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How to Invest in Agtech with #WorldPositive Venture Capital

March 9, 2016

Obvious Ventures is a VC firm that invests with purpose in what it calls #wordpositive venture capital. The food and agriculture sector fits nicely into its overall thesis. Portfolio companies of relevance include satellite imagery company Planet Labs, microbe engineering company Zymergen, and alternative protein manufacturers Beyond Meat and Miyoko’s Kitchen.

Ahead of speaking at the World Agri-Tech Investment Summit in San Francisco next week, Vishal Vasishth, co-founder of the firm, tells AgFunderNews a bit more about the company’s interest in agtech.

What’s your thesis around food and agriculture technology?

We believe at Obvious that there is a re-imagination of ag and food happening. If you think about the last 50 years, the mindset of food security has driven a lot of innovation and produced a lot of food, and I believe that in the next 50 years innovations will drive production of a lot of the right kind of food. So that’s where we are focusing. This kind of re-imagination is going to affect the entire supply chain, starting from the soil to farming to processing to distribution, and that’s where we want to play.

In distribution, we believe that as the world moves towards producing the right kind of food, there are going to be new forms of distribution, and local supply chains are going to support that. So we think about on-demand distribution or companies like that in the local supply chain which are producing food without a lot of processing.

You seem to have focused on investing on the alternative protein and nutritional side of food and agtech. How do you see this segment playing out?

We think current farming and processing techniques have been optimized to produce in abundance and have resulted in a culture of mono-cropping, with negative externalities related to environment and health. So we want to focus on reimagining farming and processing so that the needs of consumers — such as for proteins — are met in a way that is also environmentally friendly.

There are lots of potential applications of alternative protein technology. They could be food product-based or ingredient-based. We have investments on both side — Miyokos Kitchen and Beyond Meat. The market is quite huge when you think about the different kinds of proteins that we eat and also about the increasing discretionary spending power of the global population for protein-rich foods. So there is a huge opportunity to fill that growing need.

I think there will be a lot of players in the consumer game, working on building a brand and product portfolio that’s desired by consumers. On the B2B side, can you provide all the properties of traditional protein ingredients, while making sure the costs are much better than the alternative?

Who are the winners? Time will tell, but consumer branding, value positioning, and connecting with consumers on the pricing side will make it more challenging on the consumer side than in B2B.

Are you interested in any technologies that are closer to the farm? If so, which subsectors particularly excite you?

We have not invested there yet, but we are interested due to the issues with monoculture and environmental degradation through intensive farming. 

The soil microbiome is an area of interest to us. We believe that an understanding of genomics and the soil microbiome can help us figure out correlations between soils and a healthy plant, and then maybe we won’t need a lot of chemicals to improve yields.

Another area of interest is ag data where there has been a lot of phase one innovation. Lots of startups deal with probing the use of nitrogen, the existence of pests, water, and so on to help make judgments at the farm level and deal with it in a precise manner.

Innovations will happen for different aspects of the farm. We also have an internal thesis here that data and machines will augment humans to make better decisions. That will happen in agriculture and is already happening with technologies such as Blue River Technology, [the weeding robot company].

Thirdly, we are interested in vertical farming, where in some cases there is not any need for soil, and you can create conditions where you can have a much better product without the challenges of land-based agriculture.

Why haven’t you found anything yet in these subsectors?

We started 2 years ago and we’ve seen lots of investments made by others. But some companies have reached a stage where they will not be appropriate for a seed or Series A round which is where 75 percent of our focus is. We might invest at a later stage and beyond our typical $1 million to $4 million range, as we did with Planet Labs, but it has to be a very high bar with clear leaderships in that particular market. We also need to see clear differentiation in the market.

Are there any subsectors you would not invest in and why?

We are open in our business, and we don’t want to say that we won’t invest in an idea. The only thing is if it’s an R&D level business at a certain molecular level as we don’t have that much insight here. But anything which is tech related,  data related, related to hardware and software, is interesting to us.

Where do you see challenges for food and agtech startups?

On the ag side, I think the biggest challenge and my first question is always: have you been on farms and talking to farmers? Will you make their lives and experience 10 or 20 times better? Sometimes I see that, and sometimes I don’t. On the consumer side, re-imagining processing or distribution; ultimately the clear focus has to be who is the customer and what are the unit economics of the business? Some companies are going after scale and maybe they’ll figure out the unit economics. I like to see a viable unit economics business and a strong hypothesis.

 Have news or tips? Email [email protected]

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