This interview is part of a series on agrifoodtech corporate VC investment strategies and insights. The series is produced in collaboration with the OnRamp Agriculture Conference, which brings together the agriculture and food industries’ leading corporations, investors, and startups to highlight innovations disrupting agriculture and the future of food. Sign up now to receive the forthcoming report on corporate VC strategies in Q1 2021. Previous CVC interviews in the series have featured Syngenta Ventures, Leaps by Bayer and Cargill.
Like its peers (and competitors) Bayer and Syngenta, German chemicals giant BASF knows that ‘business as usual’ in the agrifood sector isn’t going to cut it. As regulators tighten restrictions on the use of fertilizers and pesticides, and consumers demand transparency on the sources and contents of their food, BASF has been turning its vast Agricultural Solutions division toward new techniques and business models for delivering services like crop protection.
Over the next decade, BASF plans to launch at least 30 new projects relating to novel seeds and traits, chemical and biological crop protection, and digital products. It’s also looking outside of its own R&D capabilities to seed and scale promising new innovations through a $250 million evergreen corporate venture fund, BASF Venture Capital.
AFN spoke about BASF Venture Capital’s evolving strategy with Markus Solibieda, who has helmed BASF Venture Capital since November 2016. In conversation, he offers a view of the group’s priorities and global perspective from its teams in Germany, the US, China, Brazil, India, and Israel.
AFN: What is the mission and scope of BASF Venture Capital?
Markus Solibieda: We have a mission statement, that is “catalyzing change for BASF and the chemicals industry.” We are there to test and learn about new business models primarily, and these new business models are very often based on new technologies – be it on the materials side, as a chemical company, or on the digitization side, where we see that a lot of data and analytics can be applied to generate intelligence about how to apply chemicals in a more sustainable way. As a venture group, we want to test and learn about these new and evolving business models.
We are a typical Series A investor, with a team of 13 colleagues investing an evergreen fund of $250 million. We invest in tickets of $1 million to $5 million. Any returns from previous exits we reinvest, so we have invested more than $300 million so far.
We are not a pure digital farming or agtech investor; we venture across all areas of interest for BASF including crop protection, base chemicals, intermediates, specialty chemicals, and so on. But agriculture is an important part of our mission because we are convinced that the agricultural space is where the use and application of chemicals will change most in the next five years. It is also here where we have the most innovation in terms of new business models, and that’s why we have a strong focus on digital farming.
Can you give us a snapshot of what’s in BASF’s agri-focused venture portfolio?
The most recent investment we made is in an Israeli company called Equinom. They have built a bioinformatics platform to generate new and non-GMO characteristics of plants. For example, they have helped develop for the French producer Roquette a new white pea breed that has a very high protein content. The white pea is a base element of the Beyond Meat burgers, so it also fits with another important change we see in agriculture: the replacement of animal proteins with alternative proteins. They also have done successful research on sesame and other plants.
We have invested in a UK-based company called Hummingbird. They are analyzing data collected by drones. In the large cereal fields that you find in Russia or Ukraine or other parts of Europe, most farmers will have a fleet of drones for taking pictures and capturing data for analytics. But there have to be a few extra steps to transform these pictures into a specific program for your tractor in order to, for example, selectively spray herbicide. Hummingbird is converting pictures taken by drones into such programs for machines on the ground.
Another example is a Swiss company called Ecorobotix, which has developed a robot to selectively spray crops, like onions or sugar beets. Spraying herbicides or insecticides on the whole field is still the standard in crop protection. Ecorobotix is taking an intelligent approach to selectively remove weeds from the field. It has developed a solar-powered robot on four wheels that rolls over the field at one or two meters per second, so it is not slow! Its cameras can detect and distinguish specific value crops from herbicides, deciding where to spray and where not to. That opens the door to using less and more sustainable crop protection products.
And then [there’s] Provivi, which has developed a new class of pheromones. These pheromones today are mostly applied in vineyards and apple orchards to manage invasive insects. Provivi wants to bring pheromones to row crops like corn and use pheromones in larger fields. One of the founders, professor Frances Arnold, won the Nobel Prize for her research. We are convinced that pheromones will make an important contribution to making crop protection more sustainable.
BASF’s CVC investment strategy has focused both on direct investments and investments in agrifoodtech funds, like Omnivore in India and SP Ventures in Brazil. Why take both approaches?
If you want to gain quick access to deal flow, if you want to build your presence and create an overview of what’s happening out there, being an investor in another venture capital fund can really help in an accelerated way.
For example, if we want to engage in Brazil or India, but we do not yet have sufficient market knowledge, we would always start with fund investments, build our network and relationships, then — step-by-step — move to direct investments.
But even going down the path of ‘fund of funds’ investing, you should have your own team members on the ground in order to make something out of that relationship. Just a remote fund investment doesn’t have such a great strategic return. You should also put colleagues from your team on the ground working with that other venture fund, simultaneously building relationships and the network.
Does BASF’s corporate venture capital strategy focus on incubators and accelerators too?
We have these activities as well. In South America, we have an initiative called Agrostart, run by our colleagues in São Paulo. This is a typical accelerator program where we invite young startups to present their solutions and work with us to see if they can work in the market. We select winners, but the prize is not cash; it’s a distribution agreement with BASF where we sell their solution to our customers. We plan to bring this program to Asia as well.
Do you see BASF Venture Capital as an impact investor?
Indirectly, yes. In agriculture, we have an investment in specialist fund Omnivore in India, and they are an impact investor in terms of improving farmers’ lives through access to technology. Still, they have a strong focus on profitable business models.
With companies like Hummingbird, Equinom, Provivi, or Ecorobotix, we always have positive side effects as well, by helping to use fewer herbicides and insecticides. So we could claim to be an impact investor. But so far, we haven’t promoted it actively in our PR.
We have a very simple fundraising path; we don’t need to reach out to external investors, where maybe an impact investor persona could make us more popular. But by doing what we are doing, we are already making an impact to a significant extent.
Why invest in chemicals reduction when BASF has traditionally been one of the biggest sellers of agri-chemicals?
As a corporate venture unit, we are not executing on existing BASF strategies; we try to inspire our existing business units on new trends, new technologies, new business models. We are the risk-takers. So we are the ones who test these new business models, and if we fail, it’s our fault. But if we are successful, we convince our business units to build these new business models. We try to be a source of inspiration for BASF, which today, of course, still has a business model based on volumes.
But we are confident that with the help of phenomenal startups, we can test certain theses and understand new market mechanics better. That’s why we are doing these kinds of investments: to try to build intelligence for our group and feed into the future strategy of BASF. There’s a high level of interest from the business units to work with us and to generate these learnings.
Hypothetically speaking, if a new startup pitched you today, what problem would they ideally be trying to solve?
We are in a period where consumers are much more sensitive to where their products come from. Is it organic? Has it been sprayed with a conventional insecticide? There will also be additional regulatory challenges—or put in a positive way, improvements—to the agri-chemicals industry. It would be useful to have a startup that is able to help crop protection companies’ clients — the farmers, for example — with verification to prove how crops have been grown: that this is organic, or that has been grown with fewer herbicides. I don’t know if it will be a blockchain solution or another digital solution, but a solution to make the agricultural industry value chain transparent would be highly interesting.
Are there any big changes on the horizon for BASF’s corporate venture group over the next two years or so?
These last four years are already quite different compared to 2001 to 2016. We have really changed the mandate and the geographies where we are present. We are no longer just a technology scout for BASF.
In the future, I would like to see that all business units of BASF feel encouraged to engage even more with startups – to the point that, one day, we are no longer needed as a facilitator of these relationships. Here we are already making a lot of progress, and we will continue to push, to inspire, and to catalyze change.