Avrio Ventures Limited Partnership III

Avrio Ventures
Limited Partnership III
Investing in the Future
Addressing Global Challenges in Health,
Wellness & Sustainability
Highlights
Thesis
Global challenges in addressing the health, wellness, the
environment and sustainability must be addressed through
innovations in the traditional agriculture and food sectors.
Fund
$125M focused exclusively on growth stage investing in advanced
agricultural and food technology. Sustainable competitive
advantage typically derived at the source of production backed by
intellectual property.
Track Record
~C$200M invested in over 50 companies since 2002.
Industry leading, top quartile returns across three funds.
Investment approach optimizes risk return profile.
Team
12 years of continuity amongst partners and key staff across
three funds.
Deep domain expertise, extensive global network and
established investment processes.
Opportunity
Overall trends are secular, and must be addressed by innovation and
efficiency gains.
Avrio Capital is the original pioneer and global leader in
providing private capital exclusively to the sector since 2002.
2
Avrio Limited Partnership III
Industry Perspective
“
The task of increasing food availability through production on a
constant area of land with reduced inputs is such an enormous
challenge that no useful approach or technology can be
ignored.
Reaping the benefits: Science and the Sustainable Intensification of Global
Agriculture
“
Maintaining the momentum of growth in agricultural productivity
will remain crucial in the coming decades as production of basic
staple foods needs to increase by 60% if it is to meet expected
demand growth.
The State of Food and Agriculture: Food Systems for Better Nutrition, FAO
3
Avrio Limited Partnership III
Industry Perspective
“
Sales of natural food products in the retail channel have
increased from $1.9 billion in 1980 to $37 billion in 2011
showing a 10% annual compounded growth rate over 31 years.
Market Overview, Natural Food Merchandiser
“
Consumers now avoid certain foods or food ingredients for
preventative health reasons….This is not about dealing with
specific allergies but rather a matter of optimizing health and
also about seeking to create a quality of life based on
eliminating negatives.
Keith Nunes: FoodBusinessNews.Net
4
Avrio Limited Partnership III
Agricultural Innovation
Foreign households w/real PPP incomes greater than
$20,000 a year (in millions of households)
Key Macro Trends
Increasing global population
Rise of the middle class in
SA,China, India
Environmental / Land
degradation
Limited food supply
1000
800
Strong demand for
commodities & protein
Fertilizer, seeds and Bio
Stimulant technologies
600
400
200
Water Scarcity
40% of water used in Ag is
wasted
0
1990
1994
1998
2002
2006
2010
2014
Source: Global Insight’s Global Consumer Markets data as analyzed by OGA
Agricultural Commodity Prices Expected To Remain
High for Next 10 Yrs
Source: 2013 USDA Baseline projection
5
Avrio Limited Partnership III
Source: Piper Jaffray Industry note 2013
2018
Food Innovation
Key Macro Trends
Top Avoidance items
•
Generally accepted that overall consumption patterns
affect human health directly.
•
Cost of treating diabetes has risen from $174Bn in 2007
to $245Bn in 2013. (ADA estimate).
•
Non OECD countries will become net food exporters by
2020.
•
“Food Avoiders” category now firmly established with
56% of all US food companies reducing the number of
ingredients used.
Preservatives
50%
MSG
49%
Artificial Flavors
47%
Artificial Colors/Dyes
44%
Hormones
43%
GMO's
29%
Source: International Food Council 2013
Most Important Consumer references
Portability
Diabetes Epidemic
65%
Population
Healthy
65%
Filling
67%
Convenience
79%
Flavor
83%
11.3%
of this Age
Group
20 - 65
% of Snackers
Source: Mintel Healthy Snacking
6
14.7M
People
Avrio Limited Partnership III
Percentage
26.9%
of this Age
Group
10.9M
People
Over 65
Source: American Diabetes Association 2013
Summary
Target: Later Stage Ag and Food Technology Companies
Avrio Ventures Limited Partnership III will invest primarily in later stage venture, growth, or expansion opportunities
Sources of funds typically for product or geographic expansion.
Strategy: Leverage synergies across ag-food value chain
Significant cross pollination and synergies across ag – food continuum.
Food related transactions will likely derive basis of differentiation from the source of production.
Competent, capable and aligned management teams underpin all Avrio investing activity.
Target Portfolio Return: 3-4X Capital
The fund will target a return of between 3 and 4 times its capital, similar to the performance of the prior portfolios which
were built, managed and liquidated by two of the founding partners of Avrio.
Early-Stage Investments: Only if Synergistic
Commercialization stage investments will be made only in companies that are synergistic to the existing portfolio in some
way such that, in the view of the GP, Avrio possesses some unique ability to accelerate the company’s growth plan.
Geography: International Markets relevant for Avrio companies
It is anticipated that each of the companies that is added to the portfolio will have certain technologies and product offerings
that are internationally relevant allowing for additional return opportunities.
7
Avrio Limited Partnership III
Success Stories
8
Avrio Limited Partnership III
Track Record (to September 30, 2014)
Capital Invested
FCC Ventures (2002)
Avrio LP I (2006)
Avrio LP II (2011)
69,018,987
49,437,868
65,023,338
Realized
Proceeds
135,886,854
38,452,815
2,698,478
As at September 30, 2014
Fair Value
49,676,672
78,705,641
Total Returns Multiple of Cost Gross IRR
135,886,854
88,129,487
81,404,119
2.0
1.8
1.3
19.6%
13.3%
20.8%
As at September 30, 2014
Avrio
Net Multiple
FCC Ventures (2002)
Avrio LP I (2006)
Avrio LP II (2011)
1.8x
1.5X
1.1x
US
1st Quartile
Canadian
1st Quartile
2
Net Multiple 1 Net Multiple
1.4x
1.4x
1.1x
N/A
N/A
N/A
Avrio
US
1st Quartile
Canadian
1st Quartile
Net IRR
Net IRR1
Net IRR2
19.6%*3
7.6%
9.7%
24.3%
9.1%
N/A
-0.3%
0.8%
16.5%
Note:
1 Source: Prequin US Venture Capital Benchmarks - October 2013
2 Source: Thompson Reuters 2014 - as at Q3 2013
3 FCC Ventures Net IRR and Net Multiple are not available. The Gross IRR number has been used and
a Net Multiple has been estimated based on limited information
9
Avrio Limited Partnership III
Fund Mission Statement
To invest in innovative Agriculture and Food companies
that are addressing global challenges in the areas of
Health, Wellness & Sustainability
Health
Avrio Fund III
Wellness
Sustainability
10
Avrio Limited Partnership III
Sector Verticals
Advanced
Agriculture
Natural And Organic Consumer
Packaged Goods (CPG’s)
& Food Technology
11
Avrio Limited Partnership III
Investments by Sub-Sector
53%
12
Avrio Limited Partnership III
47%
What is Advanced Agriculture?
Innovations that drive greater efficiency in the practice of farming or animal husbandry including:
• Precision Farming and Big Data
• Enhanced Efficiency Fertilizers and Seed Treatments
• Plant Breeding and Seed Genetics
• Food System Infrastructure Enhancements
13
Avrio Limited Partnership III
Companies Active in the Space
14
Avrio Limited Partnership III
What are Natural & Organic
Consumer Packaged Goods?
Food products that shorten the distance from the farm gate to the consumer, experience less
processing, use fewer ingredients and address real or perceived need states including: healthy
snacks, protein alternatives and meal replacements
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Avrio Limited Partnership III
What is Food Technology?
16
Avrio Limited Partnership III
• Digestive Health
• Immune and
Metabolic
Support
• Nutritional
Science
• Smart Packaging
• Close to the Farm
Gate
Market Challenges Met
• Biomass
• Raw Food &
Commodity Crops
• Intellectual
Property
• Agriculture ByProducts
• Traditional
Ingredients
Development Platform
Inputs
Food science innovation that improves overall health, nutrition,
safety or pleasure in the food and drink we consume
• Diabetes/Obesity
• Disease
• Food
Contamination
• Aging Population
• Safer Ingredients
• Increasing
Regulations
• Prevention Focus
Companies Active in the Space
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Avrio Limited Partnership III
Avrio Team
Aki Georgacacos, CA, CFA, CF, Partner
•Managing Director of FCC Ventures since 2002
•Vice-President Deloitte and Touche, Corporate Finance
•Founding Partner, Avrio
Mike McGee, MBA, Partner
•Over 20 years of experience investing risk capital in entrepreneurial small and medium enterprise businesses
•Managing Director – TD Capital, BMO Capital, and various family offices
Jim Taylor, MBA, Partner
•Established FCC Ventures in 2002
•Bank of Montreal Capital Corporation and Westcoast Energy
•Founding Partner, Avrio
Steven Leakos, B.Comm., Partner
•Over 10 years of agri-business growth equity investing with Roynat Capital
•Generated $100M in gains
•Prior domain operational experience
Daniel McCrimmon, CA, CFO
•Over 16 years of professional experience including CFO and executive positions
•Manager with Ernst & Young, Tax
Denis Boyer, Agr., Director
•Investment Manager with FCC Ventures since 2003
•SGF Soquia, Royal Bank of Canada, Bank of Montreal
•Founding member of Avrio
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Avrio Limited Partnership III
National Presence
Avrio
Calgary
Office
Avrio
Montreal
Office
Avrio
Toronto
Office
Portfolio Company Presence
19
Avrio Limited Partnership III
Executive Advisory Board
Avrio has assembled an experienced team of advisors that have
the ability to add significant value to the entire investment
process, from deal origination to exit:
Industry
Intelligence
Business
Development
Deal
Origination
Liquidity
Strategies
Executive
Advisory
Board
20
Avrio Limited Partnership III
Executive Advisory Board
•
•
•
•
•
•
•
•
•
21
Gregory Smith
President & CEO, Instar Infrastructure
Currently the Chair and past President of CVCA - Canada's Venture
Capital & Private Equity Association
Jay Bradshaw
President, Syngenta Canada
Served as Chairman for the Executive Board of Directors for CropLife
Canada for five years
25 years of experience in agriculture
Geoff Gyles
Over thirty years of experience with major AG multi-nationals
CEO of Wolftrax Inc., Avrio portfolio company, led business to
successful sale to Compass Minerals Inc., yielding >15X ROIC.
Ken Shaver
Over twenty years in major food based multi-nationals including Nestle
CEO of Brookside Foods, Avrio portfolio company, led business to
successful sale to Hershey Corporation yielding ~$50M profit.
Avrio Limited Partnership III
Transparent & Accountable LP Reporting
Annually
•
•
•
•
•
Audited financial statements of the fund
Capital account summary
All necessary tax documents
Quarterly report of company milestones, progress, challenges and supplemental information that may
be useful for your reporting needs (similar to MD&A)
Annual General Meeting
Quarterly
•
•
•
Unaudited financial statements of the fund
Capital account summary
Quarterly report of company milestones, progress, challenges and supplemental information
that may be useful for your reporting needs (similar to MD&A)
Ad Hoc
•
22
Avrio is pleased to provide LPs with any additional information that does not
appear in the quarterly reporting documents as may be requested from time
to time
Avrio Limited Partnership III
Structure of Fund
Fund Management
Avrio Management Corp. III
Fund Size
$125 Million Target
Fund Life
10 Years
Target IRR%
>25%
Management Fee
2%
Carried Interest
20%
Setup Costs
~$250k
Valuation Methodology
IPEV Guidelines, endorsed by CVCA
Fund Auditor
Collins Barrow LLP
Reporting Standards
Currently Canadian GAAP (ASPE); IFRS; US GAAP
Available
Corporate Governance
Investment Committee, Independent Executive
Advisory Board, Code of Conduct, External Auditor
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Avrio Limited Partnership III
Fundraising Status
A Fund II
Avrio
Avrio Fund III
Target: $100 Million
Funds Raised: $91.4 million
Capital Remaining for New
Investment: $0
Fund Investors:
Farm Credit Canada (FCC)
Export Development Canada (EDC)
Alberta Enterprise Corp (AEC)
AIMco
BDS Investments Inc
Target: $125 Million
Funds Raised to Date: $65 million
Initial Commitments: $65 million
Minimum Investment: $5 million
Fund Investors:
Farm Credit Canada (FCC)
Export Development Canada (EDC)
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Avrio Limited Partnership III
Contact Details
Aki Georgacacos
+1-403-215-5489
[email protected]
Mike McGee
+1-403-215-5525
[email protected]
Calgary Office
Crowfoot West Business Centre
Suite #235, 600 Crowfoot Cr.
Calgary, AB
Canada T3G 0B4
Toronto Office
Jim Taylor
+1-613-930-1721
+1-403-215-5492
[email protected]
Montreal Office
+1-819-472-1818
Dan McCrimmon
+1-403-215-5493
[email protected]
www.avriocapital.com
[email protected]
25
Avrio Limited Partnership III
Appendix
FCC Ventures Track Record
FCC VENTURES
Portfolio Summary
As at September 30, 2014
Date of
Initial
Investment Date of Exit
# of yrs
Commercial Solutions
Oct-02
18-May-05
2.5
Sterling Pork
Jun-04
16-Jun-05
Bioniche
May-03
Agribiotics
BIOX
Capital Invested
$
Multiple of
Cost
Earnings / Gain
2,000,000 $
2,516,461
1.3 $
1.0
1,500,000
1,959,764
1.3
459,764
13-Dec-05
2.5
3,000,000
4,525,034
1.5
1,525,034
Nov-03
27-Mar-06
2.3
2,500,000
5,454,474
2.2
2,954,474
Mar-05
30-Aug-06
1.4
5,000,000
7,632,448
1.5
2,632,448
Atlantic Cedar
Sep-05
31-Mar-07
1.5
1,000,000
129,615
0.1
(870,385)
Bento Nouveau
May-05
1-Jun-07
2.0
1,750,000
2,937,657
1.7
1,187,657
Houwelling's
Apr-04
19-Dec-07
3.6
3,000,000
5,144,699
1.7
2,144,699
Kinnikinick
Mar-05
19-Aug-08
3.4
1,500,000
2,681,835
1.8
1,181,835
Associated Proteins
Feb-06
25-Jun-09
3.3
4,000,000
6,182,328
1.5
2,182,328
Poss Design
Dec-03
30-Jun-09
5.5
2,200,000
3,751,441
1.7
1,551,441
AgraTurf Equipment
Aug-06
29-Oct-09
3.2
1,200,000
1,617,420
1.3
417,420
M.J.'s Fine Foods
Sep-06
10-Feb-10
3.4
1,764,198
1,875,891
1.1
111,693
Walker Seeds
Jan-05
18-Jun-10
5.4
4,300,000
10,956,566
2.5
6,656,566
Otter Valley
Dec-05
26-Jul-10
4.6
2,000,000
3,414,229
1.7
1,414,229
Brookside Foods
Dec-05
1-Dec-10
4.9
2,900,000
4,177,850
1.4
1,277,850
Multi-portion Inc.
Oct-06
26-Nov-10
4.1
1,000,000
10,000
0.0
(990,000)
Multi-portion Inc.
Feb-10
31-Dec-10
0.9
23,000
2,300
0.1
(20,700)
Valley Machines
Sep-06
31-Mar-11
4.6
2,200,000
301,682
0.1
(1,898,318)
Ensyn
Mar-04
29-Jun-11
7.2
3,300,000
8,506,261
2.6
5,206,261
La Petite Bretonne
Aug-06
23-Sep-11
5.1
1,000,000
1,658,321
1.7
658,321
Brookside Foods
Nov-06
31-Dec-11
5.1
7,300,000
53,238,541
7.3
45,938,541
MCN BioProducts
Aug-03
31-Dec-11
8.3
1,092,937
1,609,121
1.5
516,184
Sembiosys
Dec-04
31-Dec-11
7.0
4,500,000
69,406
0.0
(4,430,594)
Big Sky Farms Ltd.
Oct-06
31-Dec-11
5.2
5,500,000
491,361
0.1
(5,008,639)
Terra Grain Fuels
Feb-07
31-Dec-11
4.9
3,488,852
5,042,147
1.4
$
69,018,987 $
FUND STATISTICS
Portfolio Total Returns as % of Cost*
*Amount is estimated as fund cost information is not available
27
Realized
Proceeds
Avrio Limited Partnership III
176%
135,886,854
2.0 $
516,461
1,553,295
66,867,867
FCC Ventures Track Record
FCC VENTURES
•
•
•
All investments were made between March 2002 and November 2006
26 investments have been realized
Realized Returns: 19.6% gross IRR*. A net multiple of 1.8x all capital called has been
estimated based on limited information
Vintage Year 2002 Venture Capital Funds Multiple and Net IRR
To Q3 2013
Multiple Quartiles
1st
Median
3rd
Net IRR
1.4 1st
1.1 Median
0.8 3rd
24.3%
13.8%
8.9%
Source: Prequin US Venture Capital Benchmarks - October 2013
FCC Ventures (As at Sept 30, 2014)
1.8
Gross IRR
19.6%
*Note: FCC Ventures net IRR and net multiple are not available as the fund cost information is
owned by Farm Credit Canada
28
Avrio Limited Partnership III
Avrio Ventures LP I Track Record
AVRIO VENTURES LIMITED PARTNERSHIP
As at September 30, 2014
Date of
Initial
Date of
Investment
Exit
# of yrs
Siamons International Inc.
Capital
Invested
Realized
Proceeds (1)
Jun-07
6.5
2,400,000
SJ Irvine Fine Foods Ltd.
Sep-07
6.3
3,635,095
452,293
Ascenta Health Limited
Mar-09
4.8
6,000,000
1,033,490
Fresh Hemp Foods Ltd.
Apr-09
4.7
6,050,000
20,000
Allylix Canada Limited Partnership
Jan-10
3.9
5,731,790
770,306
Natunola Health Biosciences Inc.
Mar-11
2.8
845,000
Wolf Trax Inc.
Dec-10
Apr-14
3.0
Origin Biomed Inc.
Jun-07
Dec-12
6.5
Botaneco Corp.
Jun-08
Dec-13
Biopharmacopae Design International Inc.Dec-08
Jul-13
FUND STATISTICS
Called-up %
78%
Distribution to Paid-In (DPI)
68%
Residual Value to Paid-In Capital (RVPI)
101%
Portfolio Total Returns as % of Cost
178%
Net Realized Multiple of Cost
77.8%
29
Avrio Limited Partnership III
99,860
Fair Value
3,595,000
Total Returns
Multiple of
Cost
Earnings / Gain
3,694,860
1.5
2,940,892
3,393,185
0.9
(241,909)
10,217,921
11,251,411
1.9
5,251,411
21,000,000
21,020,000
3.5
14,970,000
7,540,276
8,310,582
1.4
2,578,792
147,051
934,592
1,081,643
1.3
236,643
2,500,000
35,116,508
3,447,991
38,564,499
15.4
36,064,499
7,953,588
79,296
-
79,296
0.0
(7,874,292)
5.5
8,314,523
337,753
-
337,753
0.0
(7,976,770)
5.1
6,007,872
396,257
-
396,257
0.1
(5,611,615)
$49,437,868
$38,452,815
1.8 $
38,691,620
$49,676,672 $
88,129,487
1,294,860
Avrio Ventures LP I Track Record
Avrio Ventures Limited Partnership
•
•
•
All investments were made between June 2007 and March 2011
4 investments have been realized while six investments remain to be divested
Realized and Unrealized Returns: Net IRR of 7.6% and a multiple of 1.5x of all capital
called
Vintage Year 2006 Venture Capital Funds Multiple and Net IRR
To Q3 2013
Multiple Quartiles
1st
Median
3rd
Net IRR
1.4 1st
1.1 Median
0.8 3rd
9.1%
2.3%
-5.3%
Source: Prequin US Venture Capital Benchmarks - October 2013
Avrio Ventures LP I (As at Sept 30, 2014)
30
Avrio Limited Partnership III
1.5
7.6%
Avrio
Ventures LP II Track Record
AVRIO VENTURES LIMITED PARTNERSHIP II
As at September 30, 2014
Date of
Initial
Date of
Avrio
Investment
Exit
# of yrs Ownership
Realized
Proceeds
Capital Invested
Fair Value
Multiple of
Cost
Earnings / Gain
Baby Gourmet Foods Inc.
Dec-11
2.5
32%
7,432,000
339,511
9,943,800
1.3
2,851,311
Farmer's Edge
Jun-12
2.0
19%
5,000,000
1,033,137
12,063,713
2.4
8,096,850
Les Mout de P.O.M
Sep-12
1.8
67%
3,250,000
185,102
3,273,322
1.0
208,424
Hortau Inc.
Dec-12
1.5
37%
6,250,000
62,500
6,349,623
1.0
162,123
Organic Meadow Inc.
Jan-13
1.4
65%
7,000,000
557,654
7,680,342
1.1
1,237,996
Sunworks Farms
Apr-13
1.2
74%
5,750,000
20,000
5,916,023
1.0
186,023
Bare Fruit
Jun-13
1.0
10%
2,538,750
-
4,489,150
1.8
1,950,400
Sulvaris Inc.
Aug-13
0.8
2%
7,500,000
-
8,625,930
1.2
1,125,930
VoloAgri
Aug-13
0.8
3%
2,302,588
-
2,302,588
1.0
(0)
Sun Select
Sep-13
0.8
8%
4,000,000
326,122
4,061,150
1.0
387,272
Enterra
Feb-14
0.4
35%
5,000,000
75,000
5,000,000
1.0
75,000
Bento Nouveau Ltd.
May-14
0.1
40%
4,750,000
4,750,000
1.0
-
Axter
May-14
0.1
80%
4,250,000
4,250,000
1.0
99,452
78,705,641
1.2
$
65,023,338
99,452
$
2,698,478
$
$
16,380,781
FUND STATISTICS
Called-up %
76%
Distribution to Paid-In (DPI)
0%
Residual Value to Paid-In (RVPI)
113%
Portfolio Total Returns as % of Cost
125%
Net Realized Multiple of Cost
31
4.2%
Avrio Limited Partnership III
.
Avrio Ventures LP II Track Record
Avrio Ventures Limited Partnership II
•
•
All investments were made between December 2011 and May 2014
No investments have been realized and thirteen investments remain to be divested as at
September 30, 2014
Unrealized Returns: Net IRR of 9.7% and a multiple of 1.1x of all capital called
•
Vintage Year 2011 Venture Capital Funds Multiple and Net IRR
To Q3 2013
Multiple Quartiles
1st
Median
3rd
Net IRR
1.1 1st
0.9 Median
0.8 3rd
n/a
n/a
n/a
Source: Prequin US Venture Capital Benchmarks - October 2013
Avrio Ventures LP II (As at Sept 30, 2014)
32
Avrio Limited Partnership III
1.1
9.7%