Koch Boosts Ag Biologicals Business with Investment in Pathway BioLogic

US fertilizer manufacturer Koch Agronomic Services recently bolstered its ag biologicals department with the acquisition of a minority stake in Pathway BioLogic, a microbial science company from Florida.

The new equity investment will see the two collaborate on bringing biostimulants to the market. This will help Koch strengthen its biologicals business, which is yet to market its first product, according to Bill Boycott, vice president of biologicals and origination for Koch.

“Working with Pathway will allow us to continue building upon the capabilities we currently have, such as a very strong discovery platform, agronomic expertise and market channels,” Boycott told AgFunderNews. “Pathway brings live microbial technologies, as well as strong fermentation and formulation capabilities. We believe this collaboration creates a very efficient process to build an industry leading portfolio of science-based microbial products.”

Koch Industries, the parent company known for manufacturing petroleum, chemicals, energy and fiber products across a range of subsidiaries,  first turned its attention to ag biologicals in December 2014 when it acquired part of plant science company Mendel Biotechnology.

Mendel’s acquisition was a win for Monsanto, an early investor that had worked with the Californian company to identify regulatory genes. It was also a win for Mendel’s venture capital investors Capricorn Venture Partners, Ziff Brothers Investments, and CFM, which joined the investor line-up in 2007 after Mendel started commercializing its technology.

Koch Agronomic Services invested in Pathway after two years of getting acquainted with each other.

“We had been aware of Pathway for a couple of years and were impressed with their sound approach to science and their entrepreneurial spirit. We began discussing potential opportunities with them last year,” said Boycott.

“Biologicals is a very exciting field right now,” he added. “The entire ag industry is benefiting from innovative approaches to research and creative thought processes. We’re seeing rapid growth driven by real value creation from universities, independent start-ups and well established companies. We believe that our development of fermentation product biostimulant chemistries is one of the exciting new initiatives underway in the sector.”

Pathway was established in 2008 evolving from 20 years of microbial formulation and fermentation technology development, according Michael Gans, co-founder and director of operations at Pathway. It separates itself from others in the market in its work with poly -cultures, a specialty that’s been little understood or accepted for some time, Gans added.

“For years biologicals were not readily accepted or implemented into standard cultural practices, but with technology improvements biological solutions can now be produced with consistency and quality,” he told AgFunderNews.  “We are excited that the industry is now receptive to biological based solutions as a tool to come alongside existing practices and provide additional value.”

While it’s onwards and upwards for the biological industry in terms of wider acceptance of its efficacy in farming, according to Boycott, there are still challenges facing farmers in their adoption of new biological products, according to Gans.

“The greatest challenge farmers currently face is differentiating biological based products within the market. Understanding the difference between science-based products “pure culture production” (products that have been characterized for their ability to have a direct impact on plant growth and nutrient use efficiency) and compost based products,” he said adding that it’s “about time” the biological startup industry took root.

Pathway will use the proceeds from the investment to improve its research and development capability and increase its fermentation capacity. This is the first injection of external capital into Pathway which has been funded by the family of co-founder Stephen Jaeb until now.

“Pathway believes the collaboration with Koch will be the catalyst generating effective microbial-based products impacting the way we grow for generations,” said Gans.

But it might still be some time before biologicals will be as effective on their own as they are used alongside chemical inputs, according to Aki Georgacacos, senior managing director of Avrio Capital, the Canadian agtech VC. He argues that there was a time when the efficacy of these products for agriculture was called into question making the subsector unattractive for investment.

“The pursuit of a hybrid approach is interesting so we are now again looking at some opportunities in this area,” he told AgFunderNews. “There’s an acknowledgement that biologicals using in conjunction with other chemistry may create solutions that are more efficacious and economical than biologicals on their own.”

With growing interest from the venture capital community — and commitments from high-profile investors such as the Bill & Melinda Gates Foundation, it’s likely the ag biological industry will only grow from here.

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Image credit: Natural Resources Conservation Service