Silicon Valley financiers look to agri-tech for next boom

New technologies that promise to change how food is grown, transported and sold are attracting increased interest from the kinds of investors that have fueled Silicon Valley powerhouses.

The money involved in US food startups is still small compared with internet companies. But venture capital (VC) investment in agriculture and food soared 54% to $US486 million last year, according to Dow Jones VentureSource.

Monsanto, Bayer and other agribusiness giants have launched their own VC initiatives, and investment managers have raised funds dedicated to food and agriculture technology.

Private equity firm Paine & Partners, for instance, raised $US893 million in January for investments in boosting productivity in areas like protein production and food safety, according to its president, Kevin Schwartz.

Driving the investments are a combination of cheap wireless technology, improved tools for collecting data and monitoring crops, and budding entrepreneurs looking to address new market demands and feed a growing global population. 

Increasingly health-conscious consumers also are scrutinising what is in their food, pushing vendors to boost the transparency of their supply chains.

“Agriculture is the last frontier for a lot of different technologies,“ says Roger Royse, a Silicon Valley lawyer who started an agricultural technology conference in the San Francisco Bay Area two years ago.

Here are five key areas drawing interest in the food-investment wave: 

Precision agriculture: Farmers are starting to harness the kind of intricately detailed and up-to-the-minute data about production costs, speed and output that have become standard in many US factories. Corn and soybean farmers in recent years started adopting such “precision agriculture“ techniques to make better-informed decisions, and it is spreading throughout the sector.

AGERPoint has adapted a laser-scanning technology used in architectural work to monitor Florida orange groves. Positioned on a small truck that can cover 300 acres a day, a mobile scanning device analyses how light reflects off trees to determine everything from the height and density of their canopies to which oranges or trunks are starved for water or afflicted with diseases or pests. It yields a map that some farmers are using to more precisely apply water, pesticides and fertiliser and treat ailing trees.

Indoor farming: The amount of US farmland isn’t growing, so entrepreneurs are starting to farm up. Indoor farms are popping up, arranging dense rows of leafy greens on to shelves layered atop each other in former warehouses and other buildings across the country. 

Shipping containers, repurposed by Freight Farms, are packed with LED lights, sensors and hydroponic systems to produce lettuce and herbs, and now are appearing in vacant lots and alleys. 

The sealed containers can yield about 500 heads of lettuce a week, year-round – even in Minnesota and Canada, where some of the 25 units sold so far by Freight Farms now operate. 

Food safety: A burgeoning array of companies are hoping to benefit from a new mandate for more stringent and consistent food safety testing and tracking, something on which food companies currently spend billions every year. They include South San Francisco-based Icix North America, which develops software to help food retailers track the route of products to market through suppliers and shippers. Invisible Sentinel, based in Philadelphia, is rolling out systems designed to quickly check food and beverages for pathogens like salmonella and listeria, incorporating handheld indicators resembling a pregnancy test.  

RapidBio Systems says it can cut hours out of the process for testing leafy greens and other foods for various toxic pathogens through its hand-held device that can do it in minutes where the food is harvested and processed.

Alternative foods: Younger consumers are warming to healthier and distinct fare, and concerned more about the way food animals are treated and the water, land and other resources consumed in food production. So investors are betting that foods with alternative production methods will become hot. 

Hampton Creek, Impossible Foods and Beyond Meat are some of a host of startups churning out foods like burgers and mayonnaise using plant-based ingredients such as yellow peas and sorghum instead of animal proteins. Modern Meadow is even making animal protein in a lab from animal cells, while Rosa Labs is formulating a nutritional drink called Soylent from vitamins, minerals and other nutrients to replace outright the need to chew a well-balanced diet.

They say their production methods can taste just as good, obviate animal welfare concerns and make food production more efficient and environmentally friendly by consuming less water and other resources than animals. 

Farm robots: Much of the picking on produce farms falls to humans. Harvest Automation, whose founders included inventors of the Roomba automated vacuum, believes robots could help grow more berries and vegetables at a lower cost by outsourcing some of the work to self-guided machines a bit larger than a five-gallon drum.

Harvest, which already has 30 customers using its HV-100 robot to manage potted poinsettias and mums in the $US14.5 billion US nursery business, now has an eye on produce, where chief executive John Kawola says potted plants managed by robot fleets could enable about 50% more plants to be grown per acre.