Editor’s Note: Ignacio Martinez is general partner at Flagship Pioneering, the venture development organization (VDO) responsible for creating and incubating agtech’s best-funded startup, Indigo Agriculture. With a background in the healthcare industry, Flagship now has three ag businesses in its portfolio with CiBO Technologies and Inari recently coming out of stealth.
The VDO is a force to be reckoned with, corralling investment from high profile institutional investors such as Alaska’s state pension fund, the Investment Corporation of Dubai, and investment management giant Baillie Gifford ($193bn under management.) These investors have a longer-term investment horizon than venture capital investors, which will no doubt stand Indigo, and perhaps other Flagship agtech businesses, in good stead on its route to a public stock market listing.
We caught up with Martinez to find out more about the unique model for building agtech companies.
How would you describe Flagship’s model?
We are a life sciences innovation enterprise. We conceive, develop, and grow life sciences companies following an institutional process we have developed. Flagship Pioneering operates in two main areas: human health and sustainability. Agriculture is part of our sustainability business. We have $2.5 billion under management that we use to fund our companies. In the 17 years since we started, we have launched many companies in both areas, and we are very enthusiastic about the three companies we are conceiving, developing and growing in agriculture: CiBO Technologies, Inari, and Indigo Agriculture.
Who are Flagship’s investors?
We have raised six funds as well as an opportunities fund, which allows us to make additional investments in companies poised for growth. Our investors are institutional entities and other investors.
AgFunder Co-Investment Fund III is now open for investment. Closing June 15, Spots are limited.
In your process, what comes first: the technology, the teams or the business idea?
We have nearly 100 people working at Flagship Pioneering, with different teams working on different topics. The process starts with what we call the “Exploration” phase, where we ask questions and develop what we call venture hypotheses. Flagship’s team of entrepreneurial scientists pioneer breakthrough innovations by first asking “What if?” and Why not?” We hope to be able to answer, “It turns out…”
We develop multiple hypotheses on different topics, and of course, there is a lot of selection, variation, and iteration during this phase. If we feel one venture hypothesis has the potential to be unique, and there is a white IP space, we go to the second phase: “ProtoCo.”
This is the phase where we prototype companies. Just as firms in other industries prototype products, we do the same with our companies. In this phase, we will have scientists do proof-of-concept experiments in the laboratories that we lease, and we try to validate, modify, or kill the original idea. If at the end of that phase we believe there is unique IP; we have proven the venture thesis; and we have attracted a high-quality initial team and advisors, then we move the project to the third phase, which we call “NewCo.”
During this third phase, we start hiring more people and expanding the team considerably to 20-30 people, including an initial executive leadership team. By the end of that phase, we have an external CEO identified and we start preparing the company to be spun out from Flagship. When we spin the company out, the fourth phase begins, and the company goes into what we call “GrowthCo” phase. We are the founders, investors, and the managers of these companies. We are focused on building value and building a company.
How does the Explorations phase work?
The teams at Flagship brainstorm about opportunities within emerging areas of science and try to identify a hypothesis for a company. This hypothesis is completely a product of our imagination. We are interested in questions that point to hypothetical solutions that would be valuable to the world, if possible and once discovered. For example, in digital agriculture, the question was, “What if we could build a scientifically-based, digital platform that could be applicable in multiple crops and geographies and was also really scalable?” It turns out that if you could do this, you could simulate global agricultural systems to understand why things happened in the past, what’s going on today, and then predict future outcomes based on different scenarios. This question led us to conceive, prototype, and develop CiBO Technologies. In the case of Indigo, we asked, “if in humans, a healthy microbiome is increasingly recognized as critical to overall health, what if microbes played a similar role within plants?” It turns out every plant has microbes living insides its tissues, and those microbes can be little bacteria, they can be little fungi, or they can be combinations of the two. This plant microbiome confers abiotic and biotic resistance to plants.
What other questions are you asking in agriculture?
We have different ProtoCos and questions in the aforementioned areas and more.
You don’t want to disclose the other areas you’re looking at?!
We’re just busy working on them. Stay tuned in the future.
What’s your priority when assessing founding teams?
We are not assessing founding teams per se, because we are the originators and founders of the companies. That said, we try to build the best teams we can to develop and grow our companies. We’ve been lucky with what’s been going on in the agriculture industry with the major acquisitions, and this consolidation is giving us an opportunity to hire really good talent. For example, the chief scientific officer of Inari, Catherine Feuillet, was the global head of traits at Bayer, and her credentials are outstanding, including her work on sequencing the wheat genome, an effort that was just completed. We are lucky to have her. We also like to bring in people with no expertise in agriculture, such as entrepreneurs and scientists from other fields who are exceptional, can question a lot of the dogma in these fields, and who have already created a lot of innovation. But it is true that finding really good talent is an ongoing challenge for everyone in life sciences.
Why aren’t others approaching agtech innovation in the same way as Flagship?
I don’t know. I’ve been here for five years and have benefitted from the experience of a team that’s been doing this for 17 years. There have been a lot of learnings on the way.
What have you learned during your five years at Flagship?
Talent acquisition is a critical part of our process because excellent ideation, iteration, development and execution is about people. Getting the right teams in place is the most important thing.
How do you look at developing business models for your companies?
Flagship likes to conceive platform companies. We like these platforms to be in areas where we don’t need to spend 12 years developing one trait and spending $150 million or more. With new technology around digital, biologicals, and plant breeding, now you can go to market quickly. If you have the talent, the financial resources, and the technology, you can develop multiple products. In the past, this was not possible in agriculture, but now it is. So, the next thing you need to ask is “what is the best business model?” There is probably no single answer to that, but rather multiple options. This gives us the opportunity to consider different models for different companies.
You have yet to settle on a business model for Inari, but for Indigo, the business model defines the company in many ways and there is a realization that innovative business models could be key to successful agtech companies. Do you think innovative business models are a necessary trend in agtech?
All great entrepreneurs are open-minded, while being opportunistic and strategic at the same time if they have the right resources at hand. When companies implement business models they think could work, that process may also open unexpected pockets of value to take advantage of. For example, Indigo is pioneering different business models and implementing them. When we conceived of Inari in 2016, we started talking about business models from day one. There are multiple options the company could follow, and the executive team is evaluating different alternatives.
I don’t know much about CiBO, can you tell me more?
CiBO emerged from an exploration and a hypothesis that a scientific understanding at a systems level is key to enabling successful digital approaches in agriculture. The platform we’re building is grounded in science, and we are developing a systems-based approach to understand scientifically how the plant grows, how it interacts with the soil and the environment, and how this whole system interacts with farmers’ practices. CiBO, which now has 125 employees, is already working intensively with customers and partners in multiple geographies to solve big problems related to food security, acceleration of innovation, improving profitability of businesses and operations, and protecting natural resources.
Do you have any concerns about how the agtech market has developed over the last five years?
The space has changed a lot in the last five years, and, in my opinion, it’s only the beginning. I’m looking forward to the next five years— I’m very excited about the future of agtech.