Editor’s Note: Kleiner Perkins Caufield & Byers (KPCB) is one of a growing number of large, established, mainstream venture capital firms that has embraced food and agriculture technology across its portfolio of funds. The $1 billion Green Growth Fund holds investments in Farmer’s Edge, the Canadian big data and farm management tool, and Kaiima, the Israeli seed and breeding technology company. KPCB is also invested in Beyond Meat, the alternative protein food tech company, AirWare, the drones company, and Farmer Business Network, the information and data sharing portal.
As a partner of the Green Growth Fund, Brook Porter keeps a close eye on the growing agtech market and is on the board of Farmer’s Edge. AgFunderNews recently caught up with Porter to hear his views on the development of the sector over the last 12 months.
The big data and farm management segment of the agtech sector is growing rapidly with increasing numbers of options for farmers set to hit the shelves. KPCB has a couple of investments in this space already. How do you think this will play out?
At the end of the day, most industries will have a winner-take-all outcome. When we look at precision agriculture, we see a large number of potential ways to add value to growers with technology. Today there are so many companies going after various elements of that stack of value — from disease forecasting to data management. But the lion’s share of that potential value — over 50 percent — is created by Variable Rate Technology (VRT).
VRT is the ability for a farmer to optimize their use of fertilizer by putting more on fertile ground, and less on lower productivity areas. This helps them to save money on input costs and net a higher yield. The return on investment of this product is amazing. It also reduces environmental liability by reducing runoff and greenhouse gas emissions, which farmers can get paid for today in Canada.
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One of our companies, Farmer’s Edge, leverages satellite imagery and cloud-connected telemetry to deliver a low-cost, scalable version of this precision ag technology and is offering it now in the US, Canada, South America, Russia and Australia.
Once a farmer has all the data collection, transfer, and analysis pieces in place for VRT, there are numerous ways to continue to add value with other elements of the precision ag stack of value — such as disease forecast — but we think VRT is the most logical place to start.
What about the enterprise resource planning (data management) tools for farmers on the market?
I think modern ERP tools are inevitable for the ag industry, and we’ll eventually get there, but I’m not convinced yet that businesses with solely an ERP value proposition will be able to grow quickly. Many farming operations, while sophisticated, still use spreadsheets and clipboards today, or some version of custom software. While that might be inefficient, it works. Switching costs are actually quite high, because farmers have to interrupt their normal operations to adopt a new platform, and it’s risky to bet their business on a new startup that might not be around in one to two years. My sense is that any company that can automatically populate data sets and translate those into ERP offerings will develop faster.
KPCB is invested in Beyond Meat, the technology company producing a plant-based alternative to meat. Are you concerned at all about the controversy surrounding the labeling of some of these alternative protein products?
I don’t think there is any real controversy. However, I do think that what matters most in the plant-based alternatives segment is consumer psychology. There are two camps emerging in the food industry, one of which mostly rejects technology and defaults to wholesome, simple foods. Think of the people in cities who are raising chickens in their back yard; these folks are not likely to want to eat engineered foods, no matter what.
The other camp is pushing the boundaries of food via technology and science. More and more evidence points to the strong health and environmental benefits of reducing meat consumption. For people who want the flavor, texture, and nutritional profile of meat, but without the consequences, products like Beyond Meat are amazing. In addition to being healthier, they should also be cheaper because it requires less grain to produce them than it does meat.
But as we’ve seen from the GMO debates, it’s not always a scientific argument that wins: emotion and psychology play a huge role. Consumers will have to be convinced that these alternatives should be a core part of their weekly diet.
But once consumers are convinced, the industry responds quickly. Today most ag companies are moving away from GMO; not because of the science, but because of consumer sentiment. Another one of our portfolio companies, Kaiima, is playing right into that trend by developing advanced breeding technologies without GMO. We will see growing demand for these types of solutions as consumers increase their awareness of the entire food supply chain.
What do you think about the insect protein market?
I’m not a fan. Back to my point on consumer psychology, I just don’t think consumers are going to be interested in eating bugs or feeding their kids bugs. The promise is a reduction in the core cost of protein, but if it’s not viewed as safe or sanitary, it will never get off the ground.
Is there a role that the government and regulators can and should play in improving the reputation of certain healthy foods?
It’s encouraging to see more and more awareness about health and nutrition from regulators — from state education boards all the way to the White House. Obesity and diabetes are major issues and bear incredible costs for society. However, government bodies are most influenced by the sentiment of their constituency rather than by science, and political sentiment can easily swing with sound-bites that appear to be scientific, but are often times wholly wrong.
In general, I would like to see an increased emphasis on science-based regulation and on transparency. As the industry becomes more open about actual practices, I believe all consumers will benefit.
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