Southeast Asia’s agtech is hidden in plain sight, it took getting a puppy to see it
Southeast Asia’s agtech is hidden in plain sight, it took getting a puppy to see it
One investor details the potential and excitement of sustainability startups
Welcome back,
Today’s original story comes from Patricia Reed, a Singapore-based early-stage investor and executive coach, who recounts how she accidentally got into agtech (agriculture tech) startups in Southeast Asia.
I’ve always been fascinated by the concept in this part of the world—I wrote in April about how Indonesian unicorn eFishery couldn’t have come from Silicon Valley—and Patricia’s experiences, and the startups she’s backed, as fascinating since they almost appear to be hiding in plain sight. Despite many VCs often grumbling about how hard it is to find sustainability deals.
I’ll be back on Monday with the weekly recap—enjoy your weekend,
Jon
Southeast Asia’s agtech is hidden in plain sight, it took getting a puppy to see it
Author: Patricia Reed
Electric cars, solar panels and other sexy green tech tends to hog the headlines, but agriculture is as much a part of our climate future. Indeed, food accounts for 21%-37% of global total carbon-dioxide emissions, according to the Intergovernmental Panel on Climate Change (IPCC) Special Report on Climate Change and Land.
Typically, agtech investing focuses on startups creating new materials, such as plant-based protein or genetic breeding to feed humans directly. But there’s a whole layer of companies that instead work with the status quo, for example improving farming through greater efficiency and less wastage.
And it is much needed. American investor Jim Rogers, who founded the Quantum Group of Funds with George Soros, invests heavily in agriculture from his base in Singapore for a simple reason: farming is in “crisis”.
“The Chinese have a word, wēi jī, which means disaster and opportunity at the same time, so I see opportunities in agriculture,” he told Bloomberg in an interview last year. “I’ve invested in agriculture, and plan to invest more, because either we’re not going to have clothes, or we’re not going to have food, or agriculture is going to get better.”
Investors often struggle to find these companies because they’re not living in their existing deal flow channels, but they are alive, well and hiding in plain sight in Southeast Asia.
Enter Poppy
As the title alludes, I got my break into this industry thanks to my dog, Poppy, a 4.5kg toy poodle.
Poppy presented a predicament. Personally, I have moved towards a primarily plant-based diet over the past decade, but Poppy needed to eat, and pet food is, well, carbon intensive. I addressed her carbon pawprint by bringing insect-based dog food back from the US and Europe, but I couldn’t find anything in Singapore, where I live.
My research centered around Thailand, which has a culture of eating insects—which are popular with locals and, to some extent, tourists. For pets, mealworms, grasshoppers, crickets, fly larvae powder, and frozen fly larvae are all available but chicken is far cheaper than any of them. That made no sense.
I chanced upon Full Circle Biotech, which recently received some press coverage, when a manufacturer gave me the name of its founder, Felix Collins. He moved to Thailand in February 2020 to start a company that could deliver on the promise of a financially viable sustainable protein, to make an impact on the agfeed industry at large.
The Black Soldier Fly (BSF—which some have suggested could “feed the world”) industry focuses on standalone BSF which has low yield, and faces high processing costs. Full Circle, however, has made strides by developing its own mini-ecosystem using insects, bacteria, and fungi, to replicate breakdown processes in nature. That simplifies processing. Protein content can be easily engineered. No small feat.
This means Full Circle can make protein just as easily for chickens—which need around 20% protein in their feed—as he can for salmon, which require 45-50%. The company can adjust the substrate ratios to engineer protein outcomes predictably. I was so impressed, I knew I had to back the company.
Organic fertilizer in Cambodia
Full Circle got me hooked on sustainable investing; I recently invested in a startup in biochar, a space that’s gained the interest of Microsoft, Stripe, Shopify and others as a way to tackle carbon removal.
Biochar, according to the latest IPCC reports, is in the top five of scalable carbon removal solutions. Rice husk biochar has been used in Asia for thousands of years and it was referred to in the Japanese Encyclopedia of Agriculture way back in 1697.
Biochar is porous, and helps to retain water, nutrients, and store carbon in soil. It is made by breaking down biomass at very high temperatures in the absence of oxygen. It is a great technique for simultaneously removing carbon from the environment, removing chemical fertilizers from effluent systems and soil, and revitalizing soil that has been degraded by chemical fertilizers.
Spain-headquartered Husk operates in Cambodia, where it sells farmers organic fertilizer that doesn’t ride on some kind of organic halo but rather builds soil, sinks carbon, and improves livelihoods as yields increase and input costs decrease. Husk is selling carbon credits generated by their product to subsidize the cost of its fertilizer, and is piloting soil carbon credits for farmers as well.
Its two co-founders, Heloise Buckland and Carol Rius, met over a coffee break at a conference in Barcelona. They were both passionate about making a difference and building a company that could leave a positive impact on both people and the planet; namely the vicious cycle of poverty, soil degradation and climate change. They found a solution in ‘cooking’ rice husk to make biochar and putting it back onto the land to make farmers’ soil rich and soft. And yes, they’re two female co-founders, to boot.
The farming equivalent of Silicon Valley garages
Large companies, whether it’s agriculture feed or fertilizers, all have carbon reduction goals. Historically, their in-house agtech development struggled to produce results. Now, many have switched approaches from internal R&D towards acquisitions of compelling small companies for less risky investment outcomes.
The barrier to entry for starting an agtech startup isn’t as tough as you’d think. Southeast Asia has the resources to enable the farming equivalent of Silicon Valley garages: diverse fields, farms, rivers, seas or, in Felix from Full Circle’s case, his Bangkok apartment balcony. They are easily connected to a global supply chain with patentable IP and there’s resourceful talent ‘on the ground’— pun intended—who understand how to grow food.
The other advantage with sustainable agriculture is that demand is pretty much universal. Felix from Full Circle and I went from a cold email to the Chief Sustainability Officer of a $45 billion dollar company to pitching to the firm’s Chief Procurement Officer in the space of just five months. We secured a letter of intent soon after. I’ve observed that there’s a burning understanding in the agriculture industry that they must innovate, so firms are open to the right solutions.
To date, I’ve invested in four sustainability-focused startups and perhaps of all the things that I love about the space is the clarity of the value proposition.
In tech, generally buyers have to be educated why they need a product, which often involves migrating from their status quo—a workflow must be changed, for example. No one has to convince a rice farmer to use fertilizer, or a chicken farmer to feed her chickens. The innovation lies in how they do it. A product has to compete on performance, nutrition and price. Sustainability, while important for bougie investors like me, isn’t always at the top of their list, but it’s a great buyer bonus if the other criteria are met.
Patricia Reed is an executive coach and early-stage investor focused on sustainability who is based in Singapore. You can find more details about her or connect via her LinkedIn profile here.