It’s hard out there for an AgTech investor. It’s an increasingly crowded space, it’s not always easy to spend time on farms and talking to farmers, and the ultimate end product has to be fit for humans to eat.

Despite the huge and increasing flow of capital into AgTech (no AgTech post would be complete with out an AgFunder annual report reference!), there’s still huge uncertainty and risk inherent in upstream agriculture investments. Natural systems don’t behave like operating systems.

People have started asking if there’s a bubble in AgTech, and wondering if there will be a crash analogous to Cleantech.

In some ways AgTech does resemble cleantech. AgTech, like Cleantech, is sill relatively undercapitalized. Given the highly consolidated nature of the agribusiness industry, there are valid concerns over the number of potential exit pathways for startups. The Climate Corp story is well-known and inspirational, but not everyone will get a $1B exit. In general, there lacks a robust funding pipeline that can support startups from idea to exit. AgTech needs to bridge the commercialization valley of death.

But there’s hope!

Two later stage funds, Pontifax AgTech and Willow Hill Ventures, were recently announced. In addition to being later stage funds- a unique phenomenon so far in AgTech- they both exhibit a two noteworthy characteristics that I think will make them valuable additions to the AgTech innovation ecosystem.

Collaborate with alternative forms of capital.

Pontifax is actively looking to co-invest with strategics, who can provide domain expertise and resources, in addition to capital and a potential exit pathway (e.g., through acquisition). Willow Hill is a collaboration itself, between VC fund Finistere Ventures and ag-focused investment firm International Farming Corporation (IFC). This partnership is mutually beneficial: Finistere gets information that helps de-risk their investments (e.g., about pilot programs on IFC land), and IFC gets access to technologies that potentially enhance their existing offerings (e.g., by making the land more productive). Both cases illustrate the need to collaborate with alternative forms of capital to help cross the valley of death.

Cultivate domain expertise.

Pontifax AgTech can leverage the related domain expertise of Pontifax, their partner VC fund focused on life sciences. Willow Hill Ventures, via IFC, has a platform to test innovations in the field. This program will give portfolio companies a way to test the efficacy of technologies, as well as get in front of real users and potential customers. Both funds are leveraging specific domain expertise to differentiate themselves, which enables them to attract entrepreneurs and de-risk investments.

I look forward to seeing where these two funds do (and don’t) invest, and who else follows in their footsteps.

Still curious? Check out…

• TechCrunch and Vanity Fair on the coming bubble
• Report on the cleantech valley(s) of death
• AgFunder on Pontifax and Willow Hill Ventures