July 17, 2024

By Gerelyn Terzo, Global AgInvesting Media

Cultivation Capital, a St. Louis-based venture capital firm, is feeling optimistic about market conditions for agtech deals. According to a U.S. SEC filing, the firm has introduced the Cultivation Capital AgTech Fund IV for a total offering amount of $20 million, with a minimum allocation from outside investors of $250,000.

If demand proves robust, the VC firm has the option to increase the offering size to as much as $25 million, the filing states. Fund managers include Cultivation Capital Co-Founder and General Partner Kyle Welborn, as well as general partners Martha Schlicher and Grant Pothast. The latest fund launch comes in the wake of the firm’s $14 million capital raise for a seed investment fund in May.

Key to Cultivation Capital’s agtech strategy is a partnership with the Yield Lab, a VC firm focused on early-stage agri-food tech startups. Together they put capital to work across the agtech spectrum, including market segments like crop innovation, animal health, precision ag, sustainability, logistics and food ingredients, with an initial investment range of $100,000-$1.5 million. With 55 venture capital investments under its belt, the Yield Lab boasts a median deal size of $2.9 million, according to PitchBook.

Agtech Deal Flow

What a difference a year makes, considering the dearth of dealflow in the agtech market segment in 2023. Last year was tough sledding, as $5.7 billion was raised across 762 agtech startups, representing close to a 50 percent drop vs. 2022 levels, according to Crunchbase data analyzed by Cultivation Capital’s Welborn. Additionally, 2023 saw just over two dozen agtech exits, all of which occurred through M&A deals, a 15 percent decline compared with the prior year.

However, as of Q2 2024, market conditions showed signs of improvement, perhaps owing to a potential interest rate cut on the horizon. Last quarter, the agtech sector raised a combined $1.6 billion across close to 200 startups, representing a 15 percent increase in funding year-over-year. Agtech’s share of venture capital investment held steady in Q2 at 2 percent of a combined $79 billion in venture capital allocated worldwide.

If market conditions improve in the back half of the year, the agtech sector could see an uptick in the amount of M&A activity, though whether it will occur in early-stage or late-stage startups remains to be seen. Nevertheless, there’s a steep hill to climb on M&A, considering as of the end of Q2, agtech exits were headed for a 21 percent decline compared with year-ago levels.

One deal that has gotten the ball rolling is an agtech merger between Swiss-based company Gamaya and Terraview, announced on July 16. The two companies are combining their artificial intelligence (AI) platforms to bolster sustainability and climate resilience in global food production, according to the announcement. Their agtech platforms deliver “decarbonization and water use efficiency solutions for sugarcane and grape crops.” The companies, which will maintain the Gamaya brand, plan to expand their footprint into other value chains and markets.

Gamaya CEO Yury Vasilkov shared on LinkedIn how “agtech isn’t for the faint of heart,” describing the past couple of years since he has been at the helm of the company as a roller-coaster ride. He believes strongly in the “power of the collaboration” in the ag industry, stating, “With this merger we can unlock a $10 billion-plus market opportunity. Decarbonization and cost-effective water use will be the top priority for agriculture in the coming years, and we are well positioned to address these opportunities, starting from the crops where we are the strongest players today.”

Whether the merger is a harbinger of more deal flow to come in the agtech space remains to be seen.

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