Recent Developments in the California Food and Agricultural Technology Landscape Gordon Rausser, Ben Gordon, and James Davis

Three years ago, a global Between 2012 and 2017, venture capital include biophysical conditions, water, assessment of all industries funding in FA technology (agtech) pesticides, and other inputs, are used revealed that food and agriculture totaled $22.3 billion, reaching a peak by different farm production methods had dramatically lagged in the of $10.1 billion in 2017, as shown in to generate raw product, which are adoption of digital technologies. Figure 1. Across the United States, the either distributed in fresh or processed Recent emerging trends in venture evolution of this emerging trend is forms. These products are sold and funding for innovative agricultural reaching far beyond Silicon Valley’s distributed by food services, farmers’ technologies hope to change this early interest in agricultural biotech- markets, traditional grocers, and inter- assessment and may well alter nology, with major investments in all net channels direct to final consumers. California’s food and agriculture segments of the FA supply chain. As It is worth noting that while four of technology sector. This article with much of its history, California FA the six areas of innovation focus on investigates those venture-backed, continues to be a leader in U.S. high- input configuration and agricultural California-based companies that tech production and is the leading production, supply chain management are engaged at various points in state by agtech investments, with $2.2 technologies comprise over half of billion in 2017 (22% of total) and a total agtech investments. the food and agriculture supply of $5.1 billion between 2012 and 2017. chain. Precision Agriculture Much of the significant increase in Precision agriculture addresses vari- venture agtech capital addresses the ability in biophysical and climatic The global economy is going through challenges of incorporating robotics, conditions at the field or crop level by a process of digitization, but a 2015 information technology, and remote enhancing the ability to apply inputs assessment by McKinsey revealed the sensing in FA. These investments can (e.g., water, pesticides) according agriculture sector to have achieved be classified within six broad technol- to a micro-level recommendation. the very lowest level of digitization. ogy categories: precision agriculture, However, the ability to assess con- Given that global food and agriculture agricultural biotechnology, vertical ditions and make treatment recom- (FA) represents approximately a $5 farming, alternative animal products, mendations has outpaced application trillion industry (the largest amongst decision-making tools, and supply technologies. For instance, using all industries), this evaluation was chain management. surprising to many. One possible various remote sensing and probe explanation is that the FA sector has Figure 2 shows where each technology technologies, a thermal image of water been the recipient of historically low category touches a particular stage of requirements at the sub-field level is levels of innovative venture invest- the FA supply chain. Inputs, which possible. However, irrigation systems ment, averaging less than $500 million annually prior to 2012. Over the last Figure 1. Agtech Investment, 2010–2017 few years, however, venture investors are realizing that new technologi- 12 cal innovations in modern biology, information technology (I.T.), machine 10 learning, artificial intelligence (A.I.), 8 and remote sensing have the potential to drastically alter the FA landscape. 6 Such investments have the potential 4 to improve agricultural productivity, $ Billions per Year introduce new products, and improve 2 supply chain efficiencies linking pro- ducers to final consumers. 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Giannini Foundation of Agricultural Economics, University of California 5 Figure 2. Supply Chain and Agtech Categories

Note: % figures are percent of U.S. sales through each distribution channel.

are not yet able to apply variable water Thus far, the political and regula- result of consumer preferences being quantities at this granular level. tory framework that has slowed the increasingly influenced by the infor- development of traditional genetic mation (certifications) surrounding In some areas of agricultural produc- modification techniques has not food product availability, start-up com- tion, this is beginning to change. For impeded the early progress of these panies in this space have the ability to instance, Blue River Technologies new technologies. One example is capture that demand for information developed “see and shoot,” which Caribou Biosciences, a UC Berkeley through novel applications of vertical attaches a small robot on the back of a startup, which enhances genetic mate- farming technology. conventional tractor to quickly detect rial of seed varieties using CRISPR- and assess weed growth and then For instance, vertical farming com- based techniques. Another example apply a micro-spray of herbicide at panies in California, such as Local is Sostena, a UC Davis startup, which the root of the infestation. To further Roots Farm in Los Angeles or Plenty utilizes specialized hybrid breeding enhance efficiency, the technology is in South San Francisco, are producing techniques in conjunction with their paired with a software program uti- organic and non-GMO certified prod- proprietary software to improve the lizing weather and climate data with ucts, attempting to capture a higher productivity of niche crops such as remote sensing and GPS to assess the willingness to pay for these charac- cantaloupe, watermelon, and pepper. sub-fields most prone to infestations. teristics and to bypass the traditional Moreover, new applications of bio- supply chain to dramatically reduce Agricultural Biotechnology technology are being applied to algae transportation costs. Overall, these Investments in agricultural bio- and mushroom-based products, and systems drastically reduce water and technology, which was focused on the early signs of the growing societal other input use but face significantly seed modification technologies until and regulatory acceptance of bio- more energy cost than conventional recently, have expanded to include technology in food products in some farming in production (due to the new methodologies of gene transfer, parts of the world should allow for need to create light). Light diodes gene editing, genomic testing and greater adoption of these innovations. and advances in solar and bio-energy pathogen identification, and biological For example, Synthetic Genomics is production may increase efficiency of imaging. These have been made possi- developing basic research that may indoor agriculture. ble by breakthroughs of CRISPR-Cas9, allow algae-based biofuels to be cost TALENs, and Zinc Fingers. TALENs effective. Alternative Animal Products and Zinc fingers are gene-editing Alternative animal products comprise systems similar to CRISPR that rely Vertical Farming a growing range of approaches to on DNA-binding domains to iden- Major advances in light diodes, com- create animal-free meat using molec- tify target sequences to cleave those puter-based decision making, and ular biology and tissue engineering sequences. These technologies range plant genetics hold the promise of to generate plant-based meat. These in efficiency with CRISPR the most allowing vertical farming systems to technologies respond to not only efficient. produce high-value, organic-certified environmental consequences of animal crops in or near urban centers. As a products but also to expensive cost

6 Giannini Foundation of Agricultural Economics, University of California structure of animal meat production. FBN is leveraging modern agronomic Supply Chain Management These available technologies utilize and statistical techniques to pro- Supply chain management technol- advances in genomic and tissue engi- vide farmers with the most accurate ogies promise to provide food dis- neering to produce meat products that information for improved farm deci- tributors and retailers more efficient are converging to the taste, texture, sion-making. For example, FBN shares ways of inspecting, certifying, and and smell of animal meat. There are chemical price data with their mem- preparing food for consumption, two principal methods. One uses all bers to restructure the current asym- and providing final consumers with plant-based materials, while the other metric information between chemical new levels of convenience and ease uses meat tissues combined with suppliers and their customers. of shopping. Business-to-business cyanobacteria (the only photosynthetic relationships have also experienced prokaryotes able to produce their own oxygen) to produce meat products in Table 1. California Agtech Investments laboratories. Invested Invested Company name Company name While most venture capital in this Capital* Capital* (*acquired) (*acquired) space is allocated to alternative ter- ($ millions) ($ millions) restrial animal products, such as Precision Agriculture Vertical Farming Memphis Meats and Beyond Meat, Blue River Technologies* 30.8/335 Back to the Roots 19.31 Granular* 24.9/325 Local Roots Farm - Finless Foods is producing fish. Abundant Robotics 12.00 Plenty 226.00 Overall, these technologies offer novel TerrAvion 10.50 Crop One Holdings 12.73 methods that may decrease marginal Hortau 76.20 California Safe Soil 14.44 costs, especially in important states PowWow 4.30 Edyn 4.22 like California with increasing strict Apeel Sciences 40.00 Farmshelf 0.76 land and pollution standards. Aqua Spy 10.80 Iron Ox 5.00 Vinsight 1.50 Decision-Making Tools These firms must also contend with Embodied 3.79 Farmers Business Network 193.90 consumer preferences that present Agricultural Biotechnology Climate Corporation* 108.8/930 challenges in acceptability, especially Caribou Biosciences 44.55 Astro Digital 20.65 if there is an early “mistake” or the TL Biolabs 4.00 Ceres Imaging 7.70 timing of broader market introduc- Sostena 8.10 IntelinAir 5.00 tion happens to align with a mishap Biome Makers 2.20 PastureMap 3.10 in another related sector (e.g., Mad Bioconsortia 27.00 OnFarm Systems 1.43 Cow Disease occurred the year after Arcadia Biosciences 101/131 HeavyConnect 0.13 the introduction of GMOs in Europe, Marrone Bio Innovations 55/107.2 Harvesting Inc - and became a major target by non- Boost Biomes 2.10 Supply Chain Management GMO activists, despite the two being Pivot Bio 16.75 Helium 38.8 unrelated). LumiGrow 19.50 Lineage Logistics 25 Synthetic Genomics 40.00 Haven 13.8 Decision-Making Tools Cibus Global 118.69 Source Intelligence 17.5 Alternative Animal Products Aera 93.7 Going beyond the laboratory, farm- Beyond Meat 104.00 Elementum 67 level technologies are responding Memphis Meats 20.00 Instacart 875 to the increasing milieu of tools at Impossible Foods 389.00 Sun Basket 108.6 a farmer’s disposal. One of the key Just (Hampton Creek Farms) 240.00 Flexport 204 issues with the introduction of many Soylent 72.40 Aromyx 5.8 new technologies is the ability for the Calysta 93.00 Impact Vision 1.4 farmer to incorporate them in their Perfect Day 26.80 Astrona 0.2 production systems. Dominant firms in Ripple Foods 109.00 Clear Labs 36.55 this sector include Farmer’s Edge, who Imperfect Foods 11.70 Mojix 85.5 utilize Variable Rate Technology to Clara Foods 1.75 Nima 13.5 improve crop production and reduce Geltor 2.50 Safe Traces 8 waste, and Farmers Business Network iTradeNetwork* - AxleHire 4.42 (FNB). Agralogics 4.18 trellisgrows.com 2.5

Giannini Foundation of Agricultural Economics, University of California 7 a dramatic landscape change with augment their skill sets. For example, of decision rules. While a software innovative supply chain technologies Sun Basket, a firm specializing in program may recommend a certain revolutionizing their transactions. farmer-to-consumer distribution, must treatment schedule, a final decision incorporate in their streamlined busi- must still be made. New tools may Companies in this segment brought ness model the functions performed by aid this decision, but risk and in roughly 60% of the $10.1 billion of the intermediaries they are supplant- uncertainty considerations will remain. total U.S. venture funding. These com- ing, i.e., food safety and processing, In addition, farmers will need to sift panies are e-grocers, retail chains, and packaging, and controlled storage. through a growing set of technologies restaurants, which are introducing dig- and companies to decide which ones ital and automated means to conduct Acquisitions are best suited for their operation, purchasing, distribution, and point- In addition to venture capital funding, market, and biophysical conditions. of-sale to end-users. This is a major a few major buyouts of early stage shift in the magnitude and direction of However, the rate of technological companies stand out. First, Monsanto funding—prior to 2015, downstream change further complicates the purchased Climate Corps for $930 and midstream investments accounted adoption process that is critical for million in 2013, indicating the growing for less than $5 billion in activity and bringing current technologies to scale. value of timely information technol- about one-third of total agtech invest- Given the rapid expected evolution, ogy in farm management. In 2017, ments. One consequence of this shift many farmers may decide to delay John Deere purchased the “see and in investment activity could well allow adoption of current technologies, spray” technology from Blue River FA to achieve some convergence with especially those requiring significant Technologies indicating the value of other industrial sectors. upfront investment costs. In a using advanced robotics in the appli- forthcoming ARE Update article, we An example of a firm in this category cation of pesticides and fertilizers. will investigate the incentives for is Helium, a smart sensing technology DuPont Pioneer acquired farm man- adoption of these technologies across company that monitors and analyzes agement software company Granular the supply chain. the temperature of refrigerators, for $300 million, showing a continued Suggested Citation: freezers, and other potentially waste- focus on augmenting farmers’ deci- Rausser, Gordon, Ben Gordon, and J. ful temperature-sensitive appliances. sion-making efficiencies. These three Davis. “Recent Developments in the Companies like Helium are also at the buyouts total $1.53 billion, with an California Food and Agricultural cutting edge when it comes to integrat- average multiple of more than nine Technology Landscape.” ARE Update ing blockchain technology. Blockchain times the invested venture capital. allows for real-time data collection 21(4) (2018): 5–8. University of Finally, nine major companies recently across smart devices cataloguing California Giannini Foundation of announced major collaborative invest- information in the cloud to improve Agricultural Economics. ments to develop blockchains as a way traceability and transparency. to manage global FA supply chains. Authors’ Bios With cannabis sales expected to reach While these acquisitions speak to the $75 billion in the next 12 years, it is success of these technologies, there Gordon Rausser is the Robert Gordon unsurprising to see applications of have been a number of noticeable fail- Sproul Distinguished Professor, and Ben these new technologies in the canna- ures. For example, SpoonRocket, a pre- Gordon and James Davis are research bis industry. For example, Trellis, an made meal delivery service, shut down assistants, all in the ARE department at Oakland-based seed-to-sale cannabis in 2016 after failing to raise sufficient UC Berkeley. They can be contacted by platform that uses data analytics to capital. Even with a profitable product email at [email protected], track the crop’s performance from the on the market and $13.5 million in ven- [email protected] and jdd- plant to the dispensary. The beneficial ture funding, SpoonRocket was unable [email protected], respectively. aspects of the new technologies in this to overcome the cost of capital-inten- For additional information, category would be the minimization of sive on-demand services. the authors recommend: the “bureaucracy” or transaction costs Manyika, James, et al. “Digital America: within the supply chain. For example, Conclusion The Tales of Haves and Have-Mores.” firms can now market directly with Major challenges remain in finding McKinsey Global Institute, Dec. 2015. their end-users in the case of B2B or complementarity between the diverse www.mckinsey.com/industries/ access consumers by direct market- set of new innovations. For instance, high-tech/our-insights/digital- ing. However, to leverage this poten- the range of precision agriculture america-a-tale-of-the-haves-and- tial capability these firms must also technologies still require the creation have-mores

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