Address to Agri Investment Forum, Toronto, June 4th 2015 Dr. Michael Raymont Founding and Managing Partner, Verdex Capital President & CEO, AVAC Ltd. © Copyright 2015 AVAC Ltd. & Verdex Capital

1. Is AgTech Addressing Real
Farm Needs; Are Farmers
Listening?
Mike Raymont
Pres. and CEO AVAC Ltd
Managing Partner, Verdex Capital
Address to Agri Investment Forum, Toronto,
June 4th 2015

2. 2050 World Food Issue

4. Ag Tech Promises Many Things
• Increase yields in both crops and animals
• Decrease net water usage
• Reduce pesticide/fertilizer usage while increasing yields
• Increase nutrient/nutraceutical content in foods/feeds
• Reduce/eliminate impacts of climate/weather
• Reduce spoilage and waste
• Improve farm management practices
• Utilize marginal soils for economic, productive purposes
• Biomass crops for energy, chemicals, pharmacologicals
But Can it, Does it Deliver?

6. The Big Bet
“I make a $7 million bet every spring, and
then I see if I’m lucky by sometime in the
fall”, (Farm owner with 25,000 acre mixed farm on the
Canadian prairies.)
So, is Ag Tech reducing risks and
increasing profits?
Several factors such as:
• Commodity price volatility, and
• Increasing severe/damaging weather events
are increasing farmer’s financial risks

7. Precision/Digital Ag Value
Proposition
The value proposition of a Precision Farming
Company can be summarized as first informing,
and then convincing a farmer that you know
how to run his farm more profitably that he
currently knows how!

8. Some Ag Tech Sub-Sectors
“Promises”
• Seeds – increased yield, improved climate
tolerance
• Fertilizers – slow release, better uptake,
micronutrients, soil health
• Pesticides and Fungicides – better efficacy,
reduced environmental and health impacts
• Digital/Precision Ag – improved input
efficiency, better economics, reduced risk

9. Ag Tech Delivering?
Relative Input Costs as a % of Gross Returns
(based on Canola in AB)
• Seeds – 10%
• Fertilizer – 17%
• Chemicals (Pesticides, Herbicides, etc) – 11%
• Agronomy – 0 to 8%
New Ag Tech Products must pay their way, so
higher costs in any form must result in proven
better returns

10. Seeds
• Arguably the best option for demonstrably
higher returns
• But new yield enhancement often involves
GMO which limits market opportunities
• May pay off under abnormal climate
conditions, but not under “normal” climate
• Extensive time to field trial, and regulatory
barriers may make investment returns to Ag
Tech investors challenging

11. Fertilizers and Micronutrients
• Are they compatible with existing equipment
and conventionally applied materials?
• Correlating enhanced yields to “standard
practices” – statistical significance
• Do proven enhanced yields result in greater
net returns to the farmer? (ie. cost of “super
fertilizers vs. conventional)
• Long-term value/impact? (post year 1)
• Soil remediation and marginal soil upgrading
(bio-char, etc); does it work in the long-term?

12. Chemicals - Pesticides, Fungicides …
• Are they compatible with existing equipment
and conventionally applied materials? Do they
degrade in the mix tank? (storage, formulation,
etc)
• Do they negatively impact beneficial ecosystem,
soils, plant biome, etc?
• Spectrum efficacy, long-term use resistance?
• Impact on nutritional plant values, harmful
degradation products – regulatory requirements
• Highest value uses?

13. Digital/Precision Ag
• Huge potential, but ….
• Many entrants, many investors = much confusion
• Data collection/aggregation, analysis or
decision/recommendation tools?
• Platform/system compatibilities?
• Data ownership and liabilities?
• Ease of use, automated, who makes the
decisions?
• Imprecise business propositions and revenue
models

14. Farmer Skepticism

15. The Farmer Perspective
• Conservative and conservative – “show me”
• Pragmatic and practical
• Vast experience and know their own farms
(often generations of knowledge)
• Small farms being aggregated – professional
management, sophisticated
• No “spare” time, especially in key seasons
• Capital constrained?
• Must have demonstrable financial returns

16. Farm Pressures
• Farmers and Agri-Businesses have both the
Opportunity and Need to Embrace Ag Tech
• Global Competition, Commodity Price Volatility
• Increasing Farmland Values pressures Returns
• Increasing Environmental pressures (phasing
out of many traditional farm chemicals)
• Water and Extreme Weather Events
• Increased Income and Financial Rewards (don’t
have to “live poor and die rich”)
More Efficient and more Effective

22. But Ag Tech Must and Will
Deliver
Many Reasons for Optimism

23. • Gene Sequencing – known tool, but huge cost/time savings
• Phenotyping Technologies – quantifying observable
physical, biochemical, and/or behavioral characteristic of an
plant or animal
• Gene Editing – “replaces” the need for GMO is many cases,
and advancing very rapidly
• Computational Biology – using biological data to develop
algorithms and relations among various biological systems
• Synthetic Biology – combining disciplines such as
biotechnology, evolutionary biology, molecular biology,
systems biology, biophysics, electrical engineering,
Ag Tech Tools Have Advanced, and Costs
Have Come Down – Exponentially

24. Accelerating Growth in AgTech
More Profitable
· Lower COGS
· 25% profit margin
Time to Market
· Advanced tool kits
speed R&D
· Lower regulatory
hurdles
Efficient Infrastructure
· $20B/yr Public R&D
· Lower Development
Costs
Market Demand
· Ag Tech 10x in last
10 years
· 500M acres of
biotech traits

25. Creating More Valuable Exits
Sooner At Lower Costs

26. Deal Exit Value
• ~$1B
• ~$400M
• ~$500M
• ~$523M
• >$1B*
• ~$115M#
• ~$1B
Revenues
• Unknown, < $50M
• None
• ~$50M
• <$40M
• Unknown, >$150M
• None
• Unknown, >$200M
Exits in Bold Red are companies invested in and/or built by the FVII Fund principals
* Market Cap at time of final Dow purchase
# Combination of $86M base payment plus $29M “progress payments”
Why Invest in Ag Tech? - Successes
(a VC perspective)

27. New Finistere/Verdex Fund -- FVII
• Pure Ag Tech – no Land
• Joint Fund between top US and Canadian Ag GP’s – 100+
years experience and 3 funds returning ~2.7x
• Max Fund size US$200 Million; Target $150M
• First close completed Jan 30th 2015; 1st investing Q2 2015
• Final close late 2015 or at Fund max. Min. unit size $5M
• Commitments from Bayer Crop Sciences and top 3 global
food company. Top global sovereign wealth fund in final
due diligence.
• North American focus; global perspective and deployment

28. Ag Tech 
Conclusion


29. Never forget the Customer
and THEIR needs, but
always question whether
your technology addresses
their Challenges!

30. Thank You!
Contact: Verdex Capital
info@verdexcapital.com
All rights reserved by Verdex Capital