Interview with Alex Steel, Head of Corporate Venture Capital, Syngenta Ventures worldagritechinvestment.com
What role do you think advanced agricultural technologies could have in achieving world food security?
Producing more food in a sustainable way for a growing population continues to be one of the most enduring global challenges. Throughout history agricultural technologies have played a major role in improving productivity, from the invention of the plough to the Green Revolution, and more recently with the use of genetically modified seed. New technologies are needed to intensify agriculture in a sustainable way by using inputs such as water, fertiliser and chemicals as efficiently as possible. Technologies that deliver this will create value for society and attractive financial returns for investors.
How great is the potential of big data in agriculture and how could the future look?
Big data has the opportunity to transform agriculture in the same way that technologies like the Green Revolution have in the past. The question is not whether this will happen, but
when. Monsanto’s acquisition of The Climate Corporation in 2013 for $1bn stimulated a great deal of interest and investment in the space, but it still remains a relatively nascent area with few companies generating meaningful insights or revenues. Agronomic complexity is high, so whilst it’s easy to imagine a future where there will be fully automated farms running on perfected algorithms, it’s less easy to see the path and timeline that gets us there.
Which types of agri-technologies are currently generating the most interest amongst agribusiness technology investors?
The broad space of Digital that encompasses big data, farm management systems, imaging and precision machinery, continues to draw the most attention and investment dollars. There seem to be new digital ag companies emerging on an almost weekly basis and it’s becoming harder and harder to keep track of them all. There are great investment opportunities here, but the space is becoming crowded with valuations that increasingly look high against the modest commercial progress being made. Another area drawing investor interest is the plant microbiome which, much like the human microbiome, is not yet well understood. Developing products from the microbes that protect or enhance crops offers great potential, particularly when used in conjunction with existing chemical and trait technologies to manage resistance challenges. Regulatory timelines are also shorter than for traditional chemicals and traits, so this adds to the attraction, though scalable production and formulation remain challenges that are often difficult to solve.
Are there any sectors within agriculture where you would like to see more innovation? In your opinion what’s ripe for disruption?
I’d like to see more innovation going into the traditional areas of chemistry, breeding and traits. It is after all these categories that still deliver the majority of solutions for growers and revenues for the industry. Much of the innovation in these areas is currently undertaken by the Ag input providers themselves as it is difficult to identify novel leads and move them efficiently through the development and regulatory process. Timescales are long and generally not attractive to traditional venture capital. New investment models are needed to make innovation in these areas more attractive to entrepreneurs and investors. Ag input providers could also benefit from increasing their external investments and partnerships in this area.
In your opinion what is the biggest challenge in facing agriculture technology companies in taking their solutions to market?
The near-term fundamentals, particularly low commodity prices, don’t incentivise farmers to experiment with new technologies where the economics are either marginal or unclear. This makes it harder for start-up companies and it’s also unlikely that this environment will change anytime soon. It is more important than ever for start-ups to have a clear understanding of their value proposition. It is also important to understand the sales and distribution channel, which generally means that companies need to work within the confines of the existing channel. Channel partners trade on reputations and relationships and will want to know that your product works and how it fits into their offering. Expect major players to undertake their own multi-year field trials before committing themselves to any commercial arrangements.
How do you identify which start-up companies to invest in or partner with?
We have an experienced investor group with over 60 years of combined investment experience. We also make the most of being able to tap into the deep expertise that resides within Syngenta, from specialist technical knowledge to first-hand commercial insights. Over the 10 years that we have been investing in this sector we have developed a good understanding of what we’re looking for in companies. When we invest close to Syngenta’s core business we will often invest early as we are well positioned to assess the technical risk and market potential. In more adjacent areas we tend to invest at a later stage to avoid taking both a technology and market risk, preferring a proven technology in an unproven market.
If you had to name a company as “one to watch” over the next 12 months, who would it be?
I’m going to cheat and highlight two companies in our portfolio, both of which are exciting for
different reasons. The first company is Agbiome, a US biotech company that develops efficacious biological and trait products from the microbes that live in and around plants. This company is exciting because it combines the recent advancements in our understanding of the plant microbiome with new technologies, such as low cost sequencing, to open up a rich new source of product innovation. It also has an industry experienced management team and strong investment syndicate that includes multiple strategic investors. The second company I want to highlight is Agrimetis. This is a company that we co-founded with a team of entrepreneurs with expertise in synthetic biology to focus on natural product-derived compounds for crop protection. It was established in direct response to the lack of external innovation in crop protection products. By combining Syngenta’s commercial and technical insights with external, entrepreneurial talent we have created an independent company that is uniquely positioned to deliver commercially attractive products together with attractive financial returns for investors. This is an example of the type of new innovation models that the industry needs.