Startups are innovating solutions to address three of the biggest challenges in food and agriculture, but barriers exist when it comes to scaling these solutions, according to a new report from accelerator group Village Capital and QBE Foundation. The report is the culmination of research and analysis that Village Capital has completed through its cohort of training and developing entrepreneurs in foodtech and agtech.
VilCap has been running an agtech accelerator since 2012, the first group to do so, and has supported 50 companies through it, making 14 investments. In its 2018 program, it identified over 100 early-stage startups that are working on ways to achieve a more sustainable food system.
“This year we focused on how entrepreneurs apply advanced tech to reinvent our approach to food, sustainability, and accountability,” Allie Burns, managing director at Village Capital, told AgFunderNews. “We started with the broad investment thesis of how the food and ag sector is approaching innovation to improve the efficiency of world farmers, decreasing food loss and waste, and consumers’ shift to healthy, plant-based diets.”
The report begins by citing a recent article from the journal Nature concluding that our existing food system is on track to push Earth beyond its “planetary boundaries.” From there, Village Capital boiled it down further to focus on climate change and then honed in on which startups were investment ready with some early traction in their markets.
Through this process, the report identifies how three categories of innovation are primed to make a beneficial impact on our food system.
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Precision Agriculture tools assist farmers with preserving resources while promoting better stewardship of the land through a reduction in the amount of chemical inputs used to grow large-scale commodity crops and wiser water use. They also ease farmers’ growing lack of labor as immigration laws and other factors make a reliable workforce increasingly scarce.
Supply chain technologies present several opportunities to make our food system more efficient, particularly when it comes to mitigating food waste. As the global supply chain grows more and more complex, technology can play a key role in optimizing systems locally, nationally, and abroad. Major international food producer Nestle sources ingredients for its products from 80 countries, the report notes, underscoring the ripple effects that applying technology at such a large-scale could have further down the food chain.
Functional Foods is as a category of products including probiotics and coconut oil that provide health benefits but can also have a positive environmental impact. The continuously climbing global per capita meat consumption puts added strain on our environment, according to the report, and increases the need for food products that offset the impact. Consumers are already keen on the new functional food categories, which is apparent by many major CPG players new product lines offering more sustainable and health-focused products.
In addition to identifying these innovation-ready sectors, Village Capital identified the three main areas that participants in this market should think about if they’re to reduce the barriers or challenges impeding innovation despite the readily available technologies that could alleviate food system pressure: Geographic focus, policy, and the obsession with disruption.
1. Investors Should Look to the Heartland
Silicon Valley is the epicenter of the venture capital investment world, but hardly a hotspot for agricultural production. The report suggests that agtech investors would do well to look beyond New York City, Boston, and San Francisco to find startups that are innovating close to the root of farmers’ worlds and the real-life problems that producers face on a daily basis. To that end, 88% of the startups that Village Capital interviewed were located outside these three venture capital epicenters.
2. Policymakers Should Consider Ag Innovation
Regulation and policy need to be a bigger focus of agrifood tech VCs playbooks. While most focus on innovation and ROI, it’s important to keep in mind that cutting-edge technologies don’t always fit into existing regulatory frameworks, which can severely hamstring a technology’s ability to commercialize. Promoting rural broadband and the widespread adoption of precision agriculture are two cornerstones of any successful agtech-focused policy platform, according to the report.
“It’s important to consider how policymakers take agriculture into consideration as part of the conversation around a ‘new green deal.’ Oftentimes, ag innovation doesn’t make it into the mainstream conversation about climate change. We have to ask what underlying structural issues drive change like creating green jobs and rural broadband. There are also other ways of encouraging the adoption of new technology like creating incentives,” Burns explains.
3. Silicon Valley-style “Disruption” isn’t Always the Answer
There’s been a lot of attention dolled out recently to futuristic tech like lab-grown meat, vertical farms, and what the report describes as other “big ideas that will disrupt global food systems.” When it comes to day-to-day food production, however, farmers will likely benefit more from tools and tech that augments their operations towards efficiency instead of completely throwing the existing system out the window. Considering that agriculture is one of the most heavily regulated industries worldwide, leapfrogging into the future doesn’t always get new and useful technology into farmers hands in a timely manner.
“This report is about how about how innovating can augment what exists. Disruption isn’t always the answer. We have a huge opportunity to augment what is happening and that’s how we will get to innovation at scale. There’s room for things like lab-grown meat and vertical farms to disrupt global food, but what is the near term opportunity to innovate at scale?” says Burns.
To read Village Capital’s report and learn more about startups innovating in each of these challenges and tackling these takeaways click here.