pribula told AgTechNavigator​ that over the next year, The Yield Lab will add another 15 companies to its global portfolio to increase its ESG (environmental, social and governance) and UN SDG impact and ensure multi-directional integration among these companies. She believes this will be “a powerful catalyst for addressing the planet’s urgent needs”​.

She added, “If the goal is to make sure there is enough affordable food on this planet for future generations, all corners of the agriculture Industry must be transformed.  It is the oldest Industry and yet, the last one to go through a massive transformation; nothing is more important or time-sensitive.

“But one hammer hitting one nail will not get this done — for example, alternative proteins alone won’t save the day. We must do more with less and make every growth cycle (whether plant or animal) count, while regenerating our environment.”

To this end, Pribula is confident that “no one is more prescient”​ than The Yield Lab, which she said “acts with urgency regarding identifying impactful innovation at an early stage and ensuring these companies are successful”​, in order to achieve the time-sensitive goal of affordable and sustainable food for all.

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