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Silicon Valley for Agtech

Is St. Louis the Silicon Valley of Agtech?

November 2, 2017

St. Louis has worked hard to be a magnet for Fortune 500 companies. Nine members of this elite class call the city home, not the least of which is multinational agricultural giant Monsanto.

Walmart has more than 20,000 employees in St. Louis alone. Post Holding Co., which owns 24 of the most recognizable boxed cereal brands in the US, is based in the city and fast casual juggernaut Panera Bread is too.

With these headquarters surrounded by nearly 100,000 farms — Missouri is a major production state for soybeans, pork, dairy products, hay, corn, poultry, sorghum, cotton, rice, and eggs — nationally recognized university programs in agriculture and the sciences, and high-quality research facilities, St. Louis looks like a natural hub for agtech. And that’s before you get into the growing ecosystem of startup-specific resources.

Indeed the city has companies from all over the globe relocating to take advantage of the wealth of resources at hand, but the city also suffers from an exodus of companies that reach a certain point, according to a local venture capitalist.

“In the agtech community here in St. Louis people have long been frustrated with startups who raise money, gain traction and then leave for the coasts,” says David Russell, venture partner at Lewis & Clark Ventures, which has a $25 million fund to invest in agtech, on top of its $78 million main fund and an additional $25 million for healthcare investments. 

Abundant farmland in the state of Missouri and the greater midwest may help with this exodus, but lack of broad acreage hasn’t stopped many a successful agtech startup from finding a home on the coasts. The Climate Corporation, Monsanto’s flagship $1 billion agtech acquisition that’s credited with sparking venture capital interest in agtech, never left the Bay Area in favor of Monsanto’s headquarters.

Why St Louis?

Despite this potential for startups to jump ship at a later stage, the agtech ecosystem continues to grow, and there are myriad reasons to launch businesses from St Louis.

One of the most obvious is an intangible midwestern friendliness and support for homegrown technologies, says Vijay Chauhan of BioSTL, an organization charged with promoting the life sciences in St. Louis. BioSTL recruits international companies to St. Louis through its GlobalSTL initiative and has recruited five Israeli Agtech companies to set up US headquarters in St. Louis in the last two years.

“Silicon Valley felt like a revolving door. St. Louis felt like a wedding party,” he says of his early experience as a cofounder of Arvegenix, a startup developing pennycress as an off-season crop with biofuel applications for corn and soy growers.

The CEO of one particularly successful agtech startup — Benson Hill Biosystems, a computational biology startup democratizing access to breeding and genetics tools with $35 million in funding under its belt — says St. Louis has the whole package.

“Every agtech startup – particularly one focused on the biology, not just the technology – needs three things: talent, infrastructure, and capital. At the time we founded Benson Hill and were getting it off the ground, St. Louis was the only geography that supplied all of these ingredients,” says Matt Crisp.

The Meaning of Monsanto

Before universities, and startup support systems, what makes St. Louis an agriculture town is its large corporate residents. The North American headquarters of international agribusiness and food ingredient company Bunge is in the city along with international animal nutrition company Novus.

But it is the presence of Monsanto’s global headquarters in the city that can give agtech startups a leg up. Constance Bowen of agtech accelerator The Yield Lab, says that apart from Monsanto’s role as an investor — through acquisitions and through its venture capital department Monsanto Growth Ventures — the concentration of talent at Monsanto feeds startups in various ways.

“Long-time Monsanto employees are incredibly supportive of local agtech entrepreneurship, donating their time and, in many cases, investing personally into agtech,” says Bowen. “Additionally, a lot of their research and talent ends up moving into the startup world.”

Plastomics, she offered as an example, is a local biotech company addressing multiple pain points in genetic engineering, founded by a Monsanto alum.

New Leaf Symbiotics is another. The 18-year-old company closed a $30 million Series C round led by Monsanto Growth Ventures (MGV) in September with fellow St. Louis resident Lewis & Clark Ventures also participating.

NewLeaf’s strong ties to Monsanto are also deeper than just funding. Last year it hired a Monsanto microbiologist as vice president of research and development. A Monsanto district sales manager also joined NewLeaf as manager of field biology and agronomy 2016.

Universities Train the Talent

A great agriculture university is just as important for its partnership capabilities as it is for the students it produces. Talent in the agtech space is often painted as a choice between real agriculture experience and tech skills. In fact, Robert Fraley himself, Monsanto’s chief technology officer, told AgFunderNews that when it was looking for engineers, statisticians and mathematicians to build out the data science capabilities of The Climate Corporation, it was quicker to find the right talent in Seattle than St. Louis.

But that is not a universal sentiment. When James Presnail sought to open up a St. Louis office for Israeli biotech company Evogene, he needed to build a team from scratch. The DuPont Pioneer alum told AgFunderNews that he was pleasantly surprised by the recruitment pool, pulling staff from the University of Missouri along with Monsanto and the local USDA office.

Josh Ellis, managing sales director of SMART!, an Israeli fertilizer management software startup, was especially impressed by the personal farming experience that local candidates had to offer.

“Our [tech] talent pool is in Israel. What we’re looking for here is agronomic support. The students relate because they come from that place,” says Ellis.

Lincoln University and the University of Missouri are both land-grant universities in the state of Missouri with strong agriculture programs. Washington University in St. Louis has the seventh-ranked research medical school in the country — which teaches skills that Russel points out are often translatable to agriculture.

The Danforth Draw

Functioning almost like a large land-grant university, the Donald Danforth Plant Science Center, a nonprofit research center, is the physical nexus of agtech innovation in St. Louis. The center has office space where several agtech startups are based, and it also hosts the annual Ag Innovation Showcase where Larta Institute, Center itself, and adjacent Bio Research & Development Growth (BRDG) Park select a group of early-stage startups to present their technologies.

The Center has nearly 200 scientists on staff and counts it research foci as basic plant science discovery and technology development, food security crop improvement and sustainability, and sustainable bioenergy. It has a yearly budget of $30 million and sustains its research through grants and its endowment.

In January, The Bill & Melinda Gates Foundation awarded a three-year, $6.1 million grant to the Danforth Center to expand and accelerate the development and deployment of improved varieties of sorghum for smallholder farmers.

More recently in October, the Center received a five-year $16 million grant from the US Department of Energy (DOE) to identify new genes and pathways that contribute to photosynthesis and enhanced water efficiency in sorghum for use in energy production.

Also in October, the Center was granted $3.4 million over five years from the National Science Foundation (NSF) to improve the productivity of maize. This is a just a sampling of the grants the Center receives. But what startups find most helpful are the Center’s lab facilities available at the Bio Research & Development Growth (BRDG) Park, adjacent to the main Danforth campus.

“The Danforth Center facilities are top notch in the plant sciences and enable small companies to realize a favorable capex-lite model to access critical laboratory functions and greenhouse capacity on an as-needed basis,” says Crisp.

Startups told AgFunderNews that being able to rent space and researcher time in Danforth was a huge draw to the city of St. Louis and allows them to iterate and test their technologies in a much more affordable and flexible way.

“We take great advantage of being right next door to the Danforth because of the expertise, but also because of the facilities,” says Evogene’s Presnail. “We have the greenhouses, the growth chamber, the laminar flow hoods — we didn’t have to pay any capital costs to put steel in the ground to have that available to us at an incremental rate. That is an amazing advantage that allows us to punch above our weight.”

Ellis of SMART! says that the facilities were a major deciding factor for choosing to open his US base in St Louis as it gave him a cost-effective way to perform small trials for specific clients.

The center also offers a weekly science seminar and periodic discussion series to the public. Larry Page, senior associate at Lewis and Clark, says that its outreach work is helpful in providing education about new technologies and new science.

“I feel that the Danforth has really taken the lead here in St. Louis in caring about that [consumer acceptance],” he says.

Local Grant Funding Available But Future Unsure

Agrifood tech startups have historically had many places in St. Louis to look for early-stage funding, but cutbacks at the state level may make for a more challenging future.

In April, Missouri governor Eric Greitens proposed slashing the state’s Missouri Technology Corporation (MTC), a public-private-partnership that co-invests in local startups often matching funding they find elsewhere. He proposed cutting funding to the MTC to just $5 million in 2018 from $23 million. A proposed budget bill in the Missouri house took it even further, proposing just $2.5 million for the organization. In September, the governor proposed bolstering the MTC by selling bonds and turning it over to private management. The final budget approval will take place next year, but the back and forth is not inspiring confidence in St. Louis startups.

Benson Hill’s Crisp has been a vocal defender of the organization, speaking to St. Louis Public Radio and AgFunderNews about its importance. According to the radio station, the MTC has co-invested about $35 million in nearly 100 startups since 2011.

“MTC played an important role early in our life cycle,” he says.

Apart from the MTC, several other organizations may be able to help fill the funding gap. In June, Kansas-based agtech venture development organization TechAccel announced plans to open an office in St. Louis at the Danforth Center. The organization typically aims to find research and opportunities in agriculture and animal health from universities and commercialize them into businesses. It is funded by high net-worth individuals and family offices and calls capital to fund specific projects.

In this partnership with the Danforth Center, TechAccel will provide grants of $250k to researchers and entrepreneurs to demonstrate proof-of-concept or commercial feasibility studies with principal investigators at or affiliated with the Danforth Center. Projects under this program will be expected to produce license-ready technology, processes or products, or new spin-off companies, and TechAccel will share any investment returns with the Danforth Center.

The partnership’s first “Path to Commercialization” grant of $60,000 will fund a project to demonstrate a sprayable technology to apply RNA interference (or RNAi) technology in a biopesticide targeting the Diamondback moth, which attacks cruciferous vegetable crops like broccoli, brussel sprouts, cauliflower, and cabbage.

In 2016, St. Louis County’s Plant Science Innovation District, the area surrounding the Danforth Center, was given a new name: 39 North. The title comes from the latitude along which the center lies. Covering some 600 acres, 39 North will include the region’s top agtech and science companies, including big names like Monsanto, Donald Danforth Plant Science Center, BRDG Park, and more. The 10-year development project received a $400,000 grant to fund the new effort and will require a complex mix of funding sources going forward.

The Yield Lab and Other VCs Bring Extra Support

The Yield Lab, one of agtech’s first startup accelerator programs, is also a major support system for early-stage agtech startups in St. Louis.

“We came about because there wasn’t enough funding in the space. It was very difficult just three years ago. There weren’t really early stage agtech options,” says Bowen.

In 2014, The Yield Lab formed a partnership with Arch Grants, a nonprofit, economic development organization with a mission to create an entrepreneurial culture and infrastructure to build successful companies in the St. Louis region.

The accelerator sources applications from all over the world and requires some presence in St. Louis, but not full-time residency. The Yield Lab also has an office in Ireland. According to Bowen, 45% of the firm’s portfolio companies are from North America, the rest are international. Three portfolio companies in its most recent cohort are from St. Louis.

“This is an easy place to start because it’s cheap here. It doesn’t make sense to establish yourself in a more expensive place that’s farther from your customer,” says Bowen.

The Yield Lab offers startups $100k in return for negotiated equity and a year-long program including mentorship, networking, and office space.

Other active growth stage funds in St. Louis focusing on agtech investments include Biogenerator, Cultivation Capital, Prolog Ventures, STL Partnerships, and Lewis & Clark Ventures

Though Lewis & Clark isn’t exclusively limited to Midwestern companies, it evaluates every deal coming out of St. Louis.

“I’ve been here 19 years and the excitement I’ve seen in the last three or four years is incredible. Having a fund specifically for ag here will drive it. Funding helps,” says venture partner Russell.

And local case studies prove out the theory that St. Louis looks out for its own. In March, Arvegenix, a Yield Lab alum, raised a $2.4 million venture round from a laundry list of St. Louis investors including The Yield LabCultivian CapitalMonsanto Growth Ventures, Monsanto lawyer Michael Roth, the St. Louis County Port Authority, cleantech venture firm Prelude Ventures, life sciences venture firm Prolog Ventures, the aforementioned Missouri Technology Corporation, BioGenerator, and St. Louis Arch Angels.

Does all of this make St. Louis the leading ecosystem for agtech startups? What do you think? We want to hear from you! Email [email protected]

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