What I said in Argentina: Innovation is a Transaction

Moderator: Is innovation in biotechnology happening fast enough to keep up with the challenges that climate change and food security represent?

I think we have to have an operational language around what “innovation” is, because we throw this word around a lot like it’s what’s going to save us all. People forget that innovation is a two-way street. Innovation is like a transaction. In a transaction you need a seller and a buyer. Innovation without a buyer is just called research. If a tree falls in a forest and nobody is around to hear it, does it make a sound? If a founder made a new product and nobody's around to buy it, would anyone call that it innovation?

The short answer to my question is, no. In food security, there is NOT enough innovation happening right now, because there aren’t enough buyers and “tryers” willing to give these innovations a chance.

If things go bad in the future (let’s say we're starving because our food production is diminished by 30%), I'm not going to look back and think, "if only we had done more research" -- Instead, I think I will be thinking "we could have avoided this if we gave more startups a chance."

In short, I am putting the burden of innovation on the buyers rather than the makers.

I’m going to contrast the food & ag space with the carbon markets, which I think does have a lot of great innovation happening right now. Why? Because of advance market commitments from Stripe, Alphabet, Microsoft, Shopify, etc. who have made a commitment to buy carbon at a specified price. Imagine if we had that for food & ag. Imagine if I said I can make high quality protein at really cheap, would you buy 50 tons from me for a certain price? If you said yes, I could get venture funding so much more easily, I could be building my company instead of spending time pandering for funding.

There could be structural ways to do this, and that's the government's job. Imagine if we had a tax credit, where farms who reserve up to 5% of their crops production to test new innovations from startups. Governments have vested interests to insure we don't have blights and widespread crop losses that threaten their agricultural outputs. Yes, crop insurance can absorb small shocks for farmers, but real material innovation is required absorb the GDP-sized shocks.

Here's a hot take: Because the original question was about climate change and food security… Is climate change actually the most disastrous thing to happen to our food security? Is a croissant really a food? It’s a refined starch, a refined sugar, and butter. That’s a monocropped wheat, monocropped sugar cane, and a monocropped cow (in the US, at least). Beef is the number one driver of deforestation in LATAM. We’re degrading our soils and deforesting our lands to grow croissants and twinkies and pasta. So even if we solved the climate change threat, how much closer are we to solving food security, and for whom?

Moderator: What emerging trends have you observed that could have a significant impact on productivity and efficiency and consequently on food security?

In my position as a really early stage investor, I’ve seen so many companies. Maybe 400+ food and ag related startups directly pitching to me or through a pitch deck. They all say they increase yield, or decrease crop loss somewhere in the chain. If you aren't looking closely, they all sound the same. So, our job as technically savvy investors is to focus not on what, but HOW. And that's where you see so many new opportunities to improve our food systems.

In just our portfolio alone we’re focusing on finding completely new modalities. One that comes to mind is BeeFlow which many Argentinians know, because it’s Argentinian. They boost bee immune systems and increase their pollinating power by hacking their minds. The more a flower gets pollinated, the bigger berries you get.

Another example, we have a company that is using electromagnetic fields to impact crop yields, and we've seen yield increases that are on par with the kind of fertilizers that we are using today, but without the harm like nitrogen runoffs. We also have a company that can fertilize a hectare with as little fertilizer as my thumb, the secret sauce is that they are optimizing on the bioavailability of the micronutrients instead of how much there is, and their number seems to be about 1,000,000 times more efficient.

So, I think we are in something I'm just going to make up called Ag 3.0.

Ag 1.0 is basically everything before the Green Revolution in the 1960's, and I would probably argue this was the best version of farming we had. We had accumulated a lot of indigenous knowledge about crop rotations and intercropping, etc. Then, around mid-20th century, Ag 2.0 took off when we globally expanded the Haber-Bosch derived nitrogen fertilizers and various pesticides to focus on productivity and efficiency, and in the process we just decimated our lands. We took the technology to make a bombs, and used that to make fertilizer, and now we’re bombing our soils.

Right now I think we're having something called Ag 3.0 which integrates more of our understanding of the complex ecosystems that are involved. The defining feature of Ag 3.0 is that I think we are starting to appreciate that soil is more biology than it is geology. We’re understanding more how fertilizers are put into the dirt, then go into our rivers, and kill our marine life. We have all this understanding thanks to new technologies elsewhere in biology, like cheaper sequencing to do metagenomic analysis, and faster/cheaper carbon MRV.

Moderator: Access to capital for start-ups has been a major challenge in the last 18-24 months, with stabilization of interest rates, are you guys seeing increasing interest from investors to fund new rounds in the biotech space?

The very first week I joined investing, we had a pandemic, when nobody wanted to invest in companies. Then the next year, we had the most investment ever where my team in SF alone deployed more than $50M in follow on capital to our portfolio. I’ve lived two ends of the extremes, and now we’re somewhere in the middle.

I can tell you that we’re definitely seeing more deals happening especially in our portfolio alone. I just can't tell you whether that’s increasing to what it should be, or more than what it should be.

But I think we are inching close to a very healthy amount right now. Because, what I can tell you is that the startups in my portfolio are hustling the most are raising capital and they absolutely deserve it, and that the slowest companies in my portfolio (in terms of research and least hustle) are not. I think that’s where we should be.

To go a little further on that, it's not always a good sign that investors are putting more money into venture investing. Sometimes people call that a "bubble." I think that carbon markets had a little bit of this, where a lot of money went into carbon capture and sequestration, and then the the promises didn't deliver for various reasons, and now we have distrust in those markets, and distrust is the last thing we need right now when we have looming issues that need cooperation and coordination from the financial markets.