Building beyond the product: the systemic challenge of agtech innovation

Last week on the podcast, we heard the story of CoverCress, a company that turned a common weed - pennycress - into a rotational cash crop with end uses including low carbon feedstock for renewable diesel, sustainable aviation fuel, and high-protein animal feed.

But as Cris Handel, an early employee and SVP of Marketing, explains, bringing CoverCress to market was not straightforward.?

“From the beginning, one of the main challenges that we saw is that it was not a product. It was impacting the full value chain, and it had to work for the value chain. And those are tough things for a startup to solve”

In addition to de-risking the technology, CoverCress also needed to:?

• Develop the market: ensure it would fit into existing farm rotations and operations
• Secure a crush partner: find processing facilities who would crush a smaller seed.
• Find offtake partners: secure (paying!) demand in the fuel and/or feed markets.
• Raise capital: attract investors willing to support all of these activities over the required timeline.

Covercress solved these challenges by raising money from strategic investors - Bayer, Bunge, and Chevron - that could help in each of the above areas.

According to a 2022 company press release, this approach worked out:

“Bayer has acquired a 65% controlling interest in CoverCress Inc (CCI) by purchasing all equity interests in CCI other than what is currently held by Bayer and CCI’s other strategic investors, Bunge Ventures and Chevron. CCI will continue to operate as a standalone independent entity. The announced transaction reflects a successful exit for CCI’s venture capital, angel and economic development investors and its founders.”

Investing for systems-change

The CoverCress story is not unique.?

In agtech (and climate tech more broadly), we often see companies that are changing a system or creating a new industry, not just commercializing a new product or process.?

And when the physical world is involved - harnessing atoms and molecules not just bits and bytes - the set of challenges a company faces is different.

We’ve seen this with our portfolio: Vow needed regulatory approval to bring a new category of food to market; and Goterra helped establish an industry body to tackle pre-competitive challenges for the emerging insect industry.?

So What? Implications for how we accelerate climate smart agtech

These founders, like many others, have embraced systems thinking, recognizing that their innovations are part of larger ecosystems, and building their teams, business models, and cap tables accordingly.

But startups do not exist in a vacuum. The broader ecosystem must also continue to evolve.?

Investors can…

• Specialize in what they provide beyond just capital. Sector-specific expertise can significantly enhance the startup's chance of success, as can tailored value-adds like storytelling or navigating regulatory environments.
• Cultivate relationships with strategics. Investors can not only open doors, but also ensure partnerships are structured appropriately.?

Government can…?

• Extend timelines for startup support initiatives. The current accelerator/incubator paradigm is often based on 8-12 week programs, which may not be long enough for companies working with nature or hardware to achieve meaningful progress.?
• Provide catalytic funding: Governments can amplify the impact of private investments by creating fund of funds programs, implementing matching grants, and blended finance or first-loss capital. These approaches reduce risk and attract more private investors into climate-focused ventures, thereby increasing the pool of capital available for high-impact startups without distorting market dynamics.

A unique moment for systems change

On the podcast, we also heard about attempts to commercialize other crops that require even more significant system changes— like pongamia. Planting new trees and developing a value chain to monetize them is immensely complex and seems well outside the realm of current commercial funding paradigms. Yet, when coupled with the existential crisis that Florida’s citrus industry is facing, maybe it becomes compelling.?

Perhaps the only way for some systems to become more sustainable isn’t to plug in marginally more sustainable versions of the existing pieces into the existing value chain, but rather by rethinking the entire system with sustainability at the core.

Perhaps we’re in a truly unique moment where systems innovation is not only viable but in fact imperative.?

Are we truly prepared to support the complexity of these ventures? Are we willing to rethink our traditional models to foster an ecosystem where groundbreaking technologies can thrive? The answers to these questions will shape the future of agriculture.

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