Silicon Valley is, in many ways, an obvious place to start an agtech venture capital fund. It’s the birthplace of the modern tech industry, home to some of the world’s greatest technological minds, and yet still next door to America’s ‘salad bowl’, the Salinas Valley.
So it’s perhaps unsurprising that SVG Ventures, one of the largest VC funds in the sector, has ploughed its furrow there for over a decade. It is now on its fourth fund – a $50m entity in partnership with Japanese food company Kagome – and recently closed major exits such as the sale of Intrinsyx Bi to Syngenta.
Yet such funds are not without controversy. Some critics claim Silicon Valley’s playbook of throwing money at achieving mass adoption, targeting big returns through an IPO, and ultimately transforming an industry through digitisation, is ill suited to an agricultural sector based around natural systems and often ailing infrastructure.
That’s not to mention the perceived psychological distance. It’s a packed graveyard of Californian start-ups whose grand visions of “game-changing” technology soon collapsed once finally confronted with the cornfields beyond their back fence.
Those inside SVG are all too aware of the pitfalls of such ideas dreamt up in coastal tech labs. “We’ve seen plenty of founders who come from the ivory towers of Harvard, Stanford, Wharton…but have never set foot on a farm,” says Danny O’Brien, managing director of SVG’s operations in Europe, the Middle East and Africa. “It’s one of the biggest red flags for us.”
So while SVG has certainly stayed local with several Californian investments, its success is ultimately based on breadth. It is a globally focused fund with over 100 investments to date across climate, food, and agtech and start-ups located in 19 different countries around the world including India, Brazil, and Nigeria.
It is not just an investment fund either, running seven accelerators for companies of different sizes and locations, complimented by around 50 partnerships with major corporates, growers, and government bodies.
“Ultimately, getting food from the field to the plate is an interconnected value chain,” says O’Brien. “When you look at sustainability and climate impact, it takes a joined-up approach if you want to drive meaningful action there.”
Clear red lines
There are still clear red lines, however. SVG steers clear of consumer facing brands, for example, believing that building a brand in the eyes of consumer is a different skill set to what it possesses.
Its global outlook has also been refined of late in response to difficulties operating in certain countries. Investments in Asia and Australia, for example, often pose questions over its potential to add real value given the geographical distance, O’ Brien explains.
In others countries, high legal costs, regulatory hurdles, and bundles of official translations can pose an even greater barrier. “If you’re making a relatively small investment the overhead of that legal cost can put you off doing deals,” he adds.
“We’ve had great companies which we haven’t invested in, not because we didn’t believe in them, but because the regulatory hurdle was too high.”
A new investment model?
But SVG has no plans on retrenching to North America and Europe, O’Brien insists. In fact, it has recently boosted its presence in Japan by developing partnerships with Japanese organisations such as Kagome, Kubota, and JETRO, Japan’s External Trade Organization.
This culminated with the launch of a joint-fund with Kagome last year, in which the Japanese fruit and veg company pumped $50m into an entity for investing in sustainable production of tomatoes and speciality vegetables.
The fund, managed by SVG with Kagome as the sole investor, recently backed its first company in Heritage, a Google spinout using AI for plant breeding.
“That’s really caught the eye of others in Japan because it’s a bit different,” O’Brien says. “It’s not a pure CVC and it’s not a pure agrifoodtech fund either. It’s somewhere in the middle and a new model,” says O’Brien.
The partnership brings together Kagome’s expertise with SVG’s venture capital capabilities, meaning that rather than build its own internal fund, Kagome has gained immediate access to SVG’s established infrastructure such as a global pipeline of early-stage start-ups, breakthrough agtech solutions, and opportunities for strategic collaboration and investment.
“It’s put us on the radar in Japan,” O’Brien adds. “We’ve had a lot more interest since that announcement, even though we’ve been there for many years.”
Partnerships like these are central to SVG’s outlook and “one of the biggest differentiators we have,” O’Brien suggests. SVG works with around 50 major corporates including Bayer, Microsoft and Shell, as well as government bodies like the USDA and the Canada’s global affair’s department, plus farming organisations like Meat & Livestock Australia and Egg Farmers of Alberta.
The benefit of these partnerships for SVG’s start-ups is not just the potential investment, but the regular roundtables and networking events run by SVG on topics like AI or the intersection of agriculture and energy. These give founders the opportunity to pick the brains of top executives in the sector, gaining a perspective on how corporates or government officials view an evolving technology or its relevant policy.
“We’ve been very deliberate about building a corporate network to support these companies grow in scale. The corporates hold all the control and influence in this sector, and being able to partner with them, we saw as a distinct advantage.”
This ability to offer new perspectives, potential mentors, or open doors, O’Brien argues the network helps SVG bring intangible value to burgeoning companies and sets them apart from other investors.
“Some founders may have taken a lower valuation to get us on the cap table, because they saw the value that our platform could bring,” he says.
“Capital is capital at the end of the day. And while there’s not a lot of capital out there at the moment, capital that can bring more value is more desirable in the eyes of founders as opposed to some generic VC.”
