The Chinese Hosen Capital Fund III, it said, has “direct relevance” for its own business activities, and the deal will allow Evonik access to partnerships with innovative technology start-ups in the Chinese agriculture and nutrition industry.
The German company plans to invest €100m in start-ups with innovative technologies and in specialized funds as part of its VC activities, with a focus on Europe, the US and Asia.
"We expect a trend of modernization and professionalization in animal protein production in China and other Asian markets. Our investment brings us close to these innovations, which we want to leverage in our business," a spokesperson for Evonik told us.
According to newly released AgFunder data, 2016 experienced a 30% decline in agtech VC funding to $3.23bn but an uptick - 10% - in the number of deals closed, bucking the global VC market where it fell 24% year-over-year.
In Asia last year, China had 10 deals totaling $427m, while 53 Indian startups raised $313m, and four Japanese companies raised $8.9m, found the AgFunder report.
The aquaculture sector in Asia is attracting capital. November 2015 saw US private equity group, KKR, invest nearly US$100m for a significant minority stake in Chinese aquatic feed producer, Yuehai Feed Group Co.
Investing in animal nutrition innovation
Fund investments, said Evonik, are an essential component of its venture capital (VC) activities.
"The collaboration with VC funds and innovative start-ups complements our open innovation strategy and creates excellent opportunities for accelerating the development of new businesses and opening up new growth fields," said the spokesperson.
Currently, Evonik holds stakes in ten start-ups and five funds.
One of those it has invested in, as part of a consortium, is US biotech developer, Algal Scientific – that company produces beta-glucan products via algal fermentation, which are said to support immune health for animals.
Geoff Horst, CEO of Algae Scientific, told us at the time of the consortium’s investment - April 2014 – that such support would solidify its reputation, allow it to tap into Evonik’s fermentation expertise and provide it with capital to accelerate commercialization of the technology.
Evonik is involved with High-Tech Gruenderfonds, a large German seed stage investor - some of the up and coming companies it finances target the animal nutrition or feed sectors including fodjan, a company producing web based software to optimize the feeding of livestock, and Subitec, a developer of a technology platform for the production of microalgae on an industrial scale. Parts of the biomass produced are used for food supplements, cosmetics and feed.
Another investment fund that Evonik holds a stake in is Pangaea Ventures – that fund was an early backer of FeedKind, the methane gas derived alternative to fishmeal developed by California based Calysta.
Proof of concept
Evonik said it generally maintains a minority share and typically invests up to €5m per firm.
The feed amino acid specialist said, typically, it invests in early-stage companies with an established proof of concept, usually in series A & B rounds in businesses that have already entered the market or are about to do so.
In terms of the criteria it applies when looking at firms with strategic investment in mind, Evonik said it wants an innovative, market-oriented technology company with a clear growth strategy, a highly motivated, focused management team, a clear, distinctive selling point and a secure IP position.
The German group said it brings strategic capabilities to the partnership including technological expertise and infrastructure, market experience and access, a global distribution network and expertise in patent strategies and on issues of industrial property rights.