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Transcript

Iliyana Dimitrova  0:04  
Welcome to the Forward Food Tech podcast. This is the first episode of our series of podcasts focusing on venture capital raising. In this episode, we're speaking with our special guest Shubhang Shankar, Managing Director of Syngenta Ventures and will focus on the topic of corporate venture capital for ag tech and food tech businesses, explore key investment practices and trends in agri food tech. A little bit more about Shubhang, he joined Syngenta ventures in 2016, based in Basel, Switzerland, after having worked for two years in the company's global strategy team, where he was part of the team working on developing Syngenta digital agriculture strategy. Shubhang looks at companies in a variety of industries of relevance to Syngenta, including digital, precision Ag and biologicals. Shubhang is currently an observer on the board of NinjaCart, BioPhero, Tarfin and Green Eye Technology. It's going to be a great discussion, so tune in and enjoy the podcast!

Rob Ward  1:07  
Welcome to the Forward Food Tech podcast. We are really excited to have you here today because you're our first corporate venture firm that we've spoken to and part of this interview series. We're really, really interested to hear on why Syngenta is investing in early-stage brands. Can you just go through that? Just the very first part?

Shubhang Shankar  1:28  
Yes. Thank you, Rob, for having me. It's a pleasure and hello to all your listeners. I think in terms of why we invest in startups or early-stage companies or early-stage brands? I think it's a very good question. What our management realised, and this was way back, I would say in 2009, much before agritech agrifood investing was super de jure was that early-stage companies, startups are a source of innovation that are unlike the traditional innovation model that companies like us engage in. And I'll expand on that a little bit. The traditional industry, agri food industry, to broaden the parameters, is very much driven by a product oriented innovation. So we introduce products mainly around inputs, and they do what they're supposed to, and you get productivity, you get yields, etc. Now, I think that model has been very successful for the past 50 years. But it has limitations. And what it has meant is that in the last decade or so the potential that digital technologies or alternative technologies have shown, we are not, I would say best positioned to capitalise on that. So the skills required to experiment and create new businesses out of software technologies, hardware technologies, location-based information, those don't reside in the traditional companies. So I think what we realised as management is that there is a lot of potential to use digital technologies and other technologies in the way that they have transformed other sectors into ag - agriculture. And the first level of experimentation and innovation would be done by startups like these, which have more leeway, or more latitude to fail, they can take higher risks, and they can be much more nimble. So that was really the intent by which this team was set up. And that I would say, has been the guiding principle of our investing activity pretty much all through,

Rob Ward  3:32  
I can see why they're attracted to you. The nitty-gritty questions, why are you attracted to them?

Shubhang Shankar  3:38  
Yeah. Well, I mean, I hope they will be able to give an answer. But I think there are a couple of things that I can touch upon. When you're a small, early-stage company, I think any kind of support is welcome, as long as it doesn't impinge on your autonomy and autonomy can mean the desire to take risks, desire to explore avenues that you want to explore, or the desire to work with whoever can be a potential customer. So I think what we decided very early on is that we are not going to engage in a bear hug for these startups. We are not going to point them in a certain direction or mandate, anything that we think that they should do. I think we realised very early that we are not the startup and we are not the entrepreneurs here, we want to take a backseat. What we would l like to do is that as part of now 48,000 people strong organisation, we have knowledge and we have some capabilities within our network that can be quite useful for startups, especially those who have their origins more on the tech side rather than on the industry side. We offer an upside without a downside, as I would like to think about it. You can get access to a network of corporate capabilities, scale and reach that would not be available to you otherwise or would take a long time to be developed. You'd get sparring partners in the board when it comes to discussing certain strategic topics or certain industry level specifics. So I'd say that is what we bring to the table. We bring upside without any real downside.

Rob Ward  5:16  
That's good to hear. So out of interest, is there anything that's mandated as part of that investment? Or as you described it to me, it sounds like it's just a working relationship by dialogue, if you like, where you work together. The level of obligation versus compensation, what is the balance?

Shubhang Shankar  5:34  
Yes. So our investing activity are the philosophy behind Syngenta ventures investing is, and it's actually written on our website as well. We asked for no special terms, no commercial benefits as part of the investment when we invest in a company look at our equity investment like any other equity or a financial VC. So we will put in money, we will take an equity stake, there is not a single term which benefits Syngenta that we mandate. The flip side of that is that our role is to be a facilitator of dialogue between the small company and Syngenta, the large corporate machinery, and there are no obligations or commitments on Syngenta's side either. So it's basically a free market. If I was to be blunt about it, if we invest in a company, then the company is free to work with any of our competitors but our internal colleagues are also free to work with any of the startups competitors.

Rob Ward  6:30  
Which is fair enough! You can't have it both ways, can you!

Shubhang Shankar  6:33  
Exactly.

Rob Ward  6:34  
And I remember you saying in a previous conversation, I said to you what if the competitor wants to buy that business on an exit? Because I think exit is the next big challenge or question I think a startup or scaleup would have about as a corporate venture capital purchase. And you gave me a really interesting answer to that last time. I wonder if you could say the same thing this time?

Shubhang Shankar  6:51  
Well, I don't remember.  You can check against what I said. All I will say is that, as an investor, I would have no problems, I just hope that they squeeze them for the maximum price possible. That's the venture capital side in me. At least I'm consistent. But I think this is indicative of the philosophy that our group has, and it's a philosophy that really drives our behaviour, when we are investing, and when we are in the space. So we are on the side of the small copy, think about the small cause interest. And what we have done and I can say this quite without equivocation is that as part of our investment, we have never put in a right of first refusal, or any kind of constraints on the exit potential of our companies or even the collaboration potential for companies. And we maintain Chinese walls. So if there are sensitive conversations about a commercial relationship with our competitors, we will step out of the boardroom. The investment by itself puts no constraint on the autonomy of the company in any way whatsoever. Of course, what you'd like is, if the company is going for an exit, then ideally, there should be an auction that everybody should be involved. And you know, Syngenta also hopefully would be involved in that process. Then in that process, if somebody else comes out to be the best place to take the company to the exit, then that's fine. That's a board-level decision, the board has to do what is most beneficial for shareholders. So that's never a problem.

Rob Ward  8:29  
I think that's very refreshing. And good to hear, particularly on First Rights on purchasing clauses, which you're saying you don't do. So just give me some idea the sort of businesses you're looking to work with. I can see in your website, you've invested in 21 businesses, is that up to date, and also give some information about the criteria you're looking for regarding investment?

Shubhang Shankar  8:50  
Yeah, it's broadly up to date, there are some investments that for a number of reasons we may not disclose. But the number that you see on our website, ballpark, that is correct. We are an agri food fund, in some ways. So that's our boundary, we are not into investing in cryptocurrencies or mobility or Bitcoin. We don't understand that space. and Syngenta has no reason to believe that we can add value to those companies.

Rob Ward  9:21  
No one understands Bitcoin, don't worry about that!

Shubhang Shankar  9:24  
Exactly. So we are agri food investors, we believe that we understand the space and those are the companies where we can add value and they would add value to us. Now, within that sector definition, at least our company and our group has been quite farsighted and said that look, you have significant autonomy, you can invest in companies that let's say, support our core business. And for the moment, let's assume our core business is chemicals and seeds. So you can invest in r&d technologies that support it, you can invest in companies that absolutely look to reduce the consumption of chemicals and seeds and that's also fine. So something that absolutely disrupts our business is also okay. We also have the autonomy to invest in businesses that do not have a direct link with Syngenta's existing lines of business right now, but they can be strategic for us. So we can invest downstream into you know, agricultural ecommerce into FinTech for agriculture, even though we are not in those businesses. Or we can take a position on any kind of a mega-trend that is relevant for food and agriculture. And a good example is, let's say alternative proteins. So last year, we organised a hackathon on alternative proteins, where we ended up investing into companies that were developing alternative protein-based businesses. Now, that's not a business we are in that's much more downstream than selling chemicals and seeds for farms. But it's a space which we decided we would like to take a financial bet on. So those other sectors in which we invest, maybe lastly, I'll just round it off by talking a little bit about the stage of our investments. So the companies we invest in, I would say, our sweet spot to enter a company is series A to series C, we invest up to $5 million, each time in a company. And we like to be in the board, either as an observer or as a director. And I think series C is probably the last time a $5 million check can get you a board presence. It varies. It's not hard and fast. But that's why we believe series A to series C is our sweet spot. On occasion and on a case by case basis, we can also invest in Seed rounds. But I would say that really should cover almost 90 to 95% of our investing activity.

Rob Ward  11:43  
When you say seed, because Seed is interpreted in lots of different ways, so they would need to have revenues even at Seed?

Shubhang Shankar  11:51  
That's a good question. Because I think you're absolutely right, there are as many definitions of Seed as there are Seed rounds for us.

Rob Ward  11:57  
Or even seeds!

Shubhang Shankar  11:58  
Yeah, or even seeds, yes! For us, a Seed round is the first institutional round that a company would have, that's how I like to think about it. So till then you could have bootstrapping, or angels, friends and family investing or really, really small fund investing supporting a startup. I would say, seed for us is the first time a proper institutional investor would enter a company. So there is an example of a company in Israel that we invested in, in the seed round, till then they had been supported by some small VCs as well as more governmental organisations so not purely Venture Capital. We were part of the first injection of market-driven financial VC money into the company. The last interesting point to add is that we have a preference to invest as part of a consortium because our mandate is quite global. So we make investments in multiple geographies and multiple regions. However, early-stage companies do benefit from having a Venture Capital fund located close to where they are, which can potentially handhold them, especially when we invest in new countries, we really do like to invest alongside another investor who is based in that nation.

Rob Ward  13:22  
Can I clarify here? Because there's a big difference between joining and leading? Will you lead in that situation or would you follow a leader?

Shubhang Shankar  13:31  
I think, just on an empirical basis, we've usually been followers, but we can lead rounds as well. It's really dependent on case by case basis. But if I were to look at the 21 companies that you see on our website, I think in the vast majority of them, we would have participated as members of a consortium led by somebody else.

Rob Ward  13:50  
So if that somebody else would come in, if you come in, because this dance that goes on these rases, and forgive me for sounding a little bit cheeky, but it feels like that at times, the ones we've been involved with. If you come in, if they come in, you might go in together. So in other words are almost equals rather than following or leading. But if it's subject to conditional on the other investor joining, and they said the same to you, would that be a problem?

Shubhang Shankar  14:17  
I think it would be, it depends on a case to case basis, because the situation may vary. But in general, what we'd like to, it's a bit like I don't know it was one of the Marx Brothers who said it, I wouldn't want to be part of any club, which would have me as a member. So it's a little bit of saying that look, if the only reason a startup is getting money is because Syngenta is coming in, then I'd rather not because a good startup should be able to attract capital on its own standing. If you're in, that doesn't fill us with a lot of optimism.

Rob Ward  14:51  
So to just pull this together with you. You're the first institutional round, you'd like to be the first institutional round and you're focusing on the core sectors within ag tech, is there any geographic limitations? I.e. countries you only work with or your countries you don't work with?

Shubhang Shankar  15:03  
Right. So just to clarify, we don't have a preference to be in the first institutional round, but we can, on occasion be part of the first institutional round.

Rob Ward  15:13  
Sorry, I meant that, thank you.

Shubhang Shankar  15:15  
No problem. In terms of geography. I think we're reasonably geography-agnostic. If you look at our portfolio, though, it would be very heavily dominated by the US and Western Europe. And I think that has to do probably with the state of Ag tech funding in general in the past 10 years, because our investing activity in earnest It started in 2011. And I would say between 2011 to 2018, especially on the upstream agriculture side, venture capital was disproportionately being invested in the US and Western Europe. I would say it's only in the last three years that agri tech capital itself has become much more globalised and we have become global along with it. So post 2016, I think 2016 was when we made our first investment in Latin America, and Israel, which were two new geographies for us. And at that point of time, Israel was a frontier market for agriculture and agri tech today, nobody would ever say that. I think in 2015, it was quite accurate. And we had made investments there. In 2018 we invested in India, same thing, I think in 2018, India was a frontier market for ag tech. Today, nobody would say that. And we've been consistently, you know, pushing the geographic frontier. So we have investments in Australia, India, Israel, Latin America, China, and we look everywhere, we may not invest everywhere, because you know, there's only so many investments a VC fund can make. But I'd say there is no preference. And there is no negative list of a region that we will not invest in. Maybe just highlight some principles, which govern our level of comfort with a market. What we really like to see is at least an emergent VC ecosystem in the country. So what would really help us get comfortable with investing in new geographies, if we see that venture capital has gone into that country, maybe not in agriculture, but at least in other sectors, so in consumer internet businesses, or in any other space. Has that country received venture capital, have there been exits in that country, again, not necessarily in agriculture. So what we like to see is a relatively not developed, but at least an emergent ecosystem of venture capital, of startups and of financing because of the way we invest. We probably will always invest in companies that are dependent on getting financing from a large number of investors. So what we want is a deep enough venture capital ecosystem in the country that we have. The other thing, which makes a little bit of a difference, I would say is the size of the domestic market, that is a major factor. Because if your domestic market is large enough, then you can reach some scale of commercialisation without having to go through the complications that come with internationalisation and crossing borders. And that's unfortunately, I think, for many European countries, that's a challenge because many European countries have very, very small domestic markets. The basic population itself may is quite low, in some cases could be 4 or 5, 8 million. And then not many of them are in agriculture. The only country to some extent, which has overcome the limitations of small domestic market is Israel. But that's almost a little bit on the other side, it's almost like an offshore, lab developing solutions for international markets from day one.

Rob Ward  18:45  
Yeah, yeah. Just closing up now. But I would like to ask you what's next? What sector do you think is going to be the emerging space? And what do you think the next year to two years will look like in the ag tech sector? Agri-foodtech sector?

Shubhang Shankar  18:57  
I think it's a great question. I think in terms of trends, what will continue to happen, though, I think AgFunder released a report yesterday, which slightly goes against this trend. I think agri and agri food venture capital will continue to become more global, you will see more countries develop an agritech ecosystem. And that shouldn't be very surprising because if you look at the agriculture industry itself, the spread of production and the spread of value creation is much more even across nations than the spread of venture capital. So I think agri food investing will continue to become more globalised. In terms of sectors or areas of emerging areas I think that's a fantastic question. If I knew that I would be very happy but let's look at a few trends. I think there will be a push towards solutions, which are probably less tech-heavy, but much more market linkage and credit provision driven for emerging markets and for smallholder farms. In the last 10 years, the first decade of agri tech solutions and investing were very heavily focused on large, almost corporate study farms, or at least large farms. The next stage is to extend innovation to small farms. And I think we will see Agri FinTech emerge as a solution because there is a huge challenge of credit throughout the agricultural ecosystem. It's even there in the US and Latin America, which are, which are mechanised farms. But that problem is especially acute even in emerging market farms. In fact, in the UK, you have a new agriculture focus bank, which I think has just started called Oaksburry. So even there is a demand for solutions like this. I think we are increasingly seeing more activity in robotics for agriculture. And that's to do with the fact that agriculture has a well known labour challenge around harvesting. Manual picking of fruit is a backbreaking and low paying job and increasingly, even migrant workers are finding alternatives or better paying jobs in their own homeland or other countries. So, I think manual harvesting is no longer a vocation of choice for anyone. And that means to overcome the labour shortage, we will see more mechanisation and more robotics, I think biologicals will continue. I think the EU has very clearly put a policy framework to move away from synthetic chemistry. So I think biologicals are anything to do with precision spraying that has a very strong future, particularly in Europe. And I think the last piece, which I am excited about is the application of artificial intelligence and machine learning, not for farming operations, but for r&d and research in our sector. Because I think, in general, r&d is very much trial and error-driven. Whereas I think, if you apply artificial intelligence, you can do things that probably are beyond the scope of the traditional orienting machinery. And this is something that we have seen in farmers in the life sciences sector, I'm sure that will happen in agriculture. That's a little bit about agriculture. On the food side, I think alternative proteins will continue to grow and become popular, I think there will be a linkage between the attributes, output traits, or you know, the attributes that we require in our food, and how to produce seeds, which reflect those attributes. Just last week, there was an acquisition announced of a company called Vindara, which was in our portfolio actually. They develop, they're in the business of developing or producing seed, what it is optimised for indoor farming and vertical farming, and then they were acquired by a vertical farm company. Those are some of the trends slightly more downstream, which I think will continue to be attractive areas for us to take a look at. And then the last piece, I would just say is innovation, entrepreneurship and venture capital is all about the unknown. So I'm 100% sure that there will be three times as many sectors that I'm not even aware of that will emerge in the next one to two years.

Rob Ward  23:13  
It's a get out of jail answer. You've given us a fact-filled punch of what you're doing and it's fantastic to hear. I think it's really exciting. The industry is booming and it's got so much potential to make huge change for both people and the planet. And that's really exciting. I'm gonna thank you for your time today, Shubhang. It's been great to see you again. I look forward to our next chat. It's always, always a joy to hear you and your fascinating insights. So thank you again for your time.

Shubhang Shankar  23:40  
Thank you, Rob. It's always a pleasure to talk to you. And I look forward to being in touch.

Rob Ward  23:45  
I hope you enjoy today's podcast, gosh, wasn't it interesting to hear how a large corporate with the firepower that Syngenta have, how they are very carefully thinking about the importance of nurturing the existing culture and structure of the small businesses that they're investing. Addressing the fears that these small businesses have is quite right. And it's something that we've never seen actually happen in any of the deals that we've been part of in this area, but are very legitimate concerns that a business can have. And it was really good to hear how they're addressing those issues. There were three key trends that were talked about today. One trend is really fundamental is how agriculture in developing countries can be liberated by new forms of technology that essentially are FinTech ideas deployed within a farming context. The potential for this is enormous, particularly around traceability, but also how a farm can now re-finance themselves. So that area is a multi multi billion dollar industry that hasn't even started yet. So that's very exciting space. We agree with that as a potential future trend. The second area was labour saving. Well, we've been doing that forever. And but of course, the acceleration of that is very apparent for lots of reasons in many countries, which are struggling to employ people to do manual work. Yes, that is a good point, and it's definitely more needed. However, gotta be really careful about unit economics. That is the unit economics for the farm or the blue manufacturer, does it really add up replacing people with a machine that then has new costs? And yes, it can do, absolutely. But let's be careful and make sure that those numbers really do add up for the business that is buying it. And the last trend is about biostimulants. The world market for agchems, be it petro-chemical based artificial fertilisers or pesticides or fungicides, is a multi multi billion dollar industry. And yet, potentially that could be replaced by biostimulants in many cases, or at least substantially reduce them. This is an incredible opportunity for many people around the world and it's a great opportunity to change the climate impact that many of these petrochemical-based materials are using. Really excited about the potential for that and all the other things we talked about today. It's been a real pleasure putting this together and stay tuned for the next one because it will be soon.

Iliyana Dimitrova  25:50  
Thanks very much for listening. If you enjoyed this episode, please subscribe, give us a five star review and share the podcast with your friends and colleagues. For more information and takeaways from this episode, please visit forwardfood.tech. See you next time!

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Learn more at syngentaventures.com.

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