4 Reasons Why Israel is Now a Developed AgriFood Tech Hub

Two weeks ago, I went to Israel to attend Food and Ag Week including FoodTech IL 2018 hosted by the Strauss Group and incubator The Kitchen, and Agrivest 2018, hosted by accelerator group Trendlines and agrifood tech VC GreenSoil. It had been five years since I last visited so I was excited to see how the agrifood tech ecosystem had developed in that time.

When I went in 2013, Israel had a burgeoning agtech scene but there was very little in the way of foodtech, and most of the agtech was still biotech focused with very little in the way of digital technologies.

Fast forward to today and it’s a very different situation. The agrifood tech space is bustling with at least 800 startups out of a total 8,000 Israeli startups from a population of 8 million; those are impressive stats by anyone’s count. Plus FoodTech IL attracted over 1,000 delegates making it one of the largest agrifood tech conferences that I’ve ever come across. And it wasn’t all work either. Israelis are known to enjoy the nightlife and there were also lots of side events and rooftop after parties to pack the schedule!

Listening to the conference sessions, speaking to various delegates in attendance from across the world, and touring The Kitchen in the aftermath, it became obvious how and why the country had managed to develop such a strong ecosystem for agrifood tech innovation.

1. Strong ecosystem

The country has world-class universities working on agrifood tech research including Technion (the MIT of Israel), Weizmann Institute and the Hebrew University. A lot of IP comes out of the universities, with some organizing startup initiatives such as Hebrew University’s HUGrow, a new food and agtech accelerator. And these universities are not shy of commercialization, in some cases taking up to 50% of the company at its inception plus licensing rights which they may need to rethink as this doesn’t leave much meat on the bone for the founders and it may give investors pause if they feel that the team is not sufficiently incentivized. However, these universities provide a strong, science-based foundation for the startup ecosystem and may provide ongoing lab/research space to cut the startup costs.

Corporates such as Strauss — one of Israel’s largest food companies — provide the support and backing startups need to get off the ground with incubation and acceleration initiatives such as The Kitchen. Ofra Strauss, Strauss’ chairperson, told me “We see a great importance in bringing technologies and innovation to the food industry and are constantly working to create the right ecosystem to do so.” There are other accelerators and startup resources providing support in the sector too including Trendlines. An established startup infrastructure creates a clear path for young businesses to build their products, find investors and pursue investment and can also help with customer traction. Israel has an established local venture capital industry too with a few behemoths such as OurCrowd that has invested several agrifood tech companies is even an investor in the Trendlines AgTech Accelerator, as well as some agrifood tech-focused venture capital firms including Greensoil Investments, Rimonim VC, AgriNation VC, and Copia Agro. Non-profit Start-Up Nation Central and GreenSoil have also done a great job landscaping the space and providing resources for startups and investors alike.

2. International Agrifood Tech VCs are paying attention

There were a number of international investors in attendance from the US, Europe and Asia. They included Anterra (Netherlands), SHIFT Invest; Five Seasons (France); AgFunder (US), Cultivian, Finistere, Germin8S2G (US); New Protein Capital (Singapore), Bits x Bites (China). However, it remains to be seen how comfortable these investors are investing so far from home  — It’s challenging for venture capitalists to invest beyond their borders when it comes to travel time needed — but their presence suggests serious interest and recent investments in companies like Taranis, Prospera, Future Meat by international investors seem to support this. Certainly, the first one is the hardest and events like these are a great attempt to break investor inertia.

3. International corporates are paying attention

International corporations including PepsiCo and Rabobank all sent sensor executives to the conference and there are many more with a footprint in Israel including Unilever and Nestle. Several corporate VCs also made the trip including ADM, Yamaha, Driscoll’s, Wilbur Ellis (Cavallo Ventures).

4. Interesting companies

I had the opportunity to spend a day at The Kitchen to meet several of their portfolio companies and noticed how strong the business/innovations were. Most of the companies I spoke with were commercializing research coming out of the Israeli Universities and were led by successful entrepreneurs. Some standouts were:

Amai Proteins: Amai is a platform to computationally design proteins that perform specific functions. Their first product is a modified version of a sweet protein found in nature. Sweet proteins that mimic the taste and functional properties of sugar are the holy grail of food ingredients. This is a very talented team led by Ilan Samish, a PhD from Weizmann who literally wrote the book on computational design, and whose scientific advisory board includes Nobel Laureate and Stanford Professor Michael Levitt, one of the founders of computational biophysics. Amai will have to navigate the regulatory environment for some proteins, although one that it’s working with – thaumatin — is already found in hundreds of food items and is approved by all regulatory agencies; Amai Proteins is working on reducing the cost, improving the supply and aftertaste of thaumatin. It also sounds like they’ll soon be signing some trials with some large fortune 500 food companies who are taking this seriously.

Aleph Farms: A cultured meat startup led by Didier Toubia, who led two companies to exit, and Shulamit Levenberg, Dean of the Faculty of Biomed Engineering at Technion, Aleph Farms is developing 3D cultured beef. Today, mammalian cell culture relies on Fetal Bovine Serum to supply the hormones, growth factors, and other nutrients to stimulate growth but as you might guess from the name it’s not exactly vegan. Aleph Farms is looking to get around this inconvenient problem with a serum-free media.

Flying SpArk: I’ve seen several dozen insect protein companies over the last few years, so I was skeptical at first. But Jonathan and Amir from The Kitchen insisted that I meet with them and they did not disappoint. I met with CEO Eran Gronich and VP of Food R&D Keren Kles, and they made a compelling business case. Specifically, their focus is on farming fruit fly larvae which they claim is one of the most efficient and low maintenance insects. Rather than going after the animal feed market, which they feel is too commoditized, they’re working on a high-value consumer grade protein as a food ingredient. They had cookies in their office made with the insect protein powder and they were actually quite good. Here’s a video interview with Eran from 2017. While this falls outside of our investment thesis at AgFunder as a production play, it was a compelling story and worth a deeper look as they continue to automate their production facilities.

BactuSense: This company has come up with an extremely elegant test for rapidly detecting bacteria from a sample such as coliforms, or pathogens like Listeria or Salmonella. The solution starts with an optical sensor and a flow-cell that contains silicon-based chips. The chips are etched with thousands of micro-pores organized in an array. Bactusense then applies a material chemistry to each pore that is sticky to the target microbe. These pores act like little lobster traps for microbes, which may only be a few micrometers in length. After the sample is introduced to the surface of the silicon chip, BactuSense runs a spectral analysis on the chip to see how many pores have trapped the target microbe and how they propagate over time. The detection of occupied pores is an indication of the presence of the target microbe, and the number of pores is correlated to the concentration of these microbes in the sample.

While I can’t say I was surprised to see how far the Israeli agrifood tech scene has come over the past five years, it was great to confirm first-hand that it is now a developed ecosystem for startups and investors alike.