Calgary-based venture capital firm The51 is raising at least $25 million to invest in seed and Series A-stage companies focused on the food and agriculture sector. The fund, which is set to launch in January, is looking for companies led by women and diverse founders, in a bid to “go where the capital isn’t,” said The51 co-founder and co-CEO Shelley Kuipers.

The firm is anticipating an initial close in January 2022. It plans to cut its first cheques—which will range from about $500,000 to $2 million—around that time, though it already has about 40 prospective portfolio firms, said co-founder and co-CEO Judy Fairburn. “In Canada, the role of diverse individuals in the food and agricultural sector, it’s significant,” said Fairburn. “We’re really motivated to work with that broader population, and have already been advising a number of founders in the space.”

The Food & Ag Tech Fund will be The51’s second fund. The first—a $9-million sector-agnostic fund launched in late 2019—has invested in 30 companies, all founded or co-founded by women. On top of prioritizing women-led companies, the organization seeks out deals involving other women investors, and to bring women in as limited partners (LPs) in their own fund. “Women have to have a material position on the cap table, and we pull that layer back to make sure that there’s no tokenization,” Kuipers told The Logic.

The next fund will target women, but also newcomers to Canada, people of colour, Indigenous communities and LGBTQ communities, among others. “There’s this whole sub-segment of the population that’s not receiving capital and not participating in the sector financially,” said Kuipers. 

As part of the organization’s dual mandate—to increase investment dollars both coming from and going to women and people of diverse backgrounds—The51 is inviting retail investors to participate as LPs in its fund alongside institutional investors. “We’re not trying to make an exclusive capital system; we’re trying to democratize it,” said Kuipers. 

The firm used a similar structure in its first fund, allowing investors to participate for as little as $5,100 per year, a substantially lower amount than most early-stage deals. (The National Angel Capital Organization’s latest annual report pegged the mean angel investment at $233,000.) Kuipers said the threshold for retail participants will be higher for the Food & Ag Tech Fund, but declined to say by how much. 

The51’s new focus on food and agtech coincides with what analysts and governments predict could be a major transformation for one of Canada’s most important industries. The country’s agriculture sector generated $143 billion and accounted for 7.4 per cent of the country’s GDP in 2018. According to a 2019 RBC report, the industry could add another $11 billion of output by 2030 by filling labour shortages and accelerating investments in technology. “With all of the opportunities technology brings to fight against climate change, to improve nutritional security, and to enhance sustainability, there is no question that it’s the way of the future for farming,” wrote KPMG partner David Guthrie in a June report on the sector.

The opportunity is fuelling startups in the space. VCs have invested US$4 billion into agtech firms globally since 2019, according to Guthrie’s report, which predicts the industry will grow to US$729.5 billion by 2025. 

Fairburn—who comes from a family of grain and lentil farmers—noted that business operators from diverse backgrounds are particularly underserved in the space, and represent an opportunity for investors and the economy. According to the 2016 census report, about one in three farm operators between the ages 35 and 54 are women, and the percentage of farms operated exclusively by women is on the rise—from 5.6 per cent in 2011 to 7.2 per cent in 2016. Meanwhile, just three per cent of dollars invested in the agri-food sector in 2018 went to women-founded teams, according to a 2019 industry report. 

“Food and ag is already a significant sector in Canada and has tremendous potential to grow, with growing global population, us being a trusted country to supply, and the rising demand for protein,” said Fairburn. “You [cross] that with the growing role of women and diverse founders and as operators, and innovation is going to flow.”

Bethany Deshpande, co-founder and CEO of SomaDetect—a Fredericton, N.B.-based agtech firm that builds sensors to analyze milk quality and cattle health for dairy farmers—raised money from The51’s first fund in May. Deshpande said a big part of the appeal of bringing the firm onto her cap table was gaining access to its network of investors and founders. “In The51, there’s this group of women with really deep expertise and doing at least some of what Soma is now trying to do,” she said, pointing to guidance she received through the network on how to commercialize and scale her technology, particularly from Fairburn and Alison Sunstrum, CEO of CNSRV-X, which applies blockchain technology to the agriculture sector.

While Deshphande said there are several government grant and loan programs available to founders in the agri-food sector, she said private-sector funding is an important source of capital for companies in the space. 

“You can’t build a company based on funding from the government,” she said. “The good thing is that when you have a VC group that is willing to put money down, and that says, ‘Yes I believe in this technology, and I’m willing to write a cheque for it,’ we have a government system that will often match the amount of money that they have access to as a result of that fundraise. It means our investment dollars go a lot further.”