In articles one and two of this series, we outlined four approaches to building crop resilience and explored how genome editing and other technologies for next generation breeding are democratizing crop improvement. These new technologies are enabling startups to target underserved crops, tackle complex traits, and pursue diverse business models, from full-stack seed companies to R&D service providers.

But technology and business models aren't enough on their own. The path from breakthrough technology to sustainable business requires alignment across market conditions, regulatory frameworks, and capital structures. The companies most likely to succeed are those that don't just bet on one of these conditions improving; they’ll actively work to influence them. This might include building business models resilient to regulatory uncertainty, generating early revenue to reduce dilution and prove value capture, and finding investors who are aligned on timelines and milestones. 

In particular, three conditions stand out to us as critical for the next 5-7 years and these are guiding our thinking about what we’re looking for in this space.

Demonstrate value capture, not just value creation

The most common challenge we see is straightforward: companies prove their technology works and even show market demand, but struggle to design business models that actually capture a viable share of the value they generate.

In crop breeding, this challenge is particularly acute because agricultural value chains are complex and asymmetric. For example, startups working at the trait identification end of the process in partnership with a seed company end up distanced from the eventual beneficiary of their technology - the growers, processors, and end consumers. So the question isn't whether value exists, it's where the competitive advantage comes from, who benefits most, and where a company can realistically capture its share.

An example that illustrates this is Avalo's climate-resilient cotton varieties. Rather than focus on traditional seed licensing models, the company is connecting cotton buyers with cotton farmers. By helping farmers earn more for higher quality and lower-emissions cotton, while assisting textile mills and clothing brands to source higher quality fiber and reduce their Scope 3 emissions, Avalo is positioning itself closer to where value is captured.

This combination of a strong value proposition and a business model designed to capture that value is attractive to us as investors, but we don’t believe that there’s a single path to achieving this. The key is designing for value capture from the beginning, not hoping it materializes later.

Regulatory clarity will determine the pace of innovation

The economics of crop improvement have historically been challenging: spend over $100M and work for 7-10 years to deregulate a genetically modified crop, which limited serious development to major crops where market size justified the investment. This skewed the industry to well-capitalized incumbents with the technical and financial resources to succeed.

Genome editing only has the potential to transform crop breeding if regulators treat edited crops differently to traditional GMOs. The shifts in the regulatory landscape we're seeing globally will fundamentally shape which companies can compete and which markets develop first. Many countries - including the USA, Canada, Argentina, Brazil, Chile, Colombia, Australia, India, UK, Japan, Nigeria, Kenya, Ghana, and Malawi - have established frameworks that do not classify genome-edited crops as GMO when the changes could occur naturally or through conventional breeding. While the EU has previously taken a precautionary approach, a new framework could see regulation relaxed for genome-edited crops.

For startups, this matters enormously. A clear path to market without the $100M deregulation burden means more innovation in underserved crops, bringing products to market in 3-5 years rather than a decade, and even doing so without raising $10’s of millions in funding. It means competing on the strength of your product and your go-to-market strategy, not just your balance sheet. However, if major markets shift to restrict genome-edited crops or if the approval process becomes unpredictable or more difficult, even well-funded startups will struggle to attract capital or justify the cost of developing their own varieties. 

Public acceptance and social licence will also be critical to the success of genome edited crops and the companies involved in making them. While there are regional differences in overall willingness to buy/eat genome-edited foods, it appears that consumers are generally more accepting of genome-edited crops than GMOs, especially where there are health and/or environmental benefits. Pairwise has also conducted its own research, which showed ‘overwhelming consumer acceptance’ of the technology.

The signs are hopeful, but it remains to be seen whether regulatory frameworks and consumer sentiment will enable the broader growth of this industry or largely constrain the opportunities to the incumbents. 

Early proof points will de-risk the category

Ultimately, the sector needs visible wins (products in market, revenue scaling, successful partnerships and exits) to demonstrate that this wave of innovation can deliver on its promise. While this is important across industries, it seems particularly relevant at this intersection of biotech and agtech, sectors that have both seen disproportional drops in funding in recent years relative to other venture capital sectors.

We’re already seeing some products in the market, accompanied by revenue generation, but the exit landscape for crop breeding startups is still taking shape. The many examples of startups partnering with large and mid-size seed companies signal interest in the solutions, but we need to see these more R&D-focused relationships evolve into commercially significant, scalable revenue and then exits to prove the market works at scale.

For today's genome editing startups, many of whom are pre-revenue or in early commercialization, the incentives for acquisition are unclear. Will acquirers pay for platform potential before revenue scales, or will these companies need to demonstrate commercial success first? And if commercial traction is needed, can venture-backed startups sustain themselves long enough to reach those revenue levels?

Could the partnerships we’re seeing develop across the value chain also open up opportunities for non-traditional acquirers? For example, Coca Cola is partnering with Avalo to find sugarcane varieties with higher yields and lower input-requirements to help address their scope 3 emissions. Meanwhile, Mars is licensing Pairwise’s genome editing platform to help develop more climate-resilient cocoa crops. Might a food company see value in acquiring a crop breeding company to secure resilient or differentiated supply chains in the longer term? 

Companies with a focus on regenerative agriculture could also see strategic alignment in bringing genetics capabilities in-house given the potential synergies associated with lower input use, greater carbon sequestration, and novel/enhanced rotation crops. We’re already seeing programs developed by startups (e.g., Indigo Ag and Regrow, a portfolio company of ours) as well as major food and seed companies in this space. Will these partnerships expand to include crops with novel traits?

While it’s hard to predict exactly what the future acquisition landscape will look like, the more diverse the buyer pool, the more opportunities will exist for successful exits for a range of startups.

A future suite of powerful new tools

While this article has focused on genetic improvement, other approaches to crop resilience all have roles to play. The companies pursuing rapid genetic improvement are not replacing these other approaches but rather adding powerful new tools to address the challenge of maintaining or even enhancing plant performance. 

If you're building in any of these spaces, we’d love to hear how you're thinking about value capture, navigating regulatory landscapes, and positioning for strategic exits. If you're investing, let's discuss how we can collectively support the proof points this sector needs to unlock its next phase of growth.

Read the full series:

• Introduction: Breaking Barriers in Crop Innovation
• Article 1: Four Paths to Climate-Proof Crops (And Why We're Focusing on Genetics)
• Article 2: The New Playbook for Crop Genetics

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