10 Billion Mouths keynote, Arama Kukutai (Co-Founder and Partner, Finistere Ventures), shares his insights from Techweek.
New Zealand has long been a major agricultural producer, often lampooned by visitors in the past for having more sheep than people. Today, it is dairy and horticulture that dominate Ag and Food exports in excess of US$37B. Moving up the ranks, technology has become the third most important export sector by GDP value at US$11B according to Infometrics and Callaghan Innovation. And the intersection between the two, Agritech, is becoming a hotspot of innovation activity.
Our recent delegation to New Zealand timed with Techweek New Zealand confirmed that the country continues to produce world-class Agritech startup companies at an accelerating pace, backed by strong public and corporate R&D that exceeds US$500M annually. The industry has moved beyond the traditional R&D funded by universities and the Crown Research Institutes (unique public-private research entities) that traditionally provided the bulk of commercialized research for the farm sector.
There is also a vocal and active angel investor community supporting a growing cohort of Agritech entrepreneurs going global with a diverse range of new technologies. Data from the Angel Association of New Zealand and Ministry of Business, Innovation & Employment reports more than 40 Agritech startups representing about 20 percent of seed activity by deal value in NZ have been created since 2013.
The delegation included global investors, scientists, entrepreneurs and industry giants with a goal of developing stronger ties with New Zealand and global AgTech networks. Experts from Bayer CropScience, Corteva (formerly Dow DuPont Pioneer), CropX, Fall Line Capital, Finistere Ventures, Innovation Endeavors, Ireland Strategic Investment Fund (ISIF), Microsoft, Middleland Capital, Rabo Bank, Radicle Growth Fund and the Western Growers Association met with more than 30 innovative startups, as well as New Zealand Ag and Food players. So what did we find from an investment perspective?
New Produce Breeds –New Zealand’s unique agricultural platform tends towards pastoral farming, which has seen historically strong investment in livestock and seed genetics, as well as emerging companies in the farm software and animal health space. These are being joined now by technologies born from high-value fruit and vegetable industry verticals such as Zespri and their partners Plant & Food Research, whose efforts have created new kiwifruit and pipfruit varieties such as Zespri Gold. We got to try some phenomenal new produce like kiwiberry, an edible skin variety with sweet juice and visual appeal, as well as a hotter-than-jalapeno variety that caught a few of us unawares! The grower industry estimates that proprietary breeds resulting from carefully conserved collections will help power kiwifruit growers revenue to in excess of US$3B in the coming years while land prices can be over US$0.5M per Ha, more than equivalent land in California!
Reducing Farmer Burdens – Automation of labor, given the high cost per hour and availability issues locally, is a hot investment area. Companies like Halter, which offers a cow wearable, aim to reduce farmers’ early callouts by “walking” the cattle to the shed for 5 am milking or ensuring they are grazing the right pastures in field. They join a very strong dairy tech cluster with the likes of Gallaghers, LIC and WMS. Robotics Plus, which was recently funded by Yamaha, is already selling its apple packing hardware in the United States and has an autonomous vehicle in the works for harvesting—and even pollination. With night vision, the bot can work around the clock. Figured and FarmIQ are sophisticated farming financial and ERP platforms respectively with strong support from industry leaders like Farmlands, New Zealand’s largest farm co-operative.
Yet for all the positive progress, there are some major headwinds that could derail New Zealand’s leadership position. With a major reliance on livestock production for dairy and meat, advances in plant-based proteins and cellular food, as well as changing consumer preferences in the protein space all pose an existential threat to the country’s dominant sector. A new government elected last year is intent on reducing the emissions profile of the New Zealand economy, but with 55% of greenhouse gases coming from Agricultural activity, it is clear new technologies and improved practices will be essential to this national goal. However, it is less clear what existing industry players are doing to rise to the challenge. Futurist and kiwi commentator Dr. Rosie Bosworth has been a vocal advocate on the need for a Plan B and deep thinking on the role of new technology, business models and open thinking. In referring to the major investments made in companies like Impossible, Memphis Meats and Ripple, she noted:
"New Zealand cannot afford to overlook the threat from global institutional investors with over US$2.4 trillion in assets - nearly 13 times larger than the size of NZ’s economy - who are now pressuring major global food brands and retailers like Tesco, Costco and Walmart to shift their product portfolios away from animal proteins towards animal-free and plant-based alternatives. The fact we produce quality meat and milk well right now doesn’t necessarily secure New Zealand a place or legitimacy in the future global food system - economically, environmentally or ethically.”
A response is coming from collaboration by farmers, technologists and investors. Agritech New Zealand is a recently formed industry group looking to work at the forefront of these technology, policy and business challenges. Led by energetic husband and wife team Peter and Jacqui Wren-Hilton, they recently held 10 Billion Mouths, the first agritech summit in New Zealand. Bringing together startups with leading agribusiness and international participants, the organization is charting a course for technology innovation to help create not only the most productive farm sector, but also one that is much more sustainable.
Peter Wren-Hilton commented on the formation of Agritech New Zealand: “For many years, New Zealand has demonstrated that it has had all the components necessary to create a significant Agritech ecosystem. However the opportunity has not reached its full potential until now. By bringing together all the country’s major stakeholders - industry, government, research & capital - and building a culture of collaboration, our organization is working to leverage the very real benefits that New Zealand’s diverse agricultural and farming systems offer.”
Perhaps the biggest challenge we saw facing NZ Agritech (and the tech sector generally) is the lack of “connected capital”. While there have been some exemplar deals in recent years in New Zealand, the reality is that the capital gap between seed and venture remains a meaningful roadblock. The government recently announced a new tax credit scheme underlining a strategy to increase New Zealand’s poor private investment record in R&D at 1% of GDP, lagging the OECD average. For pre-revenue companies, however, this won’t move the needle by itself. In addition, the future role of the NZ Venture Investment Fund, the government’s vehicle for seed and VC investment, is not settled, but it seems clear that a reset is needed. Attracting international capital has been steadily improving, but there are embedded challenges that have to be approached more creatively – particularly when considering round valuations versus the United States (lower), round sizes (smaller), and syndicate formation around deals (harder as capital needs go up). The Innovation genome project recently noted New Zealand was ranked second globally in getting new innovation formation – but was well down the rankings when commercialization is factored in. For the burgeoning Agritech investment sector, New Zealand would seem to represent something of an untapped opportunity, and one which is poised to step up, but a helping hand will be needed from government, and the private sector.
A key part of tapping into this opportunity is connecting to markets, partners and channels, as well as investment. You have to go where the capital is – and as we’ve seen in Israel and the EU ecosystem, Agritech entrepreneurs from New Zealand are setting up beachhead locations in the Unites States, Europe and Asia to plug into customer and investor networks. As an example, Finistere has invested in companies like Biolumic and is bullish on the model of unlocking R&D value from public sector investment, with presence in customer and investor markets like the United States. We expect to see this model progress but also think a thoughtful and creative approach is needed from government and the Angel investor networks that are driving most of the innovation spend locally.
The government has recognized its major role in supporting both industry collaboration and R&D, as well as providing responsive regulatory and policy support. When Spacetech pioneer Rocket Lab declared its intent to launch its Electron rocket from rural Mahia, the government needed to develop a Space Agency and relevant regulatory frameworks, which it did in record time. Notwithstanding the admonitions from government to agriculture about owning their role in mitigating water pollution and climate impact, we saw a strong pragmatism around the key role Agriculture and farming plays in both economic and cultural life in New Zealand. It is clear that the government is going to keep investing in R&D to support this sector. There seems to be recognition of a collective effort needed around a vision of more value from Ag and Food in a sustainable way, consistent with a goal to be a premium food producer for the world. Today New Zealand’s 4.5M people feed over 40M; as the demand for high-quality, safe food grows, NZ is well placed to take advantage.
Culture is a huge factor in New Zealand’s attitudes to land and agriculture, and our delegation was exposed briefly but powerfully to the role of Maori as key players in agriculture—not only in the traditional landowning role, but also increasingly engaging in adding value to food and agriculture. Noted Maori entrepreneur Steve Saunders, a founder of Robotics Plus, is also bringing new varieties of heritage germplasm in berries through Miro, a collective effort involving Maori landowners. Saunders noted, “The opportunity for Maori to own IP varieties and the value chain for berries is a first. The creation of high value businesses over Maori land, employing our people and creating authentic indigenous brands is what drives us.”
With the success of kiwifruit and rising global demand for unique varieties, perhaps this venture could leverage the best features of technology, sustainability and culture as NZ aims to reinvent its place as an Agritech superpower. As we saw the power of collaboration is strong in NEW ZEALAND, and this Maori proverb sums this up well:
Naku te rourou nau te rourou ka ora ai te iwi
With your basket and my basket the people will prosper