Agriculture expert eyes food shortages

Arama Kukutai has been in New Zealand searching for new ideas. Photo / Kenny Rodger

Stock-market jitters, a possible US recession and the credit crunch are reverberating around the world. But for Kiwi venture capitalist Arama Kukutai it's business as usual.

"The world's got to feed itself, it keeps getting bigger," Kukutai said.

There were 6.3 billion mouths to feed in 2003, which was expected to rise to 8.9 billion by 2050, he said.

Kukutai, 40, is joint managing director of San Diego-based agbiotech and medical devices venture capital firm Finistere Ventures.

Kukutai and co-managing director Jay Brumfield, 46, were in New Zealand last week hunting for new ideas and visiting sister firm Finistere Partners, which typically took the lead with local opportunities.

Finistere Ventures has about US$35 million ($44 million) with about 65 per cent invested, while Finistere Partners closes off a $30 million fund in the next couple of months.

Brumfield said global economic conditions making headlines worldwide were not affecting Finistere.

"Now in the agricultural world people are thinking about food shortages, they're thinking about the need for [alternative] forms of energy so ag is kind of rising in [the] level of importance and getting to the same level as these human health care areas because people are seeing big impacts on their wallets and also maybe on their lifestyles," Brumfield said.

However, despite the growing need for sustainable production, recessions can hit stock markets, making it harder to find an exit strategy through initial public offers or through mergers and acquisitions.

Finistere would typically be among the first professional investors, committing up to $5 million to a company.

"In a perfect world you would want to exit your investments anywhere in a two- to seven-year timeframe, at the absolute most," Brumfield said.

Kukutai said agriculture had not been the sexiest sector for venture investment and so competition was limited, "In that regard we're a big fish in a small pond." But the environment was changing.

"It's been incredible over the last year watching the explosion of interest in so-called cleantech and renewable energy plays by the venture community," Kukutai said.

The US had committed its agricultural water reserves, Kukutai said.

"So if you want to grow more crops either the crops themselves need to be engineered to be more efficient or you need to find ways to recycle and reuse water that you haven't worked out how to do before."

There were a billion acres of engineered crops planted around the world, which included characteristics for less water use, Round Up resistance, and salt and drought tolerance.