This article by Adam Putz originally appeared Oct. 17, 2017 on Pitchbook.
Michael Helmstetter, co-founder, president and CEO of Technology Acceleration Partners, has decades of experience working in the agriculture, defense and biotech industries. TechAccel has invested in a handful of companies in the agtech space this year, including its participation in a $25 million Series B round for crop science startup Benson Hill Biosystems.
We caught up with Helmstetter to learn about his firm’s approach to agtech investment and discuss what he sees on the horizon in this rapidly evolving space. The interview below is edited for length and clarity.
How did you get into agtech?
“I was in a role running an R&D institute and working closely with Kansas State University. That’s where I saw a gap in the industry. There was promising technology frequently stranded in academic labs because it wasn’t quite ready to move into a commercial-ready state. TechAccel stemmed out of the idea to build a firm that could accelerate technology development and help it find a home in the market.”
What should agtech startups know about talking to potential investors?
“Before connecting with potential investors, startups need to understand market dynamics, customer perception and farmer adoption. To prepare, make sure you can answer these three questions:
As an investor, what should you look for in an agtech startup?
“Investors in the ag space look for companies that solve real problems and understand their target consumer. You’ll want a technology that’s fresh and has shown at least technical proof of concept—and then you’ll need patience for cycles of field trials, market trials, regulatory approvals and more. You want a management team that shows perseverance, passion and commitment.”
Why is agtech a significant investment opportunity?
“The world population is expected to reach 9.7 billion people by 2050. This means that farmers will have more people to feed—with less land and water available. Our community also faces cultural and economic changes that are creating a greater demand for certain crops and meat. This means the need for efficient and sustainable crop production, water usage and animal care. Investing in agtech will be essential to increasing farmer productivity and reducing environmental impact to sustain the growing population.”
What else makes the space unique from others in which you’ve invested or worked?
“I have more than 30 years’ experience working across many sectors, including defense and biotechnology, but what makes the agtech sector unique is that it’s a small innovation ecosystem with a diverse population. That comes with challenges, but also with benefits. One of the benefits is that one out of 10 agtech startups succeed, as opposed to the roughly one in a 1,000 pharma startups that exit, or the many tech companies that close their doors every year. It’s exciting to be part of this fastest-moving innovation ecosystem working to solve big problems.”
What are the most promising technologies available in the market today and what will likely come to market in the near future?
“Data is the new soil. Everything is based on the quality, accuracy, timeliness and understanding of the data. We expect to hear a lot more about the internet of animals, robotics in precision agriculture, new sensors and processing for everything from microbial genetics in the field to customized precision nutrition for consumers. In the short term, expect more plant and animal sensors and analytics.”
What trends do you see unfolding in 2018?
“The consolidation in the ag industry is starting to take effect. Mergers like Dow-Dupont, Syngenta-ChemChina and Bayer-Monsanto usually produce a slow period while the new organizations work out internal integrations. This will affect the agtech ecosystem in two ways. First, exit activity will slow. And second, a lot of longtime ag experts from these companies will enter the innovation ecosystem, strengthening the effort from smaller upstarts and speeding up innovation. In addition, gene editing will bring new regulations and patent challenges, driving up costs in R&D. But the broad use of new tools will increase investments in this sector, which will lead to new innovations. Nevertheless, the commodities market depression is still a major concern. In fact, commodity prices are still the top concern for ag lenders. If commodities remain firm, the industry will be able to steer away from stifling innovations rooted in new crop uses.”