Australia’s Venture Capital Industry Needs to Catch Up with Local Agri-Food Innovation

Editor’s Note: Cal Foulner is founder of Beanstalk Ventures, a new network aiming to promote agri-food innovation in Australia. He recently attended the first food and agriculture technology-focused event for AusBiotech in Brisbane, and here shares his thoughts on how the sector needs to develop if it’s to become a lasting part of Australia’s technology innovation and investment landscape.

Agri-food technology innovation has begun to emerge as the new hot topic in the Australian startup scene, but if it wants to truly break through, the conversation between the big multinationals and government agencies needs to shift to include the agile startups supported by risk tolerant and globally connected angel and VC investors.

There is no denying that there is something stirring in the agri-food startup space down under. Since the beginning of the year, we have seen Australia’s first FoodTech hackathon run by the Sydney-based Food Tech Aus Meetup and the launch of the ambitious 400M initiative out of Toowoomba in Queensland who are staking their claim as the rural center of agtech innovation in Asia Pacific. The well-funded SproutX agri-tech coworking space and accelerator program by Findex and the National Farmers Federation digital strategy has been announced, and when it launches later in the year is promising to be the home of this emerging startup ecosystem in Australia. In the wake of this announcement, Melbourne has seen the launch of two new agriculture technology meetups (AgTech Victoria and AgriTech Melbourne) as well as the food specific Food Tech Meetup. 

The timing is right for the emergence of a vibrant agri-food startup scene in Australia, which is being driven by two main factors.

Agri-food innovation drivers

The first is the new government-led push to develop Australia into an ‘Innovation Nation’ based on learnings from leading global innovation hubs such as Silicon Valley and Tel Aviv. The $1.1 billion National Innovation & Science and Agenda initiative aims to support and build the startup ecosystem with accelerators, incubators, and overseas startups landing pads, incentivized investment through modified tax laws, and an increased focus on STEM in the education system.

The second driver is the slowdown in the mining sector, which has been driving the Australian economy over the past 15 years. This has caused cashed-up mining investors to look at alternative industries to invest their winnings and has been coined the ‘Mining to Dining’ shift. This transition has seen high profile Australian mining magnates making large investments in agriculture such as Andrew Forrest (Fortescue Metals Group) buying into Harvey Beef and Minderoo Station and Gina Rinehart’s (Hancock Prospecting) recent purchase of Riveren and Inverway cattle stations. When combined these two major drivers have the potential to create the perfect storm for the agri-food startup scene to boom in Australia.

It was against this backdrop that AusBiotech, the peak national industry body for biotech in Australia, hosted the first symposium specifically focused on food and agricultural technology. The event was held last week in Brisbane and was well attended with over 140 big names from the biotech space. They included delegates from the CSIRO — Australia’s national scientific research body, large agricultural corporations, even larger multinational agribusiness, government representatives, major industry groups and universities from around the country. There were some impressive presentations from top researchers and industry leaders.

Leading agri-food research

Dr Martin Cole, director of CSIRO Food & Nutrition Future Flagship, presented the latest work in developing plants that grow oil in their leaves and canola crops that produce Omega-3 making it suitable for aquaculture feed. Sam Gill, manager of beef genetics at Meat & Livestock Australia, spoke about biometric sensors on cattle and ultrasound imaging of sheep for real time meat and fat composition. Prof Michael Jones, director of the WA State Agricultural Biotechnology Centre, spoke of herbicide-spraying quadcopter drones with 10-liter payloads and robot-operated hydroponic vertical farms, just to name a few. It was hard for anyone in the audience not to feel optimistic about the future of food if the professors in the room were going to have anything to do with it.

So the timing is right, and there is no doubt that Australia has world-leading science and research institutions doing cutting edge work. But that on its own will not be enough to justify the hype surrounding agri-food tech innovation or help it gather momentum.

The most noticeable absence at the recent AusBiotech Ag & Food Symposium was a large number of startups and early stage VCs. Together they represent an important missing chunk of the ecosystem which is vital if the research that is happening in the universities and CSIRO is going to find the business smarts and funding that will make them a commercial success out in the big bad world.

Why are local agri-food startups absent?

An explanation for this noticeable absence emerged during the panel discussion on investment, where some of the event’s only startups sat.

Michael Whitehead of Agribusiness Insights at ANZ Bank opened with a speech about the abundant private capital that was available globally for good agri-food tech ventures, encouraging the room to attend the global agriculture conferences to find the right funding.

Randy Milne, CEO of Perkii spoke about their recent $4 million raise to take his company’s patented probiotic water drink to market in Australia. They plan to perfect the product and capture comprehensive data on their target market before heading overseas where the real dollars are to raise their series A to take them global.

Rob Neely, chairman of Integrated Animal Health, which specializes in repurposing human health products for use in the animal health industry, announced their recent successful $15 million Series B raise. Rob shared his chalk and cheese experience dealing with US-based VC firms, which unlike Australian firms will take the time to hear his pitch and get to know his business. Integrated Animal Health will continue engaging US funds for its $40 million Series C, which has already started.

Michael Kleinig, CEO of Go Resources which is developing technology that produces lubricants from safflower, spoke of the lack of understanding in the local angel investing community around food and agriculture. Go Resources has recently closed a $226k seed round and like the rest of the panel will look to head to the US to do a roadshow in preparation for their next raise.

Agri-food innovation investment needed

The message is consistent; Australia has great science and R&D with a strong pipeline of innovative agri-food technology. The country has strong capital markets, but a small and immature venture capital market that could be a handbrake on the development of a sector that is doing its best to flourish.

Promising ag and food tech startups will continue to head offshore to find funding, or they will attempt to raise in Australia and risk running out of runway before finding the right backing.

With more bellies to feed every day across Australasia, the world will miss out if the momentum does not continue in this up-and-coming industry in Australia. In the meantime, Australia will remain as an untapped opportunity for VCs willing to jump on a plane.

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