8 types of ag-tech startups with the right ingredients for sustainability
Kraft Heinz recently became the latest food giant to launch a venture fund dedicated to investing in emerging technology that could transform how food is grown and transported from farm to table. Named Evolv Ventures, the fund has yet to make an investment, but Kraft Heinz committed up to $100 million to it in October.
Sustainability is not on the list of priorities, although Kraft Heinz Corporate Affairs Officer Lynne Galia said that the investment opportunities evaluated by the fund "will include entrepreneurs who are tackling challenges in the sustainability arena."
Other food venture funds, such as Tyson Ventures, Campbell Soups’ Acre Venture Partners and Danone Ventures, have a far more explicit sustainability focus, although even these funds fall short of spurring the systemic change that’s needed, noted Bruce Kahn, portfolio manager at Sustainable Insight Capital Management, an investment management firm.
"Is all this attention to innovation about product, marketing and packaging — or is it really about best management practices? What they need are agricultural productions systems that are more sustainably managed," Kahn said. "Big food companies are trying to save themselves with a sustainable green bean but that’s not moving the needle."
What Kahn is getting to is that food companies are aiming to stay profitable amid profound shifts in consumer preferences, the economic landscape and the planet itself through these venture capital arms. But the massive sustainability challenges that food companies face in their agricultural supply chains — poverty, food insecurity, water stress, resource depletion and climate change — must be addressed to ensure that a growing world population has enough to eat.
Some ag-tech startups are, indeed, rising up to tackling these big sustainability challenges. Research from Agfunder found that so-called "novel farming systems," including indoor farming operations and alternative feed startups, raised $652 million in 2017 (the last year for which data is available), for an increase of 233 percent over 2016.
Some of the largest investments ($203 million in 2017) are going to companies such as Indigo Agriculture, which is developing non-GMO microbial seed coatings that could reduce use of fertilizers and pesticides. Overall in 2017, ag-tech investments reached $10 billion in 2017, 29 percent higher than the previous year.
Here are some startup categories that offer particular promise for the cause of agricultural sustainability:
1. Indoor farming systems
In October, Danone Ventures invested $28 million in Agricool, a French company that grows organic strawberries and other fruit in shipping containers, using only renewable energy and 90 percent less water and nutrients
Agricool is looking to expand into other cities beyond Paris, as indoor farming’s popularity gains steam.
Other such ventures to keep an eye on include the California-based company Plenty, which received one of the biggest ag-tech investments of 2017, at $203 million, and is expanding its indoor, vertical production of organic produce into China. AeroFarms, another indoor producer of vegetables, received $40 million.
These ventures use closed-loop aeroponic systems that mist the roots of plants with nutrients, water and oxygen, making them far less resource-intensive than traditional agriculture. LED lights substitute for sunlight.
2. Alternative feed supplies
Animal feeds that are not based on soy, corn or forage fish (such as herring) are a key solution for sustainably meeting the world’s growing protein demands. Feed production today generates 45 percent of global greenhouse gas emissions associated with livestock production and contributes to water scarcity, among other resource challenges.
Protix Biosystems received $50 million in 2017, the largest investment for an insect farming venture. Protix farms insects such as black flies for animal (pig and poultry) and aquaculture feed.
Elsewhere, Calysta Energy received $40 million in 2017 for its alternative aquaculture feeds that are made from non-GMO fermented, naturally occurring microorganisms such as yeasts and bacteria. Such alternative aquaculture feeds are critical with demand for farm-raised fish threatening to outstrip supplies of forage fish in less than 20 years.
Boston-based Indigo Agriculture received one of the largest investments in 2017, at $203 million, for its work developing non-GMO microbe seed coatings to make major commodity crops more resistant to insects, drought and severe weather. The company’s long-term aim is to enable farmers to forgo chemical fertilizers, herbicides and insecticides.
More controversial is Gingko Bioworks, which has partnered with Bayer to create genetically modified bacteria that can decrease farmers’ reliance on synthetic fertilizers, which have a large carbon footprint. The company received $275 million in 2017 and is now valued at $1 billion.
Increasingly, researchers seek to modify soil bacteria to more efficiently produce nitrogen that could serve as a natural fertilizer. While such breakthroughs could revolutionize farming, there are ample unknowns and sustainability concerns with GMOs.
4. Plant breeding
Campbell Soup’s Acre Venture Partners invested $40 million in Inari, a plant breeding company focused on developing new crop varieties adapted for local environments. Inari’s approach aims to significantly reduce the land, water and other inputs required for producing food and feed.
5. Plant-based alternative meats
Tyson Foods rocked the sustainability world in 2016 when it launched its $150 million venture fund for investing in breakthrough food sustainability companies, and took a 5 percent ownership in the plant-based burger company Beyond Meat.
Continuing in that vein in 2018, the company gave seed funding to two startups culturing lab-produced meat, Memphis Meats and Future Meat Technologies. All eyes will be on Tyson Foods in 2019 to see what’s next. Perhaps more important, when will other meat producers follow Tyson Foods’ lead?
6. Dairy product alternatives
Research published in Science in 2018 found that avoiding dairy as well as meat was the single most effective step to reducing greenhouse gas emissions. In 2018, General Mills 301Inc invested $40 million in Kite Hill, a manufacturer of cheeses, cream cheeses and yogurts made from almond milk.
Similarly, Danone Ventures invested in Halsa, a startup producing a line of plant-based yogurt drinks made from whole grain oats. More research is needed, however, into the sustainability of almond milk as a dairy substitute. While it has a small carbon footprint, the crop has high water needs and is predominantly grown in water-stressed California.
7. Fair treatment of farmers
In 2018 Danone Ventures invested $30 million in Harmless Harvest, a coconut water company that makes ethical treatment of its suppliers a core part of its business model. Harmless Harvest was the first coconut water company to receive Fair for Life Certification for Fair Trade and responsible supply chains for its equitable treatment of Thai coconut farmers.
8. Food waste
Campbell Soup’s Acre Venture Partners invested $2.7 million in seed funding for Spoiler Alert, a Boston-based software company that helps food businesses manage unsold inventory to reduce their amount of food waste. The World Resource Institute estimates that if food waste were a country, it would be the third largest producer of greenhouse gas emissions.