Cassie Doherty, Investment Director at Parkwalk, shares thoughts on how, in a post COVID-19 world, investment in agtech holds the key to a ‘farm to fork’ future free from hunger. A version of this article appeared in Investment Week – click here.
From having our lockdown baking plans scuppered by the lack of flour on supermarket shelves, to seeing images on the news of huge quantities of milk and eggs being thrown away by producers as the shutdown of the hospitality sector hit demand, to reading reports of UK farmers finding themselves short of workers to help pick their crops, we have all witnessed the short-term impacts of Covid-19 on our food supply.
The longer-term implications of the pandemic on global food security are far more shocking. In April this year, the United Nations Food Programme reported that by the end of 2020 the pandemic will cause up to 265 million people around the world to face food insecurity, double the figure for 2019. Meeting the Zero Hunger UN Sustainable Development Goal of providing nutritious food to all the people that need it is going to be even more important in a post-Covid-19 world.
The challenges of Zero Hunger are obviously complex and multifactorial. They range from ensuring resilience in food supply chains and building sustainable models of agriculture that have no negative impact on biodiversity or the climate, to ensuring governments provide mechanisms to get food to the people that need it. What is clear – and highlighted in the EU’s recent Farm to Fork strategy – is that science and innovation has a key part to play in addressing some of the challenges.
With a drive towards ethical investment, fund managers and venture funds are considering the Environmental, Social and Governance (ESG) implications of where they invest their money. Zero Hunger should be a worthwhile fund focus, enabling innovative technology companies to provide science-based solutions. Specialist food and agriculture funds such as Anterra Capital, Pontifax Agtech, and Cultivian Sandbox have emerged in recent years and are investing significantly in the sector. AgFunder reported that in 2019 $20 billion was raised by food and agritech companies, six times the amount raised in 2012. This points to an increasing interest in the sector, but issues remain for companies at the early stage seeking seed and Series A investment, which is often too early for the large specialist funds.
Innovation in agriculture crosses many disciplines, including biotechnology, food science, robotics, sensing, and AI. Recent developments in synthetic biology tools have significant potential to change the agriculture industry. They can be used to produce more nutritious crops, or crops resistant to drought or pests, and also to introduce completely new sustainable approaches to managing pests, diseases, or weeds.
Meanwhile, large agritech companies are changing their business models in response to industry consolidation – there appears to be a shift from mainly internal R&D programmes to working with external partners. This allows access to top science, builds R&D pipelines, and has more similarities with a biotech approach. For investors, this means there means adherence to sustainable principles, but clear routes to market and the potential for returns.
Boasting a strong history of transforming agriculture dating back to the 18th Century, the UK is well placed to develop the new ecosystem. There are positive signs that this heritage is being built upon, with companies relocating to the UK and a number of VC investments in the sector. One notable example is Tropic Biosciences, which has moved to the UK and raised a $28.5 million Series B round in June this year, led by Temasek. The company uses innovative technology to increase yields, but commits to supporting local grower communities, promoting consumer health, and reducing the environmental impact of global agriculture, aligning with ESG principles.
There is also a strong academic research base in the UK, with universities and research institutions such as Rothamsted and the John Innes Centre, and their research and innovation has an important part to play in addressing global food security issues. Until recently there has been a limited pipeline of UK agriculture and food startups, but this is certainly starting to change and there are some great companies solving what were previously intractable problems. At Parkwalk, for example, we have invested in MoA Technology, an Oxford University spinout addressing the global challenge of herbicide-resistant weeds. These weeds are impossible for farmers to get rid of, and substantially reduce crop yields. Unfortunately, there has been little innovation in the sector, and all current herbicides rely on a limited number of mechanisms of action. MoA Technology has three platforms to identify sustainable herbicides working through new mechanisms. For MoA Technology and companies like it in the agtech space, access to funds at the seed and Series A stage is critical to ensuring they can scale to the point of having the right attributes to appeal to a more specialist later-stage investor.
The pandemic has enhanced the need for innovative companies as well as early- and late-stage funds focused on addressing the challenge of Zero Hunger. The impact of COVID-19 agriculture has already been severe, and while the full impact remains to be seen, it is likely to be long-lasting. COVID-19 undoubtedly presents significant challenges to actors at every stage of the global food supply chain – as investors we have a responsibility to also let it be a catalyst for positive change by supporting the innovation that will drive us towards a Zero Hunger future.