Israeli agriculture and high-tech form a winning team

Grasshopper Photo: Shutterstock

From mushrooms that nourish other crops to mass production of edible grasshoppers, Israeli startups are impacting agriculture.

For many years, Israeli technological developments in agriculture were confined mostly to academic institutions, but agro-tech has now emerged as a leading global high-tech industry. According to figures compiled by the PitchBook Data research company and US fund Finistere Ventures, which invests in agrotech, over $1.5 billion was invested in the global agro-tech industry last year, and most of the investments were in early-stage startups. Israel has not missed out on this trend.

There have been quite a few arguments about the future of Israeli agriculture in recent years, and to what extent the government should invest in it. From a technological perspective, the situation looks promising. $185 million was invested in 40 financing rounds in Israel agro-tech startups in 2017, according to figures from Start-Up Nation Central. In comparison with the rest of the high-tech industry, the amounts that these companies are getting are still smaller than the average, but the trend is nonetheless positive. Israel is one of the world's five leading countries in investments in this sector, with hundreds of startups devoted to changing agriculture from top to bottom.

This change is a very necessary one. Where innovation and entrepreneurship are involved, the question always arises about which problems the entrepreneurs should be solving. In agriculture, the important challenge is global hunger. 124 million people worldwide currently suffer from hunger, according to a report by the Food Security Information Network (FSIN). The world's population, mainly in the developing countries, is growing at a rapid pace, with over nine billion people projected by 2025 - many more mouths to feed.

While the population is growing, the resources available to farmers are dwindling. Land is limited, water sources are being depleted, and natural resources are being contaminated. Climate change is affecting both natural resources and agricultural crops themselves. If the agricultural industry does not increase its output and save on natural resources, the world will enter a food crisis.

It has therefore been increasingly realized in recent years that agriculture must incorporate advanced technological solutions in order to feed the world's population. Investors, food corporations, farmers, and entrepreneurs understand that integrating technology in agriculture is also potentially profitable. The result is the use of big data, artificial wisdom, drones, and other tools we are familiar with from other branches of technology for the purpose of improving food crops. In Israel, it seems, biotechnology is being particularly emphasized.

Unusual ways of producing protein

Groundwork BioAg, from Moshav Mazor, is a startup that has developed a method of growing mycorrhiza mushrooms that creates a symbiosis with the plant and improves its crop. “The mushroom penetrates the root of the plant and expands its root system. The body of the mushroom functions as a secondary root system that feeds the plants roots,” Groundwork BioAg cofounder and VP marketing and sales Dan Grotsky told “Globes.”

These mushrooms have two advantages: they can physically reach nourishing materials deep within the soil that the plant's roots are incapable of reaching, and they are able to chemically break down nourishing materials that plants cannot break down. Conventional fertilizers use phosphorous, potassium, and carbon, but phosphorous becomes attached to a chemical compound in the ground that the plan is unable to break down, and becomes unavailable to the plant. Mycorrhiza breaks apart the molecule to which phosphorous becomes attached, thereby making the phosphorous accessible.

Grotsky says that the major markets in this area are corn and soy in the US and Brazil “In Brazil, we recently obtained a license, and we are now the sole mycorrhiza producer there, in a country in which the estimated soy crop market is worth at least $700 million. We're also doing vegetables and other field crops, and also a little fruit. The most profitable crop is cannabis, and we're also a player there.”

Another startup, Hargol FoodTech, which operates in Misgav in northern Israel, has developed a method for mass production of edible grasshoppers. The company is aiming at markets in Central America, Africa, and the Far East with an aggregate population of over one billion people. In these markets, grasshoppers are regularly used for food, and constitute an available source of protein and other important nutrients, such as iron, zinc, and omega 3 and 6. Hargol FoodTech has developed methods of growing several species of grasshoppers that quicken the pace of growing in very large quantities under carefully sterilized conditions and make it possible to market them all year round.

Hargol FoodTech, which founded the world's first commercial farm for raising grasshoppers in 2016, is also marketing powered protein produced from insects as an ingredient for the US good industry. Last May, it triumphed in the finals of the Get in the Ring global startup competition in Singapore. The company is nevertheless still quite small. It has raised $1 million to date , and its value is estimated at $2.5 million.

Hinoman is a company that develops protein from plants. The company grows the mankai plant - a leaf richer in protein than any other plant currently in the market - using a hydro-phonic method. The process consumes only a tenth as much water as kale, which is regarded as the currently most widely recognized super food. The growing process developed by the Or Yehuda-based company is designed to facilitate more efficient and faster growing of mankai, while minimizing its environmental damage, avoiding the waste of resources, and reusing the water in which the plants grow. In March, Japanese food corporation Ajinomoto invested $15 million in Hinoman, and acquired the exclusive distribution rights to the plant in Japan.

There are also analytics companies, such as Tel Aviv-based Taranis. The company provides a forecasting platform and tools for managing fields in order to help farmers grow crops and cut costs. The platform gathers data from aerial photographs at less than military resolution, sensors placed in the field, satellite photographs, weather forecasts, and information from a patrol application in the field, uses it to produce forecasts of threats to crops, and recommends actions that can prevent losses from those threats.

Taranis expanded the area using its platform by a factor of 30 last year. The company is currently assisting growers of soy, corn, wheat, cotton, sugar cane, and potatoes on millions of acres in Israel, the US, Argentina, Brazil, and Russia. Taranis has raised $9.5 million to date in three financing rounds, led by Finistere.

Up until 2016, Israel had only two prominent investors in agrotech: international funds Trendlines and GreenSoil Investments. Other concerns have since entered the picture: general high-tech investment funds, such as Vertex Ventures and Bessemer Venture Partners, which have invested in six Israeli agrotech ventures each; AgriNation VC, an Israeli agrotech firm for seed investments, which is currently raising its first fund, and has already made two investments; Bayer, which invests in Israel through partnerships with Trendlines and the OurCrowd crowdfunding platform; and Copi, a fund that invests in ventures coming from academic institutions, and which raised nearly $50 million for its first fund.

Also active in Israel are Tech for Good, the technology incubator of the Yakhin Group; Trendlines' agro-tech incubator; the agro-tech center in Edison Park, founded last year by the Innovation Coalition; and the Phenomics Consortium, sponsored by the Israel Innovation Authority, with a NIS 60 million investment. The latter is a 3-5-year program for developing new products to improve agricultural science.

The kibbutzim have also entered the agrotech sector, led by the Hamistala fund. Founded four years ago, this fund has helped 24 kibbutzim to invest a total of NIS 75 million in 19 companies. Ofir Liebstein, chairperson of the fund and general director of the Kibbutz Industries Association, explains, “The kibbutzim want to integrate high-tech companies into them. This makes it possible to develop innovative technology, create jobs, bring and retain educated personnel, and use their existing resources. In addition to human resources, they also have land, existing industries that can be partners or consultants for startups in the same areas, and agricultural sites that can be used for trials of agro-tech technologies.”

One of the questions likely to shape the fate of agro-technology in Israel and worldwide is the degree to which the large food and agricultural corporations get involved, and whether they will make large scale investments. At an Israel Innovation Authority conference last month, dozens of startups met with large agricultural companies, which told the startups about their needs. Afterwards, the companies met with enterprises for one-on-one meetings in order to find investments in the sector. The companies that participated included IBM, Israel Chemicals, Bass, and WRL-BASF, which are interested in precise agriculture technologies, effective nourishment for agricultural crops, and developing nutrition for animals and people.

Doron Meller, head of smart agriculture at the Israel Innovation Institute, told “Globes,” “The rationale is to promote these areas in the framework of a broader ecosystem. Our vision is to implant the new technology in public services, so that those who benefits from these services are not the 10% of the population connected to high tech, but all Israelis. The goal of this event was to bring the supply axis of innovation together with the demand axis - the market - large enterprises, farmers, industrial companies, and food companies.”

The research has been done; it only has to be applied

AgriNation VC cofounder and managing partner Adi Vagman said that the rise in interest by investors in Israeli agro-tech, although substantial, lags behind elsewhere in the world where investment began flourishing in 2013. She told "Globes,", "Many bodies have been set up that are investing in the pre-seed stage of startups although there were already funds that could have invested by weren't technological enough."

On the other hand, government investment in agriculture over the decades gives Israel an important advantage. She said, "We're talking about a massive investment over 25 years and the result is companies that have years of technological R&D behind them. From academia, ventures go onto the market with products that have already been developed and that suits venture capital funds well - companies with a solid scientific base with research that has already been funded."

Vagman explains that the global growth of agro-tech is taking place following a combination of several factors, "One of them is natural disasters. If we once spoke about 11 exceptional weather events annually, we are now talking about 44. Events such as extreme storms and droughts are causing people to understand that the era of abundance in which we are living won't carry on forever. At the same time, big data technologies have matured along with the hardware that allows them to be implemented in agriculture. To that must be added extreme changes in taste so that for example consumption of chicken in China rises 100% every year while in the west we see a switch to vegetarianism and veganism. These changes in taste are a catalyst for the industry. When they declared that avocado was a 'super-food,' sales doubled. As a result of these changes, between 2015 and 2017, 20 large foods organizations worldwide established venture capital funds."

Even today with the sector flourishing, the combination of agriculture and high-tech throws up many obstacles. Firstly, entrepreneurs in the agricultural sector are not always successful in convincing farmers to integrate their developments. As in any traditional industry, it is not simple for high-tech ventures to penetrate and change endeavors that have been operating for decades and they are perceived as cut-off from reality and arrogant. Another obstacle stems from the investors: from their point of view it is not always clear how a development for solving the problem of global hunger can also be profitable. In recent years, we are seeing a strengthening of the impact fund trend where investment is selected by their contribution to humanity although even if that is the approach the aim is still to make money.

Yakhin's Tech for Good startup incubator was founded, among other things, in order to cope with these two challenges. Confronting the claims that agro-tech is being held back because of a lack of openness to change by traditional farmers, the incubator tries to help entrepreneurs understand the needs on the ground. According to Tech for Good cofounder and co-CEO Omri Boral, there is no contradiction between technological development that will solve global hunger and profitability.

Boral told "Globes," "Today it is much more difficult for corporations to operate in a way that damages society. If it was once clear that as a corporation your commitment was to make as much money as possible, today that is not acceptable - expectations have changed in the age of transparency, and consumers demand social responsibility from corporations. Therefore, we see corporations changing their ways and looking at social issues as engines for success in the future. They understand that if their products and contacts with consumers won't revolve around social issues of impact and sustainability, then they simply will no longer be profitable."

In 2015, the UN defined 17 challenges that need to be solved by 2030 in order for humanity to develop in a sustainable way. Among the challenges that can be found are gender equality, concern for the climate, and the war against poverty and hunger. Borel thinks that large companies currently put emphasis on these challenges. He said, "If as a corporation, you look five years ahead then your profits won't be hit. But if you look 30 years ahead then you will encounter some very major obstacles. The moment that we change the mindset that social issues are a side-issue that only require small money and we look on these topics are a real business opportunity, then it is also possible to make profits."

An example of this comes from food waste. Throughout the entire agricultural chain from the field to the plate, one third of food worldwide is squandered. "These are crazy numbers," said Borel. Agricultural and food corporations researched the subject, and "today they can say that on every dollar that they spend on preventing food waste, they earn $14. It has simply become good business."

Published by Globes [online], Israel business news - www.globes-online.com - on April 5, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Grasshopper Photo: Shutterstock
Grasshopper Photo: Shutterstock
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