Do Well and Do Good with System Thinking

We will see more gains in agricultural productivity over the next 10 years, than we have seen over the previous 1,000 years, as farming moves from field to factory.

‘AgTech’ has existed since the dawn of humanity, but it has been a painstakingly slow process, marked by choosing the best seeds, cross-pollinating varietals, splicing stalks together, digging irrigation ditches, mechanizing farm implements, and spraying chemicals. Amazing progress has been made, but the rate of change has been measured over years and decades, rather than weeks and months.

At its most basic, AgTech is about improving two complex systems: the ‘grow’ system, which is the transformation of photon to plant matter, and the ‘transportation’ system, which is the movement of plant matter to the human. 

We are now witnessing a fundamental shift in both systems as farming becomes ‘Digital Manufacturing,’ enabled by improvements in LED lighting, sensor technology, big data, machine learning, and artificial intelligence. As farming becomes ‘Digital’, exponential improvements become reality and the famous Moore’s law now becomes applicable.

Growing in factories or ‘Digital Manufacturing’ allows for radical improvements in both systems. Energy can be more efficiently converted to photons, which can then be converted to plant matter, using less land, water, chemicals, and labor, all while producing healthier and tastier varietals. Additionally, factories, which are no longer tethered to the field, can be located closer to population centers, making factory farming eco-friendly while reducing pollution, spoilage, and scarcity

As a venture capitalist who wants to “Do Well by Doing Good”, AgTech provides an amazing opportunity as the market is essentially ‘infinite’–every person needs to eat, and as the global population both increases and becomes wealthier, the demand for better tasting and more nutritious produce will increase. While there are thousands of AgTech ideas, the agricultural eco-system is fragmented and competitive, which means selecting the right companies requires good judgment, vision, and foresight as a great idea may not have a clear path to wide-spread adoption, regardless of how scientifically unique it is.

For entrepreneurs and investors, we advise people to think in complete systems as opposed to discrete components. For instance, we have seen many ideas around better monitoring of crops, such as cameras for pickers, infrared sensors on drones, or advanced imagery from satellites. While each of these may be a promising enabling technology, the investment question is how many farmers will be able to take the insights from the technology and make real-time improvements to their growing conditions, without major changes to the rest of their  ecosystem. Before investing, ask yourself: if a satellite senses a pest infestation, is the farmer willing and able to do something different with that information to solve the problem, and is the farmer willing and able to pay for the perceived benefit that the technology will create?

At Kirenaga, we were the first institutional investor in Plenty because we saw a CEO who was solving for issues in both systems simultaneously– photon to plant matter and plant matter to human–and doing so in a way that allowed for rapid and continuous iteration. In another instance, we are involved with a company called Hyperponic, which is enabled by a distinctive lighting partner in Violet Gro, to create a similar path for the cannabis industry. In both cases, we see ecosystems where productivity growth will accelerate year-over-year as their continuous improvement machines drive further evolution in their operating models, creating an ever-widening competitive moat while providing the world with higher quality products.

We salute the innovators, entrepreneurs, and investors in the AgTech space. It is a large, fragmented, and competitive marketplace, but one with multiple opportunities for success. Think in systems and develop an approach that allows for constant improvement. You too can “Do Well by Doing Good.”