Navigating the Valley of Death

Adapted from a keynote presentation delivered by TechAccel President and  CEO Michael Helmstetter, Ph.D., at the 2017 InvestMidwest Forum.

You may have seen some of the numbers that explain the TechAccel focus:

  • By 2050, we’ll have more than 9 billion people on the planet
  • That means we’ll need 70 percent more food than we produce today
  • We don’t have access to 70 percent more land – the U.N. Food and Agriculture Organization (FAO) reports that added farmland can produce only 20 percent of the additional food needed and 10 percent will come from cropping intensity
  • 70 percent of the need will have to made up in technology innovation.

The Gates Foundation, the United Nations, the Center for Food Integrity, even the Office of the Director of National Intelligence all say the same thing. The suite of technological options need to be as broad as possible, enhancing productivity and sustainability,ranging from new plant varieties and animal breeds better adapted to changing conditions  to farming systems with improved water- and labor-saving technologies to reduce losses and waste.

It’s one of the most significant threats the world faces before you even consider water concerns, global climate change and meeting the dietary demands of a growing middle class.

Compounding the challenges is a steady decline in R&D spending. Industry R&D trends, in history, typically parallel federal trends. This is despite the extraordinary high rates of return in agricultural R&D. The under-investment in agricultural R&D in many developing countries has continued. So, basically, we need to do more with less.

More food with less land, more innovation with less funding.

 Now let’s review the normal trajectory from basic research to commercial product.

Innovators and investors alike routinely claim that a funding gap or “Valley of Death” exists between basic research and commercialization of a new product. The Valley of Death most often occurs when public investments are made in very early stage research without sufficient attention to the likely investment needs and decisions at later stages of the innovation process. Academics are great at discovery but they are not so good at commercializing these ideas – as many as four in five technologies fail to cross the Valley of Death.

Another piece of this valley is seen through the lens of Geoffrey Moore, Stanford University business professor and author of the best-seller “Crossing the Chasm,” about the challenge of an innovation reaching market adoption. It’s costly to cross the chasm between early adopters and mass market acceptance, and it often happens at the same low point in cash flow cycles.

If you layer the technology lifecycle with the market challenges and the funding challenge, you see they all align. What emerges is the Technology “Valley of Death” aligns with the Cash Flow “Valley of Death.”

There’s also a gap in focus between public and private sector investments. Public investment typically leans toward early, high risk R&D and basic research. Private investors make investments in businesses that emphasize strong management teams and products, not technologies.

It’s a pretty ugly picture when you go back to the grand challenge for agriculture and the successful innovation needed to meet that challenge.

That’s where TechAccel comes in, with a business model to change the normal trajectory.

We are not an accelerator. We are a Technology and Venture Development organization focused on advancing Agriculture and Animal Health Technologies, deploying capital and research expertise.

In some cases, it is about bridging the innovation gap from discovery to commercialization. We help with advancing and de-risking stranded or stalled technologies. These exist at universities, where basic research dollars are exhausted and the technology isn’t advanced enough to be picked up for industry development; also at strategic global industrial firms, where products stall if there’s a high technical risk profile.

In other cases, it is about adjacencies, where we can apply a new innovation or technology into a related market or product. We’re willing to share the risk of moving that technology into an adjacent swim lane.

We call our approach Equity+ (read: Equity-PLUS). Our business model is informed by the pain points and adjacencies of Industry leaders. We are allied with a strategically selected pool of the top agriculture and animal health universities and research institutions to help deliver the best possible technology derisking and advancement research.

To move new discoveries to the marketplace, private industry not only needs to make investments, but also must learn about the discoveries that scientists have made in their labs and bring those ideas into a marketable form. Equity PLUS Science Advancement.

That’s our approach. We work closely with the emerging company and the forming syndicate to determine if our model can provide value to the relationship and contribute to the ultimate success of the start-up.

The impact we seek is to deploy capital in the high-risk valley and reduce risk for the new technology. Through earlier involvement with private sector investors, market creation and other mechanisms, we decrease the size of that cash-flow valley and accelerate time to market. This increases the overall value of the company in which we are invested.

This is how we intend to bring agriculture and animal health innovations to solve the global challenges. We offer our Midwestern experience, our Kansas City-based board of civic and business leaders, our collaboration, and our equity-PLUS-advancement model to bring new value and innovation to the world.