Investing in ag biologicals: “We are looking for reasons to say no”

The word “efficacy” gets thrown around a lot when talking about naturally-derived crop production and protection tools, commonly known as biologicals.

In biologicals, efficacy is about whether or not a crop solution does what its creators say it will, be that fixing nitrogen, warding off pests or boosting yields. Or to put it simply, does the darn thing work?

But a panel of investors at the recent Salinas Biologicals Summit in California say this definition is too narrow, and that startups need to rethink the meaning of the word for both the sake of their pitch decks and the larger biologicals industry if they want to attract investment.

“Investors are not looking for reasons to say yes,” said panelist Kirk Haney, co-founder and managing partner at Radicle Growth. “I really want that to sink in: We are looking for reasons to say no.”

Make it novel, not obvious

“How entrepreneurs have been defining efficacy is, quite frankly, wrong,” said Haney.

“We look at about 1,000 deals a year, and about 200 of those are biologicals. And every deck looks the same: ‘Look at my root system untreated; look at my root system treated. Look at my yield untreated. Look at my yield treated.’ It’s the same thing over and over.”

This is no longer enough, said panelists. An increasingly crowded market for biologicals, particularly for specialty crops, has created “a lot to sift through” in terms of different products, said Audre Kapacinskas, a principal at S2G Ventures, about investing in ag biologicals. Only those that are truly novel are likely to attract investment dollars, especially in the current economic environment.

“We know that microbes add value to agriculture. We know they help with yield preservation, with the health of the plant,” said Haney. This is obvious, not novel, he added.

“What is novel and unique is when [a product] actually works in the field. “Having a microbe that works [here, he added air quotes] is one thing. But what’s the cost of goods sold? How are you going to scale this up? How are you gonna get in the market? How do you know it’s going to have the right impact in the field at scale?”