1955 Capital Makes First Investment into Startup Combatting Pests in Developing Countries

Crop Enhancement, a startup using what it dubs “sustainable chemistry” to combat crop pests and increase crop yields in the tropics, has raised $8.5 million in Series B funding.

The round was co-led by 1955 Capital, the VC firm that ex-Khosla partner Andrew Chung launched in February with a $200 million fund. This is the first investment for the fund which is focused on US and European technologies that can be exported to developing countries to solve world challenges across the energy, environment, food, agriculture, health, and education sectors.

1955 Capital led the round with MLS Capital Fund II, the life sciences fund co-managed by Spruce Capital Partners and Xeraya Capital. Existing investor Phoenix Venture Partners and new investor Bandgap Ventures also joined the round.

“1955 and MLS are particularly well positioned for our business that’s making its initial market entry into China and Southeast Asia,” said Kevin Chen, CEO of the company. “MLS has lots of funding from Malaysia and 1955’s goal is to bring Western technology to the developing world, with connections across China and Asia, so they are perfect!”

Bandgap Ventures, meanwhile, has connections to the US agriculture industry in the Southeast, which will be helpful for later products, he added.

The company’s first product is CropCoat, which is a film that’s sprayed onto crops to improve their resistance to pests and reduce the need for harmful chemical pesticides. It is initially targeting coffee and cocoa, which are largely grown in developing countries.

The cocoa pod borer (CPB) is one particular pest that’s decimated cocoa crops across much of Southeast Asia, according to Chen. Malaysia’s production of the crop has fallen dramatically since its peak in 1990 when it was a top global producer. According to the Malaysian Cocoa Board, the country produced 1.7k tonnes of cocoa in 2015 compared to 247k in 1980. And the amount of cultivated land fell from 414.2k hectares to 18k during the same period.

“The opportunity was clearly there to help solve a great challenge in Southeast Asia and address two great challenges in agriculture: being able to improve crop yields on a limited unit of land, and do it with minimal-to-no pesticide,” said 1955’s Chung, who has known Chen for several years. “That is the holy grail in ag problems and Crop Enhancement definitely fits the model.”

CropCoat forms a rain-fast, water resistant film around the cocoa pod, preventing insects from getting into the fruit where they like to feed. Traditional chemical pesticides, by comparison, are frequently washed off by the rainwater and moisture that’s prevalent in the tropics, meaning they need to be reapplied as much as 10 times per growing season. By comparison, CropCoat needs reapplications about two to three times, according to the company.

The formulation, which is a mix of organic and non-organic ingredients, can be mixed into other agricultural inputs like nutrients and fertilizers and applied with the existing spray equipment a farmer is using.

“From a practical adoption perspective, the product is very powerful as farmers don’t need to invest in any new equipment or change their existing equipment,” said 1955’s Chung. “It also gives them an interesting economic value proposition compared to pesticides, which they typically use five to 10 times during the growing season. CropCoat needs to be applied about two to three times by comparison, and increases yield.”

The timing is right for the technology in other parts of Asia like China too, argued Chung. At least one-fifth of China’s soil is contaminated and its water situation is even worse, but many farmers are forced to still grow food on this land because they have no choice, he added.

Greg Young, managing partner at Spruce Capital, agreed that the potential for Crop Enhancement to reduce or eliminate the application of toxic pesticides was an emotional subject for agribusinesses in these regions. He added that the technology is unique to the numerous chemical and biological solutions he has seen in the market.

“When we talked to different groups in Asia about their interest in this product during due diligence, they had never seen anything like this before and had very emotional responses to early trials,” he said. “We’re now working with one of the largest global food producers and getting very strong results.”

While Chung and Young believe the technology will have a pull from the market, there’s always an element of pushing ag technologies into the markets they’re disrupting. This is a challenge many agtech startups are facing today. Distributing Crop Enhancement products will be a challenge and the company is actively seeking market-entry and distribution partners to introduce relevant growers and potential buyers, according to Chen.

Crop Enhancement’s technology is centered on using films and formulations to modify the surface of crops, from leaves to seeds to fruit. Its founder David Soane has taken a similar approach to solving problems in other natural resources industries and has founded various companies with this approach including ACLARA, a diagnostic test product that’s now listed on NASDAQ, and Nano-tex, a manufacturer of textile materials.

“He always wanted to help address key issues in agriculture, such as the excessive use of toxic chemicals, and there are lots of surfaces where crop damage occurs, so he thought of taking this previous technology and applying it to agriculture,” said Chen.

“What’s unique about our team is that we have scientists and business people that have experience as diverse as solar energy and semi-conductors and are bringing their learnings from these other industries to agriculture.”

“It’s comforting to know that this polymer chemistry platform has spawned several other interesting companies in the past and is generating significant exits for investors in some cases, so that gives you extra confidence in reducing the amount of commercialisation risk,” added 1955 Capital’s Chung.

CropCoat is not Crop Enhancement’s only product; it’s also working with partners on a controlling the release of a variety of active inputs through encapsulation chemistry. It retains the active ingredients where they are needed, and prevents their dispersion into the environment, promoting less runoff of potentially harmful substances into the environment and increased yields.

Crop Enhancement, which has several field trials taking place globally, will use the proceeds to accelerate commercialization and continue to build distribution partnerships.

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