OpenTable Founder Talks GMO, Organic, and Agtech Challenges with S2G Ventures’ Krishnan

Using the consumer as its north star, the business invests along the supply chain, from ‘soil to shelf’. Across seed, venture and growth-stage firms, investing from $250k to $10 million in each portfolio business. How do you approach sourcing farmer-focused technologies, and what are the challenges in this segment? Krishnan: We are lucky that Midwestern BioAg [an inputs distributor and biological ag consulting company in S2G’s portfolio] has a direct-to-farmer model and a investigation & development farm where we can do field efficacy trials for new technologies to help with diligence.

Entrepreneurs are developing a lot of technology and think they have a good idea, but there is a disconnect with the agricultural sector. A challenge for testing agtech is that there is a much longer cycle to test and develop different iterations of a product; there are only so many growing seasons in a year compared to a much shorter iteration cycle for other industries. Krishnan: While many of these technologies will be used by the producer, we are trying not just to understand him or her, but the consumer: how can we feed a new and changing consumer?

The agtech paradigm has been very focused on growing yield, but we are looking more at what consumers will be buying. The consumer is the head of acreage, and retailers are thinking about what buyers want to see on food labels. We are pretty inclusive and flexible, so would look at precision agriculture technologies if they provide a solution for the consumer, such as ensuring transparency or traceability for labeling.

It’s a $1.4 trillion sector and we are trying to understand the problems the food service sector is facing. For the first time, large food brands are actually going to the farm gate to try. Understand their supply chains — not just calling their commodities suppliers — and looking for a level of transparency not seen before.

It’s not about non-GMO or organic, it’s about the functionality of food. We think that food will go beyond these classifications into other labels such as high protein or high in beta-glucans as shoppers look for more functional, tasty and affordable food.

Big food companies are therefore looking more clinically at food and what characteristics they can identify on their labels such as nutrition density and traceability. And we don’t think GMO is the only system that can exist; more will follow. Shenandoah Growers are one of the most proven models with 25 years of operations and product in 6,000 stores and they have had lots of iterations to meet these challenges.

Templeton: Buying farmland is not really a venture model and in addition, you have to think about the capital intensity of farming operations. This is not something we would do as a venture fund, but there might be opportunities to create special pools of capital to go after these issues.

In the past, they would have outsourced the risk to the grower, but now with more appetite for transparency, owning the land can help control what happens on the land and therefore the profile of the food offloaded. What are your views on the heating food e-commerce industry, which is essentially trying to play the intermediary between producer and consumer?