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NCBiotech Audience Finds Unconventional Routes Can Raise Ag Biotech Money

By Allan Maurer, NCBiotech Writer

Executives from two ag biotech companies that raised major funding in 2017 shared some of their success secrets to a group of North Carolina peers this week.

Tuttle

The tips came from Steven Tuttle, CEO and president of AgriMetis, a Baltimore company developing crop protection products, and Jason Rosenblatt, CFO of Cambridge, Massachusetts-based CiBO Technologies, which makes data analytics software to improve agriculture decision making.

They were in the spotlight for Wednesday’s Ag Biotech Professional Forum, the latest in a series of programs supporting entrepreneurship sponsored by the North Carolina Biotechnology Center.

CiBo, incubated in Cambridge-based Flagship Pioneering Venture Labs, raised a $30.25 million round of equity in March 2017.

Founded in 2014, CiBo says its data analytics software helps farmers increase crop yields while reducing environmental impact, predict commodity price fluctuations, value farm land, and more.

CiBo raised a total of $38 million over four fund-raising rounds since July 2015, and its current valuation is $140 million, according to Business Insider. It expects to hike its 50-person head count to 75 this year and then double it in 2018.

Rosenblatt

“We have some contrarian views about raising money,” Rosenblatt said at the forum. “Investors want to know if we are a software company or a service company. Most venture capitalists want to invest in high-growth companies, which requires scalability.”

For many software companies, that means getting a maximum number of users, he explained. But scalability for a software company often means providing a program aimed at everyone, such as Microsoft’s Excel. Users pay a flat fee but don’t get anything customized.

“That goes against the view we have of creating value,” Rosenblatt said. “We don’t believe software vs. services is a binary world. You can create scalability with software components that relate to many clients, then customize the last piece.” For CiBO, getting that story across was important.

The current market for digital agriculture is “oversold,” Rosenblatt said. “It is full of companies getting digital tools into the hands of farmers. In Iowa, one farmer said they use eight different dashboards on their tractors on any given day. The dashboards tell them what to plant, where to plant, where to spray. They focus on insights.”

CiBO takes a somewhat different approach. “We focus more on outcomes,” Rosenblatt explained. “We focus on the big value problems. They’re problems spread across many geographies, crops and issues. Our products, data analytics and dashboards are all delivered based on the unique needs of the client we are working with. When we’re successful, we might have 30 to 100 clients.”

The company offers a 160-day pilot program to demonstrate success from its platform.

Current clients include the World Bank, which wants to know the best time and methods of planting certain crops in distressed countries. It is also working with a global agriculture company to determine how drought-resistant seeds will work in different environments. It also has projects underway with government agencies, financial companies, insurance companies, farmers and large ag bio firms.

Agrimetis bases ag chem startup on biopharmaceutical model

AgriMetis discovers and develops new molecules that tend to be naturally derived or inspired, for use as broad-spectrum herbicides and novel insecticides, Tuttle said.

Founded in 2014, it raised a $10 million Series A round that year and a $23.5 million B round in 2015. It plans to reach positive cash flow by 2020.

Tuttle, hired in 2016, said the company launched as an experiment to see if it could apply the biopharmaceutical model to an agriculture chemical company. He offered a lot of advice for startups.

Alphabet soup for startup fundraising

First, he said, consider the 3Rs: Realistic, Runway, and Raise.

“Be realistic about who you are and what you do,” Tuttle said. “You have to think about your value and your exit. A 10X return is not as big in agriculture.”

Ag biotech companies also need a realistic runway. How long will the money last? When is your next round?

“Don’t get within 12 months of running out of money,” he warned. “Don’t get to the point where you stop paying bills.”

Then, consider the raise: how much money and where it is coming from. Company leaders need to think about what they’re going to accomplish with existing and future investors.

When raising a B round, Tuttle said, “I went around to every A-round investor and asked, ‘Will you invest in the B round?’ My goal was to have 100 percent A-round participation.”

Then, he said, think of B&B. “Have a plan B. What if you can’t raise the B round? Will you do a bridge round?”

Next, he offered P4: Plan, Pitch, Practice, and Perfect.

“I went out with a pitch book and practiced in front of people I knew wouldn’t be investors and go feedback. Then go to someone you think you can talk into investing and get feedback. Perfect it as you go along. It took me three or four months to get it down.”

The 3M strategy – Mobilize, Motivate, Mentor– helps get everyone in the company working as a team. “Everyone on my board and scientific advisory board understands the pitch and the elevator speech. Key employees should be able to go out and give that presentation. Motivate them. We had a pool in our A round to incentivize employees and board members.

Use the 3T approach to evaluate investors, Tuttle said: Target, Triage, and Team. “We have a target profile of investors and went to as many as we could as fast as we could. When you get down to the wire, ask which ones would make the best team with the investors you currently have.

During the fundraising process, Tuttle said, entrepreneurs experience the L3 problem: Lead, Legal A and Legal DD. “Somebody has to lead the round and they need to know who you are and trust you. But you may need a good lawyer.” And their lawyers will check you out during due diligence. “We had to cross some T’s and dot some I’s,” Tuttle said. That can be necessary when you are a startup moving as fast as you can.

Then, finally, you get to CCC: Close, Cheer, Change. “Close the round. Don’t let it wait. Sign the paperwork wherever you are in the world. Then cheer. We didn’t do enough of that.”

“But remember, things will change. You will have new board members and new money. Be prepared for change and to help your people through it. Lots of changes go on after a close.”

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