Avrio earns nearly 5x its money with Farmers Edge recap, backs FarmLead

March 24, 2017

By Kirk Falconer - The PE Hub Network

Avrio Capital is seeing a lucrative payout on money invested in Farmers Edge following the precision agriculture company’s refinancing earlier this year.

Farmers Edge, provider of a digital platform to help farmers boost crop production, in December announced an investment by Fairfax Financial, the holding company of Canadian billionaire Prem Watsa.

Terms weren’t disclosed for the deal, which wrapped up a few weeks ago. It may well have been Farmers Edge’s largest financing to date. That’s because in addition to recapitalizing the Winnipeg company, Fairfax injected fresh cash.

As part of the deal, Fairfax bought out stakes held by venture capital firms, which played a key role in the some $74 million Farmers Edge raised in prior rounds.

Among them was Silicon Valley heavyweight Kleiner Perkins Caufield & Byers, which first invested in 2014.

The other was Avrio, a Calgary agricultural tech venture firm and one of Farmers Edge’s earliest backers. Avrio sold down most of its position, realizing a multiple on invested capital of “just under 5x,” Managing Partner Aki Georgacacos told PE Hub Canada.

Georgacacos says he has “mixed emotions” about leaving Farmers Edge. But he feels its increasing capital needs will be better met by Fairfax and existing strategic investors Mitsui, a Japanese trading and investment firm, and Osmington, the holding company of Canadian billionaire David Thomson.

Farmers Edge was founded in 2005 by agronomists Wade Barnes and Curtis MacKinnon to explore the application of variable-rate technology on farming. Developing its own system, it went on to help thousands of producers worldwide to optimize crop yields and enhance efficiency.

Aki Georgacacos, Co-Founder & Managing Partner, Avrio Capital
Aki Georgacacos, Co-Founder and Managing Partner, Avrio Capital

Georgacacos says the company is looking to “go beyond precision agriculture” by adding to its data capabilities and creating “more actionable intelligence for farmers.” Doing this will require major resources from investors for whom Farmers Edge is “more than a financial play.”

Fairfax, which has holdings in financial services, appears interested in the company’s focus on agricultural data and its relevance to the insurance industry. In a recent interview, CEO Barnes confirmed the importance of this factor in Fairfax’s decision to invest.

Avrio is keeping a “small residual” in Farmers Edge so it can continue to share in the company’s global growth and a possible IPO, Georgacacos said.

From Farmers Edge to FarmLead

Avrio this week made a new investment in FarmLead, an online grain marketplace. Founded in 2013, the company raised US$6.5 million in a Series A financing led by U.S. agrochemical giant Monsanto. MaRS Investment Accelerator Fund and Serra Ventures also invested.

Georgacacos says the idea of digitalizing the buying and selling of grain products has been tried but failed to gain traction. Today it represents “a big value opportunity,” however, because the industry’s appetite for e-commerce technology has greatly increased.

Avrio helped assemble the syndicate backing the Ottawa company and its strategy to expand into the U.S. market. “It’s all about customer acquisition and rapid development of the opportunity from FarmLead’s beachhead in Chicago,” Georgacacos said.

More deals, fewer dollars

Venture deal-making in the global agtech market showed mixed results in 2016, according to a January report by AgFunder. Dollar flows, totaling US$3.2 billion last year, fell 30 percent from 2015 partly due to a cooling-off in interest in drones, food delivery and bioenergy. On the other hand, the report pointed to record deal activity.

Georgacacos says the market is consolidating after a period of large, often heavily concentrated investments. Avrio is weathering the trend because it emphasizes selective investing across a broad spectrum of agricultural- and food-tech companies, he said.

The firm has also benefited from a run of strong realizations. Along with Farmers Edge, they include Manitoba Harvest, whose 2015 sale gave Avrio a 48 percent return, and Wolf Trax, whose 2014 sale delivered a 138 percent return.

Founded by Georgacacos and Chairman Jim Taylor in 2002, Avrio is investing from its third fund, which raised $110 million last year. Georgacacos says Avrio Ventures III has deployed about one-third of its capital and is likely to commit the rest over the next 18 to 24 months.