The deal means once a start-up has put up $250,000 Callaghan will provide a repayable loan of $750,000, Sprout chief executive Dean Tilyard said.
It could finance up to 40 projects over the next eight years.
Tilyard is optimistic the arrangement will do much to help New Zealand tap into what has been an unprecedented flow of capital into agri-food start-ups over the past five years.
More than US$25 billion has gone into more than 2500 new ventures but NZ missed the first wave of this investment tide.
“I think over time NZ has done well in transferring tech through traditional channels.
“Globally NZ is quite unique.
“We have a large proportion of investment into research and technology at a public level, about $500 million.
“The challenge is the system is not translating to start-ups. From an innovation perspective we are still highly fragmented.”
Callaghan will help ramp up the volume of start-ups moving through the system, building greater critical mass in the agri-tech system.
Joining with Callaghan answers one side of the financing equation by making loans possible while Sprout’s partnership with venture investors Finistere Ventures and Our Crowd from Israel helps provide initial angel funding.
Finistere, based in San Diego, was started by Kiwi Arama Kukutai and is soon to open an office in Palmerston North.
Our Crowd has raised more than US$1.3b since establishment in 2013, with a focus on food technology start-ups.
Sprout also has partnerships with established NZ agri-tech groups including LIC, Fonterra, Massey University and Gallagher.
Fonterra strategy and innovation director Mark Piper said the partnership with Sprout fits well with the co-op’s new strategy focusing on sustainability, innovation and efficiency.
While the fragmentation of NZ’s agri-tech start-ups has been a problem in the past NZ still has a number of real advantages.
On top of its substantial public investment in research the country’s single system of governance helps keep a simple layer of legislation through the country.
“One of our strengths is we are small enough to be cohesive.
“What is new, though, about innovation in the last 10 years is the role start-ups are playing in emerging agri-tech but have not always been doing as well in the market here.”
The deal further reinforces Manawatu’s emergence as something of an agri-tech hub, following the official launch of the Rural Innovation Lab last February.
The lab was aided with $400,000 of funding from the Provincial Growth Fund.
Manawatu farmer Mat Hocken’s work, the lab is based on taking ideas from farmers seeking solutions and putting them out to start-up companies to work on.
Tilyard said Sprout has so far accelerated 46 start-ups that have raised $11m in seed funding. Companies that have gone commercial include Koru Diagnostics, OnSide and Farmote Systems.