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INVESTMENT FOCUS: How do investment firms choose the startups they support? One investment expert shares his perspectives on the industry.

Ag-tech investor shares insights

Yamaha Motor Ventures does more than look at motorcycles. Ag tech lead Nolan Paul shares what the investment firm seeks.

There’s a relatively new and evolving business around agriculture that many farmers hear about, but may not always pay much attention to. It’s the ag investment community. In the past six years, billions of dollars have been invested in a wide range of startups with new ideas for agriculture. But what drives those decisions, and what do ag investors seek?

Farm Progress connected with Nolan Paul, Yamaha Motor Ventures & Laboratory Silicon Valley partner and global ag tech lead, to discuss the ag investment opportunities his firm sees. What he shares shows that some interesting new tech is on the way, and Yamaha wants to be part of the action.

“We got started about five years ago with the mandate of exploring the next frontier for our parent company,” Paul says. “Our company sees the importance of investing in new markets, and in 2016, we identified agriculture as a big area of focus.”

The focus, he explains, is to look at opportunities where Yamaha could leverage existing technology and move to areas that would resonate with the company’s core mission. The company worked with venture capitalists and helped support strategic business development projects between 2015 and 2018. But in 2018, Paul says the company ramped up its venture investment and created a separate fund to support the effort, creating the $100 million Yamaha Motor Exploratory Fund.

The YMVSV fund is investing in a range of areas including mobility, aerotechnology, health technology, robotics and tech in general. Paul heads up investment work in food and agriculture.

He says the first step in evaluating an investment is asking a key question: “Does this company try to solve a major social problem in the next 10 years?”

Specialty crops first

For many ag technology startups, the first place to go is specialty and high-value crops. When a product will earn thousands per acre, a $500-per-acre cost isn’t seen the same way as on a corn or wheat operation. Major ag companies are making the row crop investment with tools that make sense for the different cost structures there. But Paul adds that initial investment in specialty markets often has potential to move out to row crop use in the future.

“We wanted to figure out how to be the value-added company rather than the lowest cost in the market,” Paul says. The initial investments for the group focused on the No. 1 pain point for horticulture and specialty crops — labor.

That meant investing in robotics and autonomy, and many investments were hardware-related. Yamaha is known for its motorcycles and outboard motors, so equipment made sense. But Paul says there’s a shift in the investment strategy lately. “We’re saying we don’t just want to be a hardware robotics company; we see the importance of data picked up from the field,” he says.

Yamaha made a recent investment in The Yield Technology Solutions Ltd., an Australian company that manages data for irrigation-intensive crops. Paul says initially, The Yield will be focused in the Australia market, but its technology will move into North America in the future.

Paul says that The Yield is helping understand the microclimate for a crop, and the work to manage downstream crop quality after harvest. “There is a need to be much more precise with the data you’re getting,” he says. “We wanted to find companies we felt had the best team with the best technology.” YMVSV led a $7.59 million ($11 million in Australian dollars) investment round in the company.

A local investment

While an Australian company may not seem relevant to a U.S. specialty crop grower, the management of data around the world is changing. The potential for The Yield in the North American market is one option Paul says his company is watching. But there’s another area in North America where the fund has invested — Strella Biotech.

Developed at the University of Pennsylvania, Strella Biotech has developed a tool for understanding produce shelf life to help eliminate food waste. Essentially, the company has a sensor that can measure the presence of ethylene gas, a natural product of ripening. With that information, it’s possible to help a produce company select which batches of product need to move to market first in an effort to keep stock fresh, and preserve what has longer storage life.

Strella also has proprietary tools, which caught Paul’s attention.

"Packers use 1-MCP which is a gas that slows the ripening process, but the challenge is that most [ethylene] sensors on the market are confused by 1-MCP. It’s a big issue," he says.

The new Strella sensor can pick up ethylene data at the part-per-billion level and note increases in ethylene. That's valuable information for packers. But it’s beyond the sensor where the value comes in. Paul explains that scientists at Strella have built predictive models that can help a packer manage inventory.

Essentially, using the sensor data, they can “model” the life of a load of apples, for example. If a packer has 20 different rooms of apples to ship, the system can predict which should go first so it goes to market the freshest, and the right stock is moving out. That can avoid crop rotting in storage, which is a major cost.

Identifying startups

“We spend a lot of time building up or understanding any area we go into,” Paul says. “If there is a startup with an idea, we would go to growers and discuss the idea and meet with the startup. We can provide value by being able to link startups with key growers.”

He notes there is a lot of travel involved, including trips to farm shows. His firm is also a member of Western Growers, which represents major specialty crop growers and provides insight into that part of the industry.

That doesn't mean that Paul can snag an investment in every startup. He shares a lament about the “one that got away” when he mentions Blue River. This ag sprayer tech firm had a precision spraying idea that would work well in the specialty crop market, but it also has value to the row crop market. The company was acquired by John Deere. “They focused on one thing, and it paid off for them. I respect that,” Paul says.

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