Avrio Capital

Agri Investor: Livestock Tech Could Boost Returns

June 10, 2015

Avrio's Aki Georgacacos weighs in on opportunities for early stage investors

Advances in data and animal health technology present vertical integration opportunities for early stage investors, an executive for Avrio Capital recently told Agri Investor.

Improvements in probiotic and enzymatic approaches to animal health promise to reduce producer reliance on preventative antibiotics. But technologies that monitor livestock health and automate production from feeding to temperature control can potentially enhance returns from such plays, said Avrio senior managing director, Aki Georgacacos.

“I think the companies that are going to be successful are the ones that can integrate the mechanical aspects, the information aspects, the data capture and the animal health aspect into one package,” said Georgacacos. “The idea is to be able to understand in real time what’s happening to these animals so that we can eliminate a lot of the harmful approaches that have been standard industry practice.”

Tech platforms that monitor animal health offer the potential to not only administer alternatives to antibiotics more efficiently, but also to provide ongoing feedback on the most efficient uses for them. Both animal health and livestock IT plays are a way for agtech and biotech focused funds to benefit from demographic trends that point to a secular increase in global meat demand, said Georgacacos. Rising incomes and population growth in the developing world are expected to drive significant growth in demand for protein in the coming decades.

Alongside this trend, investors and consumers are becoming increasingly aware of negative impacts from preventative antibiotic use in livestock production. In April of this year, Agri Investor reported that 54 institutional investors had urged major food companies in writing to cut out non-therapeutic use of antibiotics in their meat supply chains.

While Avrio is enthusiastic about the opportunities presented by alternatives to antibiotics, the firm has yet to make a play in the sector. “From the Avrio perspective, I think we’re still surveying the landscape and trying to decide how we’re going to make our bet in that sector,” said Georgacacos.

“The capital requirements to get an animal health product to market for very broad end-usages are much different than the capital required in an IT-based agriculture technology play… So there needs to be a very thoughtful approach to how to best use capital and how to put together the right syndicate around a transaction at the outset,” he added.

Last month, Avrio Capital was awarded ‘deal of the year’ recognition by the Canadian Venture Capital and Private Equity Association for its $52 million exit from Fresh Hemp Foods. The investment brought the agtech-focused firm’s LPs an internal rate of return (IRR) of 48.24 percent.

Avrio’s Fund III closed on C$108 million in February, short of its C$125 million target. Investors include Farm Credit Canada, HarbourVest Partners and Export Development Canada, according to PEI Research & Analytics. The firm’s $91 million Fund II is fully deployed, but maintains some capacity for follow-on investments. Fund I closed on $75 million in 2006. The firm has deployed more than C$200 million across 50 portfolio companies, according to its website.

Originally published in Agri Investor, News & Analysis, by Chuck Stanley