In the previous article, we outlined four of the approaches we’ve been seeing to building crop resilience. We introduced the $100M barrier that has historically kept advanced crop breeding (via genetic modification) in the hands of a few dominant players. We also highlighted the growth we’ve been seeing in crop innovation, particularly with the introduction of genome editing and AI. In this article, we break down the conventional approaches, how they’re changing with the entrance of next generation plant breeding startups, and our observations about implications for business models and investment theses. 

The democratization of plant breeding

The conventional process for developing new crop varieties has long been the domain of established seed companies who have built formidable competitive advantages around proprietary breeding and phenotyping datasets, elite germplasm, and production and distribution networks. These companies also have the technical and financial resources to cover the significant expense and timeline required to bring a new trait to market (not to mention distribute it to farmers). This has historically limited serious development efforts to only the major commodity crops (corn, soy, cotton, etc.) where market size can justify the investment, typically focusing on genetic engineering of simple, often single-gene, traits that function in an on/off manner like herbicide-tolerant canola or insect-resistant cotton.

In contrast, today there are dozens of companies pioneering novel approaches in this space. These companies are working across all parts of the plant breeding process, bringing fundamentally different capabilities and business models. Although much attention has been drawn to the potential of CRISPR/Cas systems to enhance crop performance, innovation is occurring around and beyond this core tool of genome engineering. This stretches from complementary tools that enable faster and more controlled introduction of genes into both transgenic and non-transgenic crops, all the way to a rapid evolution platform based on highly diverse genomic datasets and predictive modelling. 

We’ve summarized the conventional approaches as well as how and where these new companies are intervening in the figure and following sections. While we’ve split the process into five separate stages for clarity, in reality, many companies are working across two or more of these stages. The range of approaches companies are taking, including their different target markets and value propositions, demonstrates how fast the space is moving and how diverse it is becoming. 

Germplasm and datasets

Rather than focusing exclusively on the major crops (the domain of the incumbents), many startups are targeting underserved crops like vegetables, sugarcane, and barley. These crops still represent large markets and have nutritional and/or agronomic importance, for example, in a crop rotation. Importantly, these companies can also leverage unique datasets and insights for these underresourced crops and traits, many of which are based on years of academic research. This provides a headstart for trait and target identification and helps to build a competitive moat.

Examples include companies such as Heritable Ag and Avalo, both of which are helping to reduce the time to market for new varieties through modelling the complex interplay of genetics, environment, and management. They’re creating value for crops and geographies that have typically been underserved.

Trait and target identification

Recent technological advances are particularly striking in trait and target identification, where AI and machine learning are enabling data analysis and genome optimization at unprecedented scales. This allows companies working in this space to move beyond simple traits to tackle complex, multigenic traits and to focus on fine-tuning regulation of gene expression rather than simple on/off switches. 

Some companies are developing grower-facing traits that address pain points in production and harvest. InnerPlant and Insignium AgTech, for instance, are developing plants that send clear signals in response to stress. This includes early disease detection and warning systems that allow growers to take preventative action before yield losses occur. Phytoform Labs is working on the rapid delivery of a range of genome-edited traits including agronomic traits such as compact, jointless tomatoes designed for indoor cultivation that significantly lower waste and damage at harvest. Plantik is focusing on altering the dark genome (gene regulatory rather than coding sequences) to improve the heat tolerance of crops.

Consumer-facing traits represent another major category where companies are looking to capture value beyond the farm gate. Although few genome-edited foods have been commercialized, consumers appear to be accepting of products that offer tangible benefits like nutritious mustard greens without the bitter taste. Pairwise's seedless blackberry exemplifies this approach, targeting a clear consumer preference while potentially commanding a price premium. These differentiated traits and products allow Pairwise to demonstrate the value of its genome editing platform in smaller crops alongside partnerships with Bayer and Corteva for developing agronomic traits in row crops.

In some cases, a trait may deliver strong benefits to both growers and consumers. For example, genXtraits has developed tomatoes with a high vitamin C content that boosts human nutrition and protects crop yields. The company is looking to license the trait for other crops including corn, soybean, and potatoes.

Trait delivery

Delivery of complex traits can be enhanced by a range of additional technologies including multigenic editing (e.g., Inari and PairWise) and novel transformation systems (e.g., Vireo Ag and Phytoform Labs). These technologies accelerate the process of creating genome edited plants, thereby reducing the time and cost of academic research, proof of concept work for startups, and commercial breeding programs for small and large seed companies. This breadth of customers has the potential to create multiple revenue streams through licensing and service agreements.

However, large seed companies are also making significant technological improvements in this space. For example, Syngenta has a proprietary, patented process that integrates haploid induction with genome editing and is making some of its genome editing technology available to academic researchers. Corteva also has proprietary (multiplex) genome editing capabilities, a joint venture with Pairwise, and multiple other genome editing partnerships, and is widely licensing its platform technology.

Trait validation

While trait and target identification often begins in silico, ultimately, a trait must be  validated in living systems. Companies are innovating here, too. Phytoform Labs’ high throughput protoplast transformation and screening methods, for example, can provide rapid early validation of new traits before expensive glasshouse and field trials. In contrast, CQuesta’s partnership with the Salk Institute provides a pipeline of traits backed by significant studies in plant sciences. Advances like these can compress development timelines, which has the potential to generate earlier revenue for startups via milestone-based commercial partnerships. 

New commercial varieties

Even once a new variety has been validated in multiple field trials, multiple steps to market remain. This includes meeting regulatory requirements, bulking up seed, and tapping into new or existing distribution networks and supply chain relationships.

Whether a startup or their customer is responsible for each of these steps influences revenue type and timing (which then relate to fundraising plans). 

Going beyond technology and finding business models that work

Technological innovation alone is not enough for companies to succeed at scale; ultimately, the commercial strategy choices they make will be at least as, if not more,  important. Commercial choices also have implications for investors.

Major crops vs. underserved markets

One common choice we’re seeing is to work with major crops (corn and soy) because these represent the largest addressable markets. Companies taking this route aim to develop traits in these crops, but often face major challenges to scale and bring new varieties to market themselves. Beyond the capital intensity of such an approach, startups also face difficulties around accessing or developing elite germplasm, as incumbents control the breeding datasets and genetic material that have been refined over decades. While we are commonly seeing partnerships between startups and the major seed companies, it remains to be seen whether the market size benefit will outweigh the strategic risk, especially as these seed companies control production and distribution and may be partnering with multiple startups in the space simultaneously.

Other companies are attempting a similar playbook - trait development - but in smaller markets such as tree crops, sugarcane, or vegetables. While relatively smaller and potentially less attractive to certain types of investors, these markets still offer potential for significant revenue and face less entrenched competition. Startups in this space might still partner with (smaller) seed companies or even acquire their own quality germplasm to  be able to produce their own high value seeds. 

For startups in all markets, careful selection of crops, traits, and partners to maximize the chances of commercial success given the complexity and asymmetry of the value chains is critical. For investors, the consideration will center around the relative market size compared to the strategic risk.

Licensing platforms or producing seeds

Rather than building a complete seed business, platform technology models offer an alternative route to commercialization through milestone-based payments, licensing, and royalties. Some companies have also found ways to capture value without developing new crop varieties at all. By deploying proprietary models to identify the best existing variety for a particular region or farm and providing agronomic advice, they can solve specific problems in the value chain without the capital intensity of seed development and production.

Considerations for investors here include the type of value a startup’s IP offers to customers (and who within that customer - what division, what budget line item, etc.) and any implications for the time to revenue and terminal enterprise valuations. 

Providing service to access revenue independent of new varieties

In another model, startups are positioning themselves as service providers for R&D across both industry and academia. By offering models and methods that accelerate internal development and breeding programs, these businesses can generate revenue relatively quickly while building relationships that may lead to future licensing opportunities. This approach provides earlier technology validation and reduces dependence on the long development cycles inherent in bringing new varieties to market. 

While there is some appeal to this approach, investors must also consider whether there are potential tradeoffs for margins, and the capital intensity of scaling up a physical (lab- or field-based) service.

Matching business model to technology and resources

Choosing a business model depends heavily on a company's core technology, the founding team's background and network, and investor expectations around capital requirements and time to revenue. Companies with breakthrough platform technologies may have the luxury of pursuing multiple models simultaneously, while those with specific trait innovations may need to choose a narrower path.

But proving your technology works isn't the same as building a sustainable business; so how do these startups actually capture the value they create? In the final article of this series, we'll dig deeper into the potential of different business models and examine what needs to fall into place over the next 5-7 years for this wave of innovation to deliver on its promise, and what could derail it.

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 3: Conditions for Success in Crop Innovation

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