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April 22, 2010 BUSINESS OF GREEN

Selling Agriculture 2.0 to Silicon Valley


SAN FRANCISCO SILICON VALLEY S apricot and cherry orchards disappeared decades ago, replaced by semiconductor plants and office parks populated by technologists. Now some of the Valleys most prominent venture capitalists are looking to the regions roots for what could be the next new thing in an old business: agriculture. Sustainable agriculture is a space that looks as big or bigger than clean tech, said Paul Matteucci, a venture capitalist with U.S. Venture Partners in Menlo Park, Calif. Historically, we have not seen a ton of entrepreneurial activity in agriculture, but we are beginning to see it now, and the opportunities are huge. A catch-all phrase for environmentally beneficial farming, sustainable agriculture has long been the province of organic enthusiasts. But venture capitalists say a growing awareness of conventional agricultures contribution to climate change and concerns over its consumption of water and energy are creating markets for technological innovation to minimize those effects. The Johnny Appleseed of what is being called Agriculture 2.0 is a 33-year-old former Wall Street investment banker named Janine Y orio. Her New Y ork firm, NewSeed Advisors, brings together sustainable agriculture entrepreneurs and investors. At the Four Seasons hotel in East Palo Alto, Calif., last month, NewSeed Advisors attracted a crowd of well-dressed investors from some of Silicon Valleys top venture capital firms. They packed a ballroom to hear entrepreneurs pitch start-ups developing everything from nontoxic pesticides and analytical tools for soil analysis to indoor urban farming systems. If youre interested in investing in energy and water, you become interested in investing in agriculture, said Amol Deshpande, a venture partner at Kleiner Perkins Caufield & Byers, who attended the conference. A lot of ag opportunities are going to be driven by water, its availability and cleanliness. Ms. Y orios career had been far afield from farming. She put together corporate deals at Salomon

Brothers and then at the private equity firms HVB Capital and NorthStar Capital. She was working on real estate transactions when the market collapsed. Looking for ways to generate income from empty buildings, she explored renting space to companies that grow plants indoors. In the process of putting together that idea, I started to meet all these ag companies and sensed an opportunity, said Ms. Y orio, whose father owned a farm when she was a child. Sustainable ag fits neatly into an area that is already well invested, clean tech and life sciences. She founded NewSeed Advisors last year. Ms Y orio said the firm is advising wealthy individual investors on sustainable agriculture deals and is considering raising its own investment fund. Sustainable ag smells like clean tech, but its not so obscure that youve never heard of it but obscure enough theres no competition, said Ms. Y orio, who added that investors had approached her about bringing the Agriculture 2.0 conference to Canada, Europe and India. So far the venture capital investments in sustainable agriculture have been modest. Mr. Matteucci said his firm had one investment in an agriculture wastewater treatment start-up and was reviewing other potential deals. Mr. Deshpande said Kleiner Perkins Caufield & Byers had invested in companies developing technology to deal with agricultural water and waste. Khosla Ventures, one of Silicon Valleys leading green tech investors, is backing Solum, a company started by three Stanford physics graduates that is developing tools to perform real-time measurement of the nutrient content of soil. Such measurements allow fertilizer to be precisely applied, avoiding nitrogen runoff and contamination of waterways. Mr. Matteucci said the challenge would be to build a Silicon Valley-style ecosystem around sustainable agriculture. The venture infrastructure doesnt understand agriculture yet, he said. Y ou have to have a bunch of investors, and you have to have bankers that get it, lawyers that get it. Cityscape Farms, a San Francisco start-up developing urban rooftop greenhouses that combine aquaculture and hydroponics, was one of the companies selected to make a presentation at the Silicon Valley conference. Mike Y ohay, Cityscapes founder, said he talked to many venture capitalists in attendance but had not received any offers. Janine has created a conversation that didnt exist previously, said Mr. Y ohay. Even though were at an early stage of development, for us to be on the radar of investment firms is incredible.
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