For January, my word is “biologicals”, a topic of long-term interest for me.
Perhaps you are familiar with the story about Albert Einstein, involving his final exam for a physics class. The story goes that the questions on that physics exam were precisely the same as on the previous year’s exam. That should have made it easy to do well by consulting a successful member of last year’s class.
However, when asked, “Dr. Einstein, aren’t these the same questions as last year’s final exam?”
Dr. Einstein replied, “Yes, but the answers are different this year.”
So much scientific progress and so much change, even in a year.
While there’s no evidence that this story is true, it should be.
And why do I bring it up in the context of the venture industry and biologicals in particular? In some cases, the market questions are indeed the same for many successive years, but the technological solutions evolve rapidly, and what was an uninvestable opportunity becomes very investable.
However, in the case of biologicals, the reverse seems true – the questions (read market demand) are changing, but the core technological problems and solutions haven’t evolved as much as we’d all like.
With greater demand for natural solutions and increased demand for the elimination or reduction of synthetic pesticides in the market (a trend started at least 60 years ago with Rachel Carson’s publication of “Silent Spring” in 1962), even biological products with performance gaps are finding a home. And the opportunity, therefore, is finding a new market fit rather than new technology. So biologicals are applied at the end of a farming cycle so that a final treatment with no residue issues benefits still from earlier use of more effective conventional pesticides.
Other new demands are relatively recent, driven by climate change and geopolitical realities caused by the Russian invasion of Ukraine: how do we feed our crops (and therefore people) while reducing the GHG impacts from synthetic fertilizers made using the Haber-Bosch process and in light of trade impacts? With geopolitical fragmentation threatening reliable access to synthetic fertilizers, there is also a growing demand for more locally produced fertilizers. Hence, we now see more and more companies focused on biofertilizers, simple biological products, as well as complex ones with multiple microbial components, not just to serve organic farmers but all farmers. We’ve recently commented on biofertilizers’ importance to the industry (Bloomberg article), seeing this as an increasingly important opportunity.
Likely, these new questions will remain the same for quite some time as new potential answers emerge. As investors, we see proposals on biologicals frequently, including combinations of older technologies, novel discovery approaches such as via extremophiles or endophytes, applications of synthetic biology to improve sub-par performance by improving one aspect of biocontrol or production of forms of nitrogen available to a plant. Novel discovery approaches remain a high priority for step-change improvement. We’ve acted on this conviction by getting behind Pluton Biosciences as the winner of our Carbon and Soil Challenge with UPL and FA Bio as the winner of our Radicle Inclusion Challenge presented by Nutrien.
When I started in the biotech industry nearly 40 years ago, my first project was to improve the performance of a Pseudomonas fluorescens strain as a biocontrol agent for fungal pathogens through genetic engineering. We improved antibiotic synthesis levels by disrupting negative feedback and also worked to improve root colonization. Unfortunately, that approach probably received an “incomplete” on our test at the time as regulatory barriers precluded the use of genetically engineered microbes in the 1980s.
As investors, we are still looking for meaningful breakthroughs that finally overcome some critical performance limitations. So we’d really like to give an A+ to some clever innovators soon!
