How agri-tech innovation in NZ can help solve the world's most pressing problemsby Peter Griffin
A Silicon Valley-based venture capital firm run by a Kiwi looks for agri-tech solutions to global problems.
By 2050, the world will need to feed 10 billion people. That will require a 70 per cent increase in current food production and a leap forward in innovation as significant as Norman Borlaug’s green revolution of the 1950s and 1960s, which massively increased crop yield and is credited with saving hundreds of millions of people in the developing world from starvation.
We will literally have to do more with less, a situation that is fueling an investment boom in cutting edge agri-tech companies – estimated at US$735 million last year alone by analyst group PitchBook. Now a Silicon Valley-based venture capital firm run by a Kiwi is opening an office in Palmerston North to tap our own agri-tech industry for answers to that existential problem.
“I have a passion for what we can do here. There's a lot of great technology and science that is not being commercialised,” says Arama Kukutai, the co-founder of Palo Alto-headquartered Finistere Ventures.
The pioneering agri-tech investor has taken stakes in companies from Ireland to Israel, but also has a strong weighting of New Zealand companies in its portfolio, thanks to Kukutai’s roots in Ngaruawahia and long association with the New Zealand agricultural sector.
Zeakal, BioLumic and Invert Robotics are among Finistere’s local investments, with the company often leading a group of investors who bring international networks and industry links, as well as money to the table.
Beyond meat substitutes
Finistere, says Kukutai, is on the hunt for innovations that can disrupt sectors, not ‘me too’ ideas. That means less of a focus on plant-based meat alternatives, epitomised by the likes of Beyond Meats, which listed on the Nasdaq stock exchange last month, or New Zealand’s own pea protein-based chicken substitute producer SunFed.
“We are looking at novel technology in ‘protectable’ areas,” he says.
“We are doing some work around molecular proteins and in algal protein production. There are algal compounds that have the effect of sweetening. They could be replacements for sugar or synthetic sweeteners.”
Another area of focus for Finistere is on technologies to help reduce food waste. US supermarkets alone lose US$15 billion annually in unsold fruit and vegetables, according to the US Department of Agriculture.
“From field to farm, as well as inside the supply chain, waste is a massive issue,” Kukutai says.
Finistere has invested in Danish company Telesense, which uses sensors to monitor the contents of grain elevators, where a year’s inventory of food can be stored at any one time.
“When you think about all the inputs that went into producing it, to waste any of it adds another environmental problem. It's another way of addressing food security,” says Kukutai.
Protecting crops with alternatives to traditional pesticides and herbicides is also another area of focus, particularly as agriculture would need to adapt to the impacts of climate change.
Our own burning platform
Kukutai is also particularly interested in innovation to reduce agricultural greenhouse gas emissions, which he describes as a “burning platform”, given that methane and nitrous oxide emissions from agriculture make up around half of the country’s total greenhouse gas footprint.
“There are longer-term structural issues including the fact that we are so heavily reliant on nutrients to supply those protein businesses, like dairy,” he says.
Again, molecular science could play a role in finding alternatives to traditional fertilisers such as synthetic nitrogen and phosphate, making our farming sector more self-sufficient, cutting emissions and reducing the impact on our waterways.
"It is the technology that could potentially disrupt the entire nutrient chain. In terms of reducing run-off, in terms of precision agriculture technology, we could start to see new microbial chemistry really make a dent in fertiliser production.”
He keeps a close eye on New Zealand’s long-running scientific efforts as part of the Global Alliance to reduce emissions from cows and sheep. It was clear no silver bullet from those efforts would emerge in the short term, but Kukutai says that New Zealand is playing a role internationally that outstrips its share of global agricultural output.
“We are making a contribution already, there's a necessity for it. We need to be smarter about scanning for technologies that could be rolled into our solutions. It could be a combination of technologies from different sources.”
Start-up funding boost
Missing too, locally, is capital to fund innovative start-ups and the novel technologies coming out of our research institutions. Last month’s Budget revealed a new $300 million fund, using contributions earmarked for the New Zealand Superannuation Fund, to address a ‘capital gap’ facing start-ups worth $2 million to $15 million.
Kukutai says that was a welcome move, but it’s still modest considering US$130 billion of venture funding went into US start-ups last year alone, surpassing the dot-com boom.
“At the same time, there are 450 series-A start-ups in Israel in agri-food,” Kukutai points out.
“We’ve been in one of the largest boom periods of venture investment ever. New Zealand really missed that wave. We were structurally unprepared for it.”
What our agricultural sector does have is a great international reputation and areas of genuine leadership, including in livestock and pasture productivity, genetics and horticulture and process innovation in the dairy sector, which accounts for around three per cent of global dairy production.
Fat, happy and complacent
During a discussion during a Tech Week event held in Tauranga last June, Kukutai described our dairy sector as “fat, happy and complacent”.
The sector had done a great job at increasing productivity but hadn’t focused as heavily on changing nutritional needs and improving sustainability.
“We produce enough calories, but we don't produce enough of the right calories,” he says.
After a tumultuous year, Fonterra is “making the right noises” about investing more in innovation. In February, the dairy co-operative took a stake in Boston-based Motif Ingredients as part of a US$90 million financing round. The biotech company uses fermentation of genetically engineered yeasts and bacteria to recreate proteins from dairy, eggs and meat that could be used to create alternatives to animal-based products.
Fonterra is late to the alt-protein game, but Kukutai says it's an interesting move to watch.
“The discovery of new knowledge and commercialisation of science is inherently a process that takes time and sustained investment.
“Fonterra has a new CEO and there's some clean-up to do in the capital structure of the company. But the Crown Research Institutes and Callaghan Innovation also have their role to play in improving the efficacy of their scientific research.”
While Motif and many of its rivals are experimenting with genetically modified
organisms (GMO) to come up with consumer-pleasing meat-free protein alternatives, New Zealand’s stance on genetic modification (GM) severely limits scientific efforts to pursue similar efforts here.
“It is difficult to jump through the hoops here,” admits Kukutai.
Focus on the consumer benefits of GM
“But there's a big shift occurring.”
Growing acceptance of GMOs would come with more uses of GM that had direct benefits to people’s lives.
“The average consumer can’t relate to a herbicide-resistant crop, there's very little connection to what is in it for them,” he says.
The benefits of GM were most easily identified when it came to human health and pharmaceuticals, he adds.
“Does anyone bring up the fact that insulin [from recombinant DNA] is genetically modified? Of course not, if your life is at stake.”
Finistere is researching the potential of genetic modification and more precise gene editing tools like CRISPR cas9 for a variety of applications, including crops that absorb more greenhouse gases and are drought-resistant.
Palmerston North-based BioLumic, which Finistere invested in last year, is a cutting-edge plant biology company using non-GM methods to improve plant productivity.
“We'd never come across another company that was using ultraviolet light to manipulate the genetic performance of a plant,” he says.
“It's phenomenal. Instead of doing genetic engineering of the plant, they are effectively activating genetic responses using light. It started with seedlings and they are now doing work with seeds.”
BioLumic subsequently received a $2 million investment from Canadian company Canopy Rivers, which is interested in applying the UV treatment to improve the yield of cannabis crops.
The new Palmerston North Finistere office, based at business incubator and co-working space The Factory and led by entrepreneur Dean Tilyard, will scout for similarly disruptive technologies to invest in.
The task of feeding those 10 billion mouths in 2050 without trashing the environment is very much front of mind in all of these investments. Finistere has joined former Google chairman Eric Schmidt and his own Palo-Alto-based investment company Innovation Endeavours, in creating Farm 2050, an ag-tech consortium that includes big agricultural players such as Bayer and Du Pont, as well as banks and tech companies Microsoft and Google.
“We are trying to get healthy, high-quality food that's affordable,” says Kukutai.
“But we also don't want massive externalities impacting the environment and our ability to survive in the future.”
New Zealand agriculture faces significant headwinds in the form of changing consumer tastes and increasing regulatory compliance as health and environment factors are increasingly prioritised.
“There's push back by the consumer that the farmer and everyone up the chain have to listen to,” Kukutai warns.
“They’ll be punished if they don’t.”
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