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Thiel-Backed Breakout Ventures Invests in Phylagen $14m Series A with Cultivian, AgFunder For Microbe-Based Traceability

February 14, 2019

Microbiome data analytics company Phylagen has raised a $14 million Series A round led by Peter Thiel-backed Breakout Ventures, agrifood tech venture pioneer Cultivian Sandbox, supply chain innovation fund Working Capital with participation from AgFunder.

3M Ventures, Dolby Family Ventures, Duck Investors, Blackhorn Ventures, J-Angels, Western Technology Investment, and Arden Road Investments also invested.

Phylagen has found a unique way to create value in one of science’s newest frontiers in the microbiome by weaponizing the dirt, dust, dander, and filth around us against pervasive fraud and human rights violations in the global supply chain.

Microbe Fingerprint

The San Francisco-based startup has developed an analytics platform that catalogs samples of dirt, dust, and other matter from various locations around the world. Every location on the planet has a unique colony of naturally-occurring, invisible microbes, essentially creating a genetic fingerprint unique to each particular place.

Tapping recent advances in bioinformatics and machine learning, combined with rapidly declining costs for DNA sequencing, Phylagen has digitized these microbial fingerprints and cataloged them in a microbiome geo-knowledge base that can be queried by companies that want to make sure the goods they’re sourcing aren’t imposters.

“For us, Phylagen represents the ideal venture investment, with an incredible team led by Jessica Green — a globally recognized expert in microbial environmental fingerprinting and a TED Fellow — who have developed category-defining technology that is applicable to large markets across several multi-billion dollar verticals,” said Michael Dean, AgFunder founding partner. “We believe Phylagen has the ability to revolutionize product traceability and provenance across the food system.”

Phylagen is applying its platform first to the apparel industry, where a significant proportion of materials and goods are sourced and manufactured in unauthorized locations that often have poor working conditions, unfair wages, reduced product quality, and greater natural resource depletion.

“The first service we are offering is for brands in the retail and apparel space. Brands and consumers want to know that goods aren’t being made in sweatshops. One-third of our apparel comes from unauthorized factories where slave labor or toxic working conditions are more likely to persist,” Phylagen co-founder and CEO Jessica Green told AgFunderNews. “There is no good way of assuring that clothes or other commodities come from a trusted supplier or country of origin. Brands have tried using RFIDs or taggants to track goods, but these can easily be cheated.”

By taking samples from manufacturing environments around the world and turning it into genetic data, we can create a barcode for a particular location. Samples of product shipments or other goods traveling through the supply chain can be cross-checked with the genetic barcodes to see if the items really came from the sender that’s on the shipping label.

This novel application of microbiome-based technology was one of the primary things that caught Cultivian Sandbox Ventures’ eye and compelled them toward investment, managing director Dan Phillips told AgFunderNews.

“Rather than trying to understand how a microbial community will affect biological processes in a living organism, they are taking this data from the microbiome and through research showing that those microbial communities differ around the world they are able to determine where things came from,” he explains. “There is an artful simplicity to what they are doing.”

The funding will be used to expand Phylagen’s microbial forensics service and to grow its microbiome database. This involves making new hires on both the business side and the research side of the company.

Food is Phylagen’s Next Frontier

At its core, Phylagen’s service is product agnostic. Whether the shipping container contains hoodies, cocoa beans, or AirPods, the microscopic particles bespeckling the box will tell where the goods came from and whether the sender has some explaining to do.

“There are so many different agricultural goods for which Phylagen could have a use or some value and that’s something we find as we talk to more and more people in our network,” Dan Phillips, managing director at Cultivian Sandbox Ventures, told AgFunderNews. “Without fail, someone we introduce the idea to immediately identifies multiple products or goods that the technology could apply to and we rapidly had several dozen potential opportunities. Phylagen is aware that they can’t pursue them all at once.

From seafood to coffee to palm oil, the food supply chain is rife with horror stories chronicling slave labor conditions, sex trafficking, and environmental degradation. Consumers are becoming increasingly aware of the negative externalities that some of their favorite daily food items cause clear across the globe and major corporations are listening. Unilever has made efforts to implement greater transparency in its palm oil supply chain, a crop that has been linked to deforestation and substandard working conditions. Walmart has an entire program dedicated to responsible sourcing.

With food-focused investors on board like Cultivian Sandbox Ventures and AgFunder, there’s no doubt that Phylagen has mapped out a trajectory for tackling traceability in the food system.

“As a first step, we are working with one of the largest North American brands on packaged food,” says Green. “We think our investors are excited by the possibilities. There are so many different applications of a microbiome platform in agriculture, not only just in provenance and understanding the origin of food, but also being able to mine data to gain insight around food quality, food safety, and other performance metrics.”

This could also include sussing out whether a farmer used certain agricultural practices or products in her operation. Not only would food manufacturers and retailers be eager to doublecheck that their suppliers complied with certain requirements, but certain federal and state agencies would be eager to get their hands on that data as well. Soon, enrollment in farm support programs like crop insurance and the Environmental Quality Incentives Program (EQIP) may be contingent on providing scientific evidence that you are farming in accordance with the program’s rules.

“More work will need to be done here, but it’s not hard to imagine that Phylagen would be able to authenticate certain farming practices, like how something was grown, whether it was grown with a certain pesticide or other things that might impact the microbes that are on a given plant or food,” says Phillips.

The Traceability Battlefield is Getting Crowded

To date, companies have had few tools to know for certain whether suppliers are abiding by ethical and sustainable practices. Blockchain has been a frontrunner in the technology-based crusade to lift the veil between suppliers and purchasers, but its potential applications for addressing other aspects of the food system like inventory management have fragmented efforts to see whether it can make sourcing more transparent.

Green is not aware of any other companies using naturally occurring microbes as a traceability solution. And when it comes to blockchain, she sees her product as offering greater assurances.

“We are familiar with digital traceability tools like blockchain and the reason we don’t see blockchain as a competitor is because of any type of digital traceability solution requires having trusted input data, particularly at the source or beginning of the supply chain. So we see what we are providing as being essential to any type of traceability solution,” she explains.

Phylagen’s closest comparison is probably SafeTraces, which manufactures biological tracers that are invisible, edible, and odorless barcodes that food producers and processors can apply directly to food with a spray. The seaweed-based DNA tracer or tag can be used to determine the provenance and qualities of food for verification throughout the supply chain. They can also be applied to equipment to ensure sanitation but this solution requires supply chain actors pay for and apply a tracking media that the natural environment ubiquitously offers for free.

Instead of categorizing Phylagen as a microbiome startup, the VC views it as a supply chain traceability and transparency technology, where there are plenty of other tech-focused startups in play including farm management software, enzyme-based pathogen detection kits, DNA tags on individual food items, and transparency-focused digital marketing tools.

Putting Phylagen’s microbial fingerprint database to use is not without its challenges. From a logistics standpoint, the company will have to come up with a way to collect and receive samples for vetting.

“If they work with large global brands or global agriculture companies, it will require substantial sample and collection work,” says Phillips. “But I think they are being thoughtful about how to form partnerships and how to leverage partners that already have existing testing or sample collection capabilities.”

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