AquAgro Fund, a venture capital fund affiliated with Gaon Agro Industries Ltd., is focused primarily on mid-to-late stage water, agriculture and other cleantech-related companies. The fund recently invested $4 million in Advanced Desalination Technologies. AquAgro has raised $40 million and plans to close on $100 million by the end of 2008.
Aqua Lab
With the launch of Aqua Lab, which will operate in a format similar to that of a technology incubator, AquAgro Fund will now also be involved in making seed and early-stage investments.
"We decided to set it up together with two overseas funds, and it will be managed by Oded Sagee [Chief Scientist of Gaon Agro Industries]," says Nir Belzer. "The important thing here is that Aqua Lab is not a fund, and so there are no limitations on the time one can spend raising money for it. Venture capital funds, by contrast, have a deadline set out in the prospectus, by which time you have to have secured the maximum commitment out of the designated target sum. We will decide whether to float or merge Aqua Lab depending on how profitable and successful it is. In other words, its unique structure gives us flexibility in various matters," Belzer adds. Milo will be company chairman.
According to Belzer, each company under the Aqua Lab umbrella will receive between $250,000 and $750,000 in investment, with an option of follow-on investment under the auspices of the AquAgro Fund. Belzer and Milo prefer not to disclose the names of the funds that have joined the investment so far but say that one is from the US and the other European, with all three entities owning the company in equal shares.
"We want Aqua Lab to have an international character with the partners sharing responsibility," explains Milo. At the same time as the tying up of the procedural ends entailed in the formation of the company, which has already been registered, Aqua Lab is seriously considering investments in two companies, and hopes to finalize these by the end of the current quarter. Also under consideration are early stage investments in four more companies.
Investment in agriculture and food
Globes: How will the fund operate?
Milo: "It will last for 8-10 years. We will not invest more than 10% of the fund in one company and we intend to reach 12-13 investments in all, provided that we manage to raise $100 million. The idea is to create an adequate spread of the risks on the one hand, while maintaining a critical mass in each company on the other."
Belzer and Milo have known each other for 10 years, and both have gained knowledge and investment experience in other funds. They teamed up with Benny Gaon, Chairman of Gaon Agro Industries, who wanted to set up a cleantech fund, and gave it shape and focus. He brought the money. The fund focuses principally on water, alternative energy, smart agriculture and food, "and we don't go in for trends," says Belzer. "We will stick to things that really are essential. Such as, for instance, cost reduction, which is a critical factor when selecting a technology - reducing the price of a cubic meter of desalinated water, a kilowatt hour of solar energy, and the consumption of water per hectare for a specific crop," Milo explains.
The fund employs a utility model when investing in technologies designed to cut costs. This means that if the company has significantly reduced its price per unit, the fund shares in the profits and not just the technology. "This is the sole incentive to buy technologies like these. Ultimately, it's a commodity, so costs are a critical element," says Belzer.
What differentiates your fund from others?
Milo: "We have several unique characteristics, one of which is the fact that we will also invest in agriculture and food, fields which other cleantech funds (worldwide as well) avoid. Because of the changes in regulation and requirements in the food industry, there are now a lot of investment opportunities for venture capital in these two fields."
Belzer: "There is now rivalry between products that serve as food ingredients and fuel applications. Smart agriculture focuses on the growing of inedible crops, on residual land and in saline water. One option is the growing of seaweed. There is no shortage of saline water in the Negev, the Jordan Valley and the Arava region. Israel will be an excellent trial site for this, and the big money will be in the growing of raw materials for producing biomass fuel. We're well ahead of the rest of the world in smart agriculture and water and we are poised to build a strong strategic presence in them."
Hillel Milo is a mechanical engineer and co-founded Walden Israel, Clal Venture Capital, and Israel Infinity Venture Capital, and was also managing partner of Alice Ventures. Nir Belzer is a computer and avionics engineer and co-founder of the Millenium funds.
