Food & Agriculture: Major Trends and the Growing Role of Venture Capital

Food & Agriculture: Major Trends and the Growing Role of Venture Capital Ron Meeusen, Ph. D. Managing Director ron@cultiviansbx.com January 23, 2017 Farm & Food 4.0 Conference Berlin www.cultiviansbx.com 1

Topics The Recent Rise of Venture Capital in Food & Agriculture The future shortages or surpluses as a function of innovation The role of Venture Capital: increasingly driving early innovation General Trends and Specific Examples Technologies crossing traditional industry lines Big Data, Remote Sensing, Robotics, Artificial Intelligence, Synthetic Biology Is AgTech Investing Actually Impact Investing? Summary Growing investment area with global implications 2

The Need for Innovations in Food & Agriculture Increasing food demand & declining agricultural land per capita 3 Source: WRI, Aquila, Robeco.

The Future Food Shortages or Surpluses? Innovations will determine whether production lags, meets or exceeds this growing demand. And the pace of innovation depends upon funding 4 Source: UN FAO.

New Ag Technologies Are Increasingly Funded by the Private Sector Funding flat to down in key countries Governments Corporations Expanding both internally and externally Open innovation, captive VC funds, private collaborations USDA R&D Expenditure ($ billions) Big 6 R&D Expenditure ($ billions) $4.0 $3.0 $2.0 $2.9 $2.8 $2.5 $2.5 $2.8 $3.1 $2.8 $2.7 $2.4 $2.7 $2.7 $15.0 $10.0 $6.8 $7.8 $8.5 $8.9 $11.6 $12.3 $12.5 $12.9 $11.0 $10.4 $9.2 $1.0 $5.0 $0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 $0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 And venture capital is beginning to play a key role 5 Source: AAAS Reports and agency budget data, Capital IQ. Big 6 includes BASF, Bayer, Dow, DuPont, Monsanto and Syngenta.

New Ag Technologies Are Increasingly Funded by the Private Sector Investment Community AGTECH FUNDS (2006-PRESENT) Traditionally overlooked AgTech for healthcare, IT, etc. Specialty VC funds forming, but still fewer than 10 globally First food/ag crowdfunding platform formed: AgFunder Accelerator programs proliferating Tennessee, North Carolina (RTP), St. Louis, San Francisco, Wageningen Yet deals still greatly outnumber investors! (~2,000 Cultivian alone) Climate pre-competitive amongst VCs More cooperation than competition 6 Source: AgFunder.

Topics The Recent Rise of Venture Capital in Food & Ag The future shortages or surpluses as a function of innovation The role of Venture Capital: Increasingly driving early innovation General Trends and Specific Examples Technologies crossing traditional industry lines Big Data, Remote Sensing, Robotics, Artificial Intelligence, Synthetic Biology Is AgTech Investing Actually Impact Investing? Summary Growing investment area with global implications 7

Technology Does Not Respect Traditional Business Boundaries Example Crop Protection Without the new technology of GMO s, today s chemical crop protection industry would likely be closer to $70B not $54B. Just three traits from crop genetics took > $15 billion/ yr of value from one industry. Synthetic Organic Chemistry $54 billion GM Crop Traits $20 billion And the number of potentially competing technologies has increased 8 Source: Phillips McDougall.

The Next Crop Protection Technologies May Come from Many Directions Biological Production of Molecules Microbiome Precision Delivery Biologicals Nanotech Pesticides Genomics Directed Chemistry Natural Biochemicals Robotics 9

Competing Technologies Today Come from Many Disciplines Genomics Directed Chemistry Biologicals Synthetic Organic Chemistry Biological Production of Molecules GM Crop Traits Precision Delivery Opportunities and threats have multiplied Microbiome Nanotechnology Applications Natural Biochemicals Robotics Venture capital sees most of them early Many companies use VC funds as early windows Investors see opportunities Traditional Breeding & Other 10

Big Data and Remote Sensing Forecasts global commodity crop production more accurately, more frequently, and more granularly than the best government or commercial source 11

Big Data and Remote Sensing Z-Trap provides automatic, real-time trap data Monitors pests populations with MyTraps software from a laptop and smartphone AquaSpy s implanted soil moisture sensors communicate with its user s roots every fifteen minutes As subscribers to its service, users receive data allowing them to make informed decisions, saving money and improving yields The Semios platform allows growers to view and control their ranch in realtime Connect frost, leaf-wetness, soil moisture and pest pressure sensors customized to a grower s orchard 12

Robotics and Artificial Intelligence 13

Synthetic Biology Engineering microbes to create biobased prodcuts (alternatives to petrochemical-derived products) In-plant, in-shift pathogen detection and control (starting with listeria) 100,000 times more efficient than similar technologies 14

Is AgTech investing actually impact investing? Social and Environmental Footprint of Food & Agriculture: Arguably largest of any industry: # people, land and water use Improvementsare likely to have direct effects on people and the environment Food Security Reduced Inputs and Runoff Reduced Food Waste Improved Nutrition Reduced Water Use Some real world examples 16

Sustainability Impact Assessment Cultivian Sandbox Fund II PortfolioCompany Sustainability Impact Metrics Developing single domain antibody animal feed additives to reduce salmonella and campylobacter in poultry On-farm diagnostic test tools for the rapid, early detection of disease in production animals, beginning with dairy cows and beef cattle Using plant-expressed enzymes to develop transformational products for animal nutrition Developing crop protection tools to improve the water use efficiency of plants Antibiotic use reduction Antibiotic use reduction Increased food production Reduced PO 4 pollution Increased yield Water use reduction Antibiotics replaced Usable milk, antibioticsreplaced Meat per pound of grain; phytaseused Product sales Helping farmers improve their results with farm management software Chemical inputs reduction Acres under management Using remote sensing science and deep learning algorithms to Forecasts global commodity crop production Farming efficiency Water monitoring Acres under management Engineering microbes to produce biobased products 100,000x faster than its competition Petrochemical reduction Sales of bio-based products Enriching depleted soil with sustainable alternatives to chemical-based fertilizers Increased arable land Product sales (Volumes / acreage) Developing in-shift pathogen diagnostics paired with powerful analytics to help shift food safety from reaction to prevention Increased safety Food waste reduction Fewer recalls; fresher food Developing safe and effective bioinsecticidesderived from naturally occurring peptides Chemical insecticide reduction Poundsof biopesticide sold Pursuing natural processes which allow the benefits of hybrids without the attendant time and costs of producing hybrid seed Increased food supply (long-term) Licenses 17

Summary Whether the 2050 population enjoys plenty or endures shortages will be determined by the pace of innovation. Venture capital is a relatively recent factor in funding Food & Ag innovations. Still small, but growing. Opportunities (and threats) abound, coming from an increasingly wide range of scientific disciplines not correlated with existing business lines. AgTech investing, despite its focus on financial returns, almost invariably results in positive social and environmental impacts. 19