With a fund of US$ 50 million, The Yield Lab enters the hunt for the 1st agro unicorn in Brazil
- May 26, 2022
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The American manager The Yield Lab has been operating in Latin America since 2019, when it raised two funds that together raised US$ 6 million and invested in 18 agribusiness startups in six countries in the region – five of these investments were in Brazil in companies such as TerraMagna, Seedz, Agroforte, Voa and @Tech.
Now, The Yield Lab is raising its third fund in Latin America which is expected to reach US$50 million – the first closing just happened and raised US$ 15 million, with the Inter-American Development Bank (IDB) as an anchor. The goal is to find the first agro unicorn in Brazil, as startups that reach billionaire valuations are called.
“I believe that the first agro unicorn in Latin America will leave Brazil”, says Irishman Kieran Gartlan, managing partner of The Yield Lab for Brazil, exclusively to the NeoFeed. “If you combine fintech with agribusiness, you have an attractive model for venture capital funds and a huge market.”
In the first two funds, The Yield Lab tested the Latin American market, investing small checks ranging from US$150,000 to US$500,000 in rounds. seed in companies at a very early stage, but which already had a product tested on the market. “We like startups asset light and that have recurring revenue”, says Gartlan.
In this new phase, the objective is to increase the value of the check and be more comprehensive in the rounds, acting from the seed up to series B rounds – in addition to reserving resources for follow ons. The check can reach up to US$ 1.5 million. The goal is to invest between 25 and 30 startups in Latin America. About 40% of the new fund’s resources are expected to be spent in Brazil.
The Yield Lab has partnered with AgTech Garage, an innovation hub in Piracicaba, in the interior of São Paulo, which has helped attract investors to the new fund. In general, they are individuals who act as executives of large agribusiness companies.
They are also investors in The Yield Lab’s fund for Latin America, family offices that want to operate in this asset class, but whose resources are destined for agribusiness companies. One of them is Tridon Participações, linked to the Nishimura family, the founders of the Jacto group.
Companies operating in Latin America also became shareholders of the third fund. Among them are the Gloria group, from Peru, and the Ilolay and Red Surcos groups, both from Argentina. The idea is to attract more corporations from the sector until the final closing of the fund.
“We mapped the ecosystem to see if we had deal flow”, says Gartlan, who has a slight Irish accent and has been in Brazil since 1994, where he settled after traveling the world. “Now startups are ready to receive investments.”
Despite being a small check, The Yield Lab helps the startups in which it invests with its network of contacts (many of whom are investors in the fund) and through its offices throughout Latin America. The manager, in addition to Brazil, is present in Argentina and Chile and will start operating in Mexico.
“They are one of the few venture capital specializing in agro and with a footprint very interesting international market”, says Matheus Ganem, CEO and founder of Seedz, a relationship and loyalty platform in the field, in which The Yield Lab participated in a round led by 10b and Volpe Capital, in October last year.
According to Ganem, Seedz is starting to operate in Argentina and The Yield Lab presented the main companies in the country and even supported bureaucratic issues. “They helped us access customers and the market,” says the founder of Seedz, which has 1,000 companies using its platform and has 90,000 users.
Founded in 2014, The Yield Lab was born in Saint Louis, Missouri, an agricultural region of the United States that is far from Silicon Valley, where the main US venture capital managers are located.
When it emerged, the idea was to attract executives from agricultural companies to invest in agribusiness startups. In addition to capital, The Yield Lab provided its network of connection and expertise. Gradually, the thesis evolved and the manager started to have partners in different parts of the globe.
Today, The Yield Lab works with regional funds in Europe and Asia/Pacific, in addition to the United States and Latin America. It has raised over US$200 million and invested in approximately 90 agtechs. “We like to have regional funds to have access to a deal flow bigger,” says Gartlan.
In the portfolio are companies such as the American Lepidext, which isolated a strain of a natural virus that causes sterility in the corn caterpillar; Ireland’s CarbonSpace, which has a satellite-powered platform for tracking the carbon footprint; and India’s Fasal, which provides real-time crop information to farmers.
In Brazil, Gartlan initially invested in agrifintechs – three of the investments (Seedz, TerraMagna and Agroforte) are in this area. “The biggest pain for small and medium-sized products is having access to capital”, says the managing partner of The Yield Lab.
But The Yield Lab also invested in Voa (crop spraying drones and other services) and @Tech, which uses data science, artificial intelligence and the internet of things to optimize animal protein production.
Now, Gartlan sees room to put his chips in “greentechs.” “There will be a search for more efficiency in the field and with less impact on the environment”, says the investor.
For a long time, agtechs were passed over by venture capital funds, with few deals and low volume of investments. But that is changing. Last year, startups in the area received US$ 109.2 million in investments in Brazil, according to data from Distrito, an independent startup ecosystem, up 60%.
This year, until the beginning of May, investments in agtechs totaled US$ 54.7 million, half of all that was contributed last year. In the period, there were 10 deals against 34 in 2021.
This advance has a lot to do with venture capital funds specialized in the sector. Their pioneer is SP Ventures, founded by Francisco Jardim, which aimed to reach R$ 300 million in its second fund.
10b, one of the managers of SK Tarpon, led by Marcelo Lima, is also specialized in investments in agribusiness companies and has already invested in Rúmina, Solinftec and Seedz, among others.
With a strategy focused on agtechs and foodtechs, Mandi Ventures, by Antonio Moreira Salles and Julio Benetti, has US$ 30 million to bet on this thesis. In the portfolio is the American Farmers Business Network (FBN), valued at US$ 4 billion, the most valuable agtech on the planet.
Mandi Ventures invests in Brazilian companies Gaivota, which works on digitalization related to the agribusiness chain, and Tarken, a grain marketplace, and French company Les Miraculeux, a natural supplements company.
The arrival of The Yield Lab brings another competitor in the hunt for the first Brazilian unicorn in the countryside. In times of lean cows, with a retracted market and more down-to-earth valuations, it will not be an easy mission.