AgFunder
Robert LeClaire came to AgFunder after a PhD at Yale and about four years at an agriculture startup, where he saw how hard it was to raise capital in a sector nobody was paying attention to. The numbers he cited made the gap clear. Agriculture represents about 10% of global GDP, yet only about 0.3% of the world's investable assets are allocated to the space. He compared it to commercial real estate in the 1960s, when almost no one invested in it. The goal was an online platform that would make food and agriculture a mainstream allocation for investors, much like AngelList did for startups.
AgFunder launched in late 2013, shortly after new rules under the JOBS Act. The founders began with a pure marketplace model, which meant working with a FINRA broker-dealer and taking a transaction fee. That model carried heavy regulatory overhead. LeClaire said the first year brought in zero revenue because the team focused on proving the model could attract a community of investors and companies. Venture backing came from 500 Startups, and the company had about $1.8 million in funding at the time of the interview.
LeClaire said the platform attracted investors from around the world who sought out opportunities in a hard-to-access global industry. By the time of the interview, about 3,200 accredited investors were on the platform, ranging from individuals putting in $25,000 to sovereign wealth funds and venture firms. The company had listed about 21 companies, mostly seed and Series A technology companies, with 14 deals closed. Its public investment pages, which show how much each company has raised, gave the platform a Kickstarter-like transparency.
The biggest source of traction was community. LeClaire said AgFunder had built about 20,000 members and subscribers across the food and agriculture industry through research, media, and crowdfunding. The 5% transaction fee made early revenue thin. Revenue was about $100,000 for 2015 and about $150,000 in the first quarter of 2016, and the founders noted that they had operated for a long time without charging fees. Rather than rely on that model, they decided to shift toward asset management, where AgFunder would invest its own capital, take a management fee, and earn carried interest.
At the time of the interview, AgFunder was raising a $20 million capital fund to invest in companies on the platform and invite co-investors to join it. LeClaire said the tech focus was a starting point, with farmland and emerging-market agribusiness planned later. The team had 17 members in San Francisco.
- •Targeting a sector with a large economy but very little investment (about 10% of GDP versus 0.3% of investable assets) gave the platform a clear gap that few competitors were filling.
- •Building a community of about 20,000 members and subscribers through research and media created an audience before the marketplace had to earn revenue from it.
- •Accepting zero revenue in year one to prove that investors and companies would show up made the marketplace's network effects visible before monetization.
- •Public deal pages that show funding progress made investment activity transparent, which helped attract global investors who otherwise struggled to find deal flow in agriculture.
- 1.Pick a sector that is large in the real economy but under-invested relative to its size, and quantify the gap to make the case to both sides of the market.
- 2.Build an audience through research, media, and content before launching paid transactions, so the marketplace starts with engaged users on both the supply and demand sides.
- 3.Use public, transparent deal pages showing how much each opportunity has raised to draw in investors and build trust in an opaque market.
- 4.Plan a monetization path from the start, such as moving from transaction fees to asset management fees and carried interest as the platform gains credibility.
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