Bayer, Halvorsen's Viking Make Record Wager on Farming TechBy
Companies provide $100 million Series A financing round
Ginkgo Bioworks to focus on microbes for nitrogen fertilizer
Bayer AG is joining with hedge-fund giant Viking Global Investors for a record wager in the burgeoning world of agricultural technology, the latest bet that farmers are going to need new tools to feed a growing population.
Bayer and Viking were part of a Series A round of financing that raised $100 million, the most-ever in the sector, according to the companies. The investment was made in a venture between Bayer and Ginkgo Bioworks, a Boston-based biotechnology company that specializes in modifying genes of microbes. Ginkgo also participated in the financing round.
The unnamed firm will focus on finding ways to reduce nitrogen fertilizer waste and will be co-located in Boston and in West Sacramento, California, where Bayer has existing facilities, company executives said in telephone interviews Wednesday.
Investors are pouring money into agricultural technology companies as the world faces declines in arable land amid population growth. Meanwhile, growers are searching for ways to increase efficiency after declines in crop prices. William Blair & Co. has dubbed it “the AgTech Revolution” and in a Sept. 7 report noted that “the deal cadence has picked up.” Goldman Sachs Group Inc. has said the growing market may be worth $240 billion by 2050.
Investment in farm technology companies rose to $1.13 billion in the first half of 2017, up 56 percent from a year earlier, according to the latest data from AgFunder, a firm that connects investors with agricultural startups.
Fertilizer is among the most costly inputs for farmers. It has also raised pollution concerns. Among the new venture’s aims is to mimic genomes, like those found in peanuts, that automatically provide nitrogen and apply them to crops that don’t have the capability, such as corn, wheat and rice, Jason Kelly, one of five co-founders of Ginkgo, said in an interview.
In early 2015, Bayer identified industry challenges that it wanted to tackle, including declining farmland and nitrogen, said Axel Bouchon, head of the Bayer Life Science Center, the company’s research and development arm.
The move comes as Bayer continues to seek regulatory approval for its $66 billion takeover of agriculture giant Monsanto Co. In 2013, Monsanto helped to ignite interest in farm technology companies when it agreed to buy The Climate Corp., a digital agricultural company, for $930 million. It also invested in new companies through its venture capital unit.
Viking, the firm founded by Andreas Halvorsen, manages about $32 billion, making it one of the largest hedge funds in the world.
Mike Miille, vice president of strategy and business management biologics at Bayer’s Crop Science, will be the interim chief executive officer of the new venture with Ginkgo. The board will have two representatives from Ginkgo and two from Leverkusen, Germany-based Bayer, one of whom will be Bouchon.
The median Series A for agricultural technology, or agtech, has increased 74 percent since 2014 to about $6.8 million this year, according to data firm CB Insights.
“2017 has already seen new funding highs in ag tech,” Nikhil Krishnan, a tech industry analyst at CB Insights, said. “As the Series A rounds slowly increase, the signs of maturing ag-tech startups may be explained by the capital-intensive nature of some businesses.”
Part of the rationale in providing such a large investment is that it allows the companies to focus “entirely” on the challenge that they’re tasked with solving over the next four to five years, in this case nitrogen, Bouchon of Bayer said.
“Big challenges need big tools,” Bouchon said.