September 26, 2024

By Gerelyn Terzo, Global AgInvesting Media

SVG Ventures has partnered with Tokyo-based Kagome, a global fruit and vegetable company specializing in all things tomatoes, to launch the $50 million Sunrise Agrifood Tech Fund. With a vision to catapult innovation in agri-food tech, the fund will back cutting-edge technologies around the world at the forefront of tackling climate change, targeting early startups with investments ranging in size from $500,000 to $1 million and the potential for follow-on capital.

Structured as a joint corporate venture capital fund, SVG will serve as the GP alongside LPs amid a 10-year commitment to confront some of the world’s most urgent challenges facing ag and sustainability, such as an acceleration in climate change, heat waves, droughts and the spread of crop diseases, all of which have impacted the food value chain.

Domiciled in Silicon Valley, SVG Ventures runs an innovation and investment platform dubbed Thrive that’s focused on the agri-food tech sector. The firm works with global corporations, farmers and startups to create a more sustainable future for food and agriculture through innovation, giving it unique insight into the challenges and opportunities across the food supply chain.

SVG Founder and CEO John Hartnett stated, “By leveraging Kagome’s rich history and expertise, alongside our experience in accelerating and investing in agri-food technologies, we are confident that this collaboration will empower the next generation of startups to create sustainable solutions that will transform the agricultural value chain. Together, we are not just investing in technology but in the future of food and farming worldwide.”

Kagome boasts over a century of operating history under its belt as an ingredients partner serving the global food industry by growing tomatoes around the world, including California, Europe, Northern Africa and Australia.

“At Kagome, it must be said that our agri-food industry has faced increasingly difficult circumstances in recent years. There appears to be an imbalance between the agri-environment and technology. History has shown that innovation often arises during such periods of imbalance,” Kagome Global Agri Research & Business Center’s Hiroyuki Ueda said, pointing to the SVG Ventures partnership and fund as a testament to the company’s commitment to driving sustainable solutions for the ag community.

SVG’s Hartnett graciously spent some time with GAI News to discuss fund strategy, the capital raising environment, agtech startup valuations and more.

1.) GAI News: Congratulations on the new SVG Ventures Sunrise Fund and partnership with Kagome. Can you tell us about the mechanics of the fund?

Hartnett: “We have already raised $50 million, including LP and GP contributions. We reached first close and are up and running, ready to invest. The fund is set up as a typical GP/LP fund with a 10-year horizon. Obviously, we will make investments over the first four to five years, support companies in scaling their operations and then exit them throughout the life of the fund.

“Last year, we launched the Pioneer Fund, a sister fund anchored by Farm Credit Canada, with Argosy, the family office of the co-founder of Boston Scientific, as one of our lead LPs. The Pioneer Fund also invests in the agtech space. Additionally we have been running our agri-food startup accelerator for the past decade and run six different accelerator programs globally where we are finding great venture stage Series A+ companies.”

2.) GAI News: Is that the pool from which the Sunrise Fund will back agtech startups?

Hartnett: “It’s one pipeline. We also have over 10,000 startups in our network and ecosystem today from all over the world. Our pipeline is fueled by the programs we run in Canada, the U.S., Europe, Israel, Australia, Brazil and Japan which drive a significant portion of our dealflow. However, we also actively explore opportunities in the companies we’ve previously invested in as well as new ventures outside of our programs. Participation in the program is valuable, but it’s not our main source of deal flow.”

3.) GAI News: How did the relationship with SVG’s new strategic partner Kagome come to be?

Hartnett: “For the past 10 years we’ve being running an open innovation program with our corporate partners as a core part of our model. When we initially engaged with Kagome, it began as a collaboration from an open innovation perspective. Over time, it evolved into an investment opportunity. We were engaged with them for over a year to develop the partnership that we announced today.”

4.) GAI News: What is the regional focus of the Sunrise Fund?

Hartnett: “We will look at global companies around the world. Based on our typical footprint, probably 65 percent of those companies will come from outside the U.S., with the remaining 35 percent in the U.S. Key geographies that we would like to target include Canada, Brazil, Israel, Australia, the U.K., France and Germany. That’s where we see strong innovation emerging.

“We recently released our THRIVE top 50 report on the top scale up companies where we see 65 percent of these scaling companies based in the U.S. and 35 percent internationally. However, when we use the same analysis on our entire database of 10,0000 start ups Series A and beyond, it flips to 35 percent U.S. and 65 percent international. As companies gain scale, they seek investment in the U.S. faster than their international counterparts.”

5.) GAI News: You mentioned a 10-year investment horizon for the Sunrise Fund; that seems like a long hold time for investors, isn’t it?

Hartnett: “We will make distributions along the way. The 10-year horizon is for the life of the fund. If we exit companies every two to three years, we’ll make distributions as we move along with the fund.”

6.) GAI News: How would you characterize the capital raising environment for agtech?

Hartnett: “It’s a very difficult environment, not just for agtech but startups in general in terms of investment. Financing has dried up fairly significantly. Existing funds are focused on their own portfolios and not necessarily leading new rounds of capital. In this last year, we’ve seen a significant reduction in terms of the valuations of companies. However, we also see it as a time of opportunity. We look at 2024 as being a flight to quality; we see companies that have fundamentals in terms of financials, technology, team and traction. These are the companies that will make it to the other side and the companies that we are excited about as we go forward.

“As they say, the hype cycle of 2021-2022 for agtech valuations is now undergoing a correction. Going forward, it will be long-term, steadier growth for agtech companies. At the end of the day, the core challenges are not going away. Climate change continues to intensify, labor shortages are worsening and water scarcity is becoming a critical issue for many corporations around the world. These challenges are intensifying therefore opportunities still exist, if not bigger than before. So, it should be an interesting couple of years ahead.”

7.) GAI News: Can you offer us a glimpse into the fund’s investment pipeline?

Hartnett: “We are already assessing opportunities for investment. I would say you will see us deploying capital in the next three to four months.”

GAI News would like to thank John for his time and congratulate SVG Ventures and Kagome on the new fund!

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