/ What VCs love about regenerative agritech
How do we feed a population of 8bn and counting? That has to be the most pressing question facing the world today.
The answer is multifaceted and increasingly the role of regenerative agri-technologies is becoming central. That is the technology helping to transform the global food system to adequately adapt to — as well as reduce — its greatest threats: climate change, resource scarcity and biodiversity loss.
Developing these regenerative farming technologies requires big upfront costs so VC and impact funds are crucial to their continued innovation and ultimate uptake.
The European Circular Bioeconomy Fund (ECBF) is the first private VC impact fund exclusively dedicated to the cause in the bioeconomy. It invests in growth-stage companies with high potential for innovation, favourable returns and a sustainable impact.
The €300m fund has set out to prove that regenerative agritech presents a dynamic growth market where innovation in the field and financing models will determine the winners.
Here are the categories it thinks are most attractive to VCs.
1/ Biological substitutes
Biological substitutes are technologies substituting chemical ingredients with biological ones. This helps reduce nitrogen emissions, reverse the degradation of soil and support biodiversity.
One example is Aphea.Bio, a biotech based in Belgium, which develops microbial-based biocontrols and biostimulants that serve as natural replacements for chemical pesticides and synthetic fertilisers. They help stimulate crops’ growth, making them more efficient in absorbing nutrients and fighting disease.
“Less than 50% of applied conventional fertilisers are effectively used by the plant. The rest is absorbed into the air as a greenhouse gas or leaks into the soil and groundwater making them toxic,” Isabel Vercauteren, Aphea.Bio’s CEO and cofounder, tells Sifted.
Farmers can’t feed the population under these conditions — so we have to help them adapt.
“With such low efficiency, we end up pumping on more and more, further harming biodiversity and humans,” she says. And yet, despite the evident urgency, “agrotech receives peanuts compared to pharma” — something she attributes to the prevailing understanding of health that wrongly excludes our connection to the planet.
France-based Elicit Plant, is another example, having created a technology that brings about plants’ natural defenses in times of drought.
“Water scarcity is a human induced imbalance between water demand and water supply — and it’s an extremely serious problem worldwide. Soon, there will be billions of humans impacted by the lack of water,” says CEO Jean-François Déchant.
Agriculture accounts for 70% of fresh water’s usage. “Farmers can’t feed the population under these conditions — so we have to help them adapt,” Déchant adds.
The technology — commercialised in 16 countries and protected by over ten patent families — has demonstrated yield gains in over 90% of trials conducted under water stress conditions, with an average increase of 10% and a resulting 3x return on investment for farmers.
2/ Precision agriculture
The second category is precision agriculture. Slovenia-based Trapview, which uses AI and digital sensors to minimise pesticide use and protect biodiversity, is an example of this approach.
Trapview’s chief operating officer Boštjan Božič says that 30% of food is lost to pests (insects, diseases and weeds) before harvest. To secure enough food against these odds, farmers overegg on expensive and damaging inputs like chemical plant protections and machinery.
One case study in France showed that treating apples based on decisions supported by Trapview’s technology reduced the use of insecticide sprays by 50%. Another tomato farmer found his yield margins increased by 2% — this may sound small but it translated into a 20% gain in profits.
They win on their sustainability commitments and the resilience of their supply chain, whilst the farmers improve their profitability.
“This is the difference between a farmer staying a farmer or being forced to leave the industry,” Božič says, adding that livelihoods are one of the measurable outcomes of regenerative agriculture.
“The world hasn’t been so polarised since World War II and the access and availability of crucial ingredients and inputs needed for food production have become limited,” he adds.
Another example is France-based Weenat. President and founder Jérôme Le Roy tells Sifted that through weather and soil sensors and an AI-powered spatial data service, Weenat offers “highly reliable weather and irrigation forecasts to help farmers make smarter, real-time decisions,” optimising processes like irrigation.
“Weenat’s data can help validate claims tied to carbon, water or insurance — key for monetising ecosystem services in agriculture. We’re already working with insurers and cooperatives on this front and really support a stronger remuneration of farmers for ecosystem services,” Le Roy says.
Partner at ECBF Stephane Roussel says that startups like these are “ripe for venture investments.”
It’s where industry meets agritech, she says: “Companies like Doktar from Turkey are working with food and beverage companies with a corporate responsibility angle to equip farmers in their supply chains, for example with precision fertilisation tools to reduce their footprint, meaning they win on their sustainability commitments and the resilience of their supply chain, whilst the farmers improve their profitability.”
3/ Financial support for transition
Other investment opportunities include helping farmers fund the shift to regenerative farming practices. This may be in the form of prepayment of credits or investments in the farm, then monetising the revenue via carbon credits as offsets or rather insets (large companies investing in projects within their own supply chain) —- as is being done by companies and programmes like Klim, Soil Capital and Climate Farmers.
Regenerative agriculture startups whose model relied primarily on carbon credits has been popular with VCs. However, ECBF has chosen not to back these projects due to concerns around the science for soil carbon measurement and reporting, and the uncertainties linked to an evolving regulatory framework for carbon markets.
The end consumers are becoming more aware and are demanding healthier food which ultimately pushes the whole industry to change.
Another way companies and funds fund this shift is to invest into natural assets, like buying land or farms themselves and to fund or operate their transition to regenerative agriculture.
Although many monitoring, reporting and verification programmes are new and relatively small , there is a scope for them to be scaled. Božič welcomes new initiatives for “measurable and verifiable reporting on sustainability” because he hopes “they will help divide the grain from the weed.”
Božič says that Trapview’s greatest competitor is the “old way of doing things because old habits die hard”. But ultimately, “the end consumers are becoming more aware and are demanding healthier food which ultimately pushes the whole industry to change.”
Read the orginal article: https://sifted.eu/articles/regenerative-agritech-vcs-brnd/
