Our Obsession with Optimizing the Food System, One Startup at a Time

By Brett Brohl, Managing Director, Techstars

Brett Brohl, Managing Director, Techstars

When you think “food,” billion dollar startup exits probably aren’t top of mind.

But, while many of us still cling to the idyllic image of the old-school family farm or a home grown consumer product, the reality is that food and agriculture have been fertile ground for some of the last decade’s most innovative technological solutions.

It started with Agtech back in 2013, when Monsanto announced its acquisition of The Climate Corporation, a startup whose software and insurance products help farmers improve profits and guard against financial loss due to inclement weather. This $1.1 billion dollar deal largely catalyzed awareness of the space, which has since spread across the entire vertical—from farm to fork to food waste mitigation.

Just this month, the Boston Consulting Group released a report quantifying food waste as a $1 trillion problem and a $700 billion opportunity. And, it’s valuations like these that have VCs watering at the mouth. 2018 is on target to set a decade-high record for VC food tech investment, with over $1.3 billion invested in the first six months alone.

So, where exactly is all this money going?

Driven by increasing consumer demand for convenience, transparency, and sustainability, the food tech sector continues to expand, encompassing restaurant tech to clean meat product development, and everything in between. For entrepreneurs craving a food system revolution, the world really is their oyster.

Five Food Tech Trends and the Companies Tackling Them

1. Big Data

It’s not news that big companies have lots of data. What is surprising, however, is the inability of these industry behemoths to efficiently activate this information. Instead, large companies are looking to startups to help them turn this asset into added revenue. One popular use-case for such data is personalization. Startups like dishq combine vast recipe databases with food science research and customer behavior analytics to deliver personalized recommendations to the end consumer. Instead of relying on Yelp reviews and Google ratings, the modern eater can now receive recommendations based on her unique taste profile and preferences—doing for dining what 23andMe has done for ancestry and health.

2. Artificial Intelligence

Perhaps even more exciting is the role that artificial intelligence plays when applied to this big data. dishq’s AI technology can uncover novel food trends (Nutella and soy sauce, anyone?) and consumer behaviors, invaluable insights for CPG brands in an increasingly competitive market. But, brands aren’t the only ones benefiting from AI technology. Traive, an innovative lending platform for Brazilian farmers, is using alternative data and AI to generate credit risk assessments for a never-before-tapped market. This unique data-driven underwriting process keeps costs low for farmers and improves returns for lenders.

AI also has huge implications for automating tedious processes in the agriculture and restaurant industries. For example, Big Wheelbarrow, an Austin-based startup, has created an AI-powered sourcing engine that helps large scale produce buyers work with more local growers by automating time-consuming transactional conversations. Similarly, by integrating seamlessly with POS and supplier invoicing systems, tools like Pepr are using AI to automate inventory, accounting, and weekly P&L generation. This type of operational efficiency not only saves small business owners time and increases profits, but it can also significantly reduce wastage.

"Driven by increasing consumer demand for convenience, transparency, and sustainability, the food tech sector continues to expand, encompassing restaurant tech to clean meat product development, and everything in between"

3. Supply Chain Efficiency

We already produce one and a half times the amount of food needed to feed everyone on the planet; unfortunately, one-third of that global production is lost annually across the supply chain, and inefficient production and transportation are largely to blame. On the production side, farmers need more education on how to protect their crops and livestock from pests and diseases with potential food safety implications. That’s why startups like EIO Diagnostics, a touchless mastitis detection tool for dairy animals, and HeavyConnect, an in-field food safety compliance app, are stepping up to provide this support.

On the transportation side, companies like TradeLanes are helping producers and retailers reduce loss by digitizing and automating the manual processes required to ship ocean containers. This ensures food actually gets to your table rather than spoiling at a port.

4. Upcycling

In the fight against food waste, chefs and CPG startups have made the old adage “reduce, reuse, and recycle” cool again. Originally led by thought leaders like Chef Dan Barber and his WastED pop-up, “upcycled” products have swept the market: ReGrained turns spent grain from breweries into granola bars, Misfit Juicery turns the produce farmers can’t sell into cold-pressed juice, and Renewal Mill turns the byproduct of soymilk production, okara, into a high-protein, gluten-free flour, to name a few. The availability of these products, coupled with large scale consumer education campaigns like NRDC’s Save the Food, are helping turn the tides.

5. Modernization

Despite all these technological advancements it’s important to remember that food system innovation continues to lag behind that other industries in many ways. For the dogged entrepreneur, this presents a huge opportunity to innovate the “unsexy” — or rather, the old school hardware and processes that still govern large swaths of the food production landscape. When it comes to evaporating and pasteurizing beverages, for example, we’re still using imprecise, inefficient conventional steam-powered heating. But, with a little out-of-the-box thinking, startups like Induction Food Systems (IFS) are harnessing in-line heating technology originally created for NASA to unseat steam, increase efficiency, and improve sustainability. These types of solutions may not be as flashy as alternative proteins or machine learning, but we shouldn’t discount the economic value of these dark horses.

So, when you think of “food” and “agriculture,” billion dollar exits may not be top of mind. I hope I’ve convinced you that they should be.

It’s incumbent upon on big corporations to realize the power of startups to optimize the global food system and jump on board as partners. Disruption is coming, and the Cargill’s, the Ecolab’s, the General Mills’ of the world have a choice: join the movement and give entrepreneurs a chance or risk getting disrupted one piece at a time.

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