By: Gerelyn Terzo

 

Maumee, Ohio-based The Andersons, Inc., a publicly traded company operating across the agriculture spectrum, in recent days announced the launch of Maumee Ventures, its new venture capital arm.

Maumee Ventures, a fully owned subsidiary of The Andersons, is not seeking institutional investors for the fund, which will hunt opportunities across the U.S. and Canada. The VC firm to date has held discussions with some 15-20 companies, most of which are located in the greater Midwestern United States.

The Andersons seems to have laid the groundwork for the venture with its 2013 investment in eWeatherRisk, a weather risk-management play. It’s unclear whether or not that company will be added to Maumee Ventures.

Amar Singh of The Andersons and Maumee Ventures Managing Partner took some time to discuss fund strategy, investment horizon and drones with Global AgInvesting (below).

 

GAI: What is the investment strategy for Maumee Ventures?

 

Singh: “The fund is focused on innovations in our area of competence, chiefly grain supply chain, crop inputs i.e. herbicides/pesticides, inoculants/adjuvants, new chemistries and biological compositions and precision ag applications.”

 

GAI: Is the focus on ag tech?

 

Singh: “We are focused on how we can help our grower-customers increase yields. Any technology that can help us get there, we will take a look at it.”

 

GAI: How will the investments be funded, and what is the average investment size?

 

Singh: “Whether we use notes or preferred stock or take an equity position, it entirely depends on the nature of the investment and our comfort level with the risk associated with it. Investments will be in the ballpark as other early stage rounds at series A/B. We can invest up to US$5 million.”

 

GAI: How involved will you be with the management of the companies you invest in?

 

Singh: “Certainly, our goal is to be hands-on and be the best assistant to entrepreneurs in achieving operational, strategic and financial milestones. We are not seeking operational control. We want to partner with entrepreneurs and their teams and help them execute. We’re there for capital injection, introduction to potential new customers, [to] assist in making key hiring decisions and in some cases product distribution. These are some of the ways we can contribute.”

 

GAI: What can you tell me about the companies you’re talking with?

 

Singh: “Right now we do come across many ideas, primarily in precision agriculture applications. That is both manufacturing drones and software that can crunch the numbers. We have also seen some resource planning software for growers and new chemical and biological applications in crop inputs for yield improvements.”

 

GAI: Tell me more about the drone technology.

 

Singh: “Spectral images can help farmers assess optimal water and nitrogen usage. Farmers are interested in actionable intelligence that can help them improve yields and be more efficient with inputs.”

 

GAI: Who will make the cut?

 

Singh: “Are they solving existing problems, i.e. fulfilling unmet demand, or are these solutions looking to create new demand? In our experience, there are tremendous opportunities to add value by solving existing problems that growers face today. We are interested in those companies that have a singular focus fulfilling unmet demand. If our investment can help these companies reach certain milestones and scale the idea, we are certainly interested.”

 

GAI: How would you describe conditions for agriculture investing today?

 

Singh:“If you look at technological innovation or software application in agriculture relative to, say, telecom or media, you’ll find that agriculture is under-served. As we spend more time with entrepreneurs and farmers, we’re seeing the trend is gradually changing — entrepreneurs are coming up with novel ideas, and most importantly we are seeing an uptick in customer adoption of new ideas.”

 

GAI: How do you expect investments made by Maumee Ventures will influence The Andersons?

 

Singh: “For one it extends our R&D capabilities. Growing R&D organically in some areas we operate in can be expensive. However, if we can link up with entrepreneurs, I think that’s an equally appealing way of extending our R&D. [Next,] their folks are mingling together with our folks. We expect more new ideas to be generated from that union. [And] financially, it really depends situation by situation. Generally speaking, we could integrate or exit. Premature to make these decisions yet.”

 

GAI: What are your target returns?

 

Singh: “We are expecting returns that are consistent with the level of risk that corresponds with the nature of early stage.”

 

GAI: When will you begin investing?

 

Singh: “We are unencumbered by a compulsion to deploy capital. Unlike some of the classic VC firms that raise capital from LPs and generate fees, Maumee Ventures is not focused on fee-generation. Our No. 1 focus is to examine ideas where we can add value beyond a mere capital injection.  If we don’t end up making an investment in [the] next six months or two years, that will be OK. We are under no pressure to deploy capital. This is structurally different from how some of the VC firms operate.

 

GAI: What else makes Maumee Ventures unique?

 

Singh: “As a VC arm of The Andersons, we have some advantages over some of the pure-play VC firms. Our unique position in the agriculture value chain enables us to spot trends and opportunities that are not always apparent. Further, we have a roster of industry veterans with subject matter expertise available to advise entrepreneurs and their teams. It also helps that we have trusting relationships with our customers built over 65 years.”