According to the UN Food and Agriculture Organization (FAO article or 2015 report), the global food system will need to meet a 30% increase in demand by 2025. Further, due to climate change, this will require not just greater efficiency, but also smarter systems — producers must be able to meet changing consumer expectations, and farming itself must be more profitable and resilient in the face of macro-economic pressures.

Fortunately, there is a quiet revolution going on, with more “smart” and innovative technologies than ever to meet the challenge of sustainable food systems.  But even the best technologies alone are insufficient.  Growing concerns about genetic modification, waste, toxins (especially the persistent ones that end up in food, water, and soil), the nutritional content of foods, along with the long-standing issues of effective labor relations and social justice.  And there are interconnections between food, energy and water that directly implicate our choices as they also affect our prospects for abating climate change (2015 FAO report).

These concerns require a portfolio of solutions, starting with increased levels of engagement and education, and this article intends to capture the elements of this portfolio to stir up discussion and debate.  As the world changes, so must our definition of “best practices.”  Some examples:

  1. To transition to a low-carbon future, is there an inherent tradeoff between food and biofuel feedstocks?
  2. When does it make sense to remove the salts and other chemicals from agricultural drainage water?
  3. Is the model of large, centralized farming the best way of satisfying an increasingly hungry world?

Entrepreneurial Innovation and Capital Access

This sector is ripe for innovation.  But if innovations are to gain the support of the public, the ultimate customers, that vote every time they shop, they must be tuned to deliver value and quality, not just profits.  So many new technologies — from drones to big data to “precision” agriculture via sensors — have arrived in recent years, one would think the problems of the past — rampant waste and inefficiency, for example — are happily behind us.  Not so according to the report from the Netherlands-based Rabobank.

This report mentions three keys that will be essential if global food and agriculture is to meet the demand for an increasingly urban population in the next decade:

  1. Strengthen supply chains: A smarter food system will require buyers and suppliers to make new investments and take on new risks in pursuit of new rewards. Success will depend on greater connectivity between buyers and suppliers, sharing data and making joint decisions in real time.
  2. Enable investment: New approaches and technologies entail new risks and opportunities. This will require understanding and support from both investors and regulators, who will need to provide frameworks where technology can be used safely and effectively.
  3. Achieve societal acceptance: consumer concerns include genetic modification and cloning, and data privacy, food waste and nutrition. These concerns should be addressed and taken into account in the change process. Increased levels of engagement and education are required to build a smarter and more sustainable food system backed by public support.

So long as there are pathways to capital to accelerate commercialization, entrepreneurs promoting solutions will flourish. Our experience has been mixed.  Some of the more deserving teams have had trouble raising money from traditional private equity, venture capital and institutional debt sources.  Several of our clients have found new alliances and partnerships through impact investment sources, as well as a new breed of investor working across multiple disciplines.

The goal of sustainable food systems creates a wide tent, ranging from “holistic management” with smarter land use plans, soil health and carbon sequestration technologies, to “biorefinery” models that deliver food, fuel and fiber from certain agricultural feedstocks that would otherwise provide only one of these products while wasting the rest.

The Rabobank report goes on to say that steps are already being taken to address these three keys, citing a sharp increase in capital for smarter food systems (nearly double to $4.2bn this year from last year, which “saw a threefold increase on 2013’s level of investment”).

Further, food and ag companies are making sizeable investments focused on the the three “sweet spots” of farming systems, food processing and trading, distribution and logistics.

Past event on sustainable ag tech innovation and investing opportunities in California held Thu., 7 January 2016 in Salinas, CA (view PDF of agenda and speaker biographies).

Or contact us to participate in private meetings focused on this space.

Daniel Robin
Senior Partner, In3 Group


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