Starkly intensifying climate-induced stressors to our natural systems, a growing population, and an established agricultural industry fueling a vicious, exacerbating cycle of climate change and productivity loss through its short-term focus on crop yields. These are some of the main challenges faced by the agricultural industry, and continuing business as usual will not ensure a resilient agricultural system.

To address the challenges, investors and start-ups should widen their perspective to solve for resilient, healthy ecosystem health across three innovation areas: biological resilience solutions that plug into existing supply chains, alternative farming methods that free up land and produce food in new, resilient supply chains, and enabling innovations that can fuel the transition towards a resilient agricultural system.

Climate change puts agriculture’s productivity at risk

Productive agriculture is one of the most important building blocks for ensuring a livable and stable existence for all human beings. This foundation is challenged by a rapidly growing population and the accelerating consequences of climate change. As the world reaches nearly 9.7 billion people by 2050, the world must achieve a staggering 70% increase in food production to ensure global food security. At the same time, climate change leads to crop failures and disruptions to the global supply chain, posing significant economic and social risks to society:

From an economic perspective, changes in temperature and precipitation patterns, along with the increased frequency of extreme weather events, significantly impact agricultural output. According to a study by Cornell University, global farming productivity in 2020 was 21% lower than it could have been without climate change, equivalent to losing about seven years of agricultural productivity growth. Adding to this, McKinsey found that the likelihood of a +15% global yield failure is projected to double by 2030 and quadruple by 2050. In essence…

“… Multiple-breadbasket failure - simultaneous shocks to grain production in a sufficient number of breadbaskets to affect global production - becomes increasingly likely in the decades ahead, driven by an increase in both the likelihood and the severity of climate events.” McKinsey

From a social perspective, the failure of entire breadbasket regions poses a direct threat to the availability and affordability of food on a global scale, potentially leading to food shortages, increased prices, higher poverty rates worldwide, and ultimately migration: In 2023, food prices outpaced inflation by two percentage points and the International Food Policy Research Institute found that recent global price shocks have led to a rise in national poverty headcount rates by as much as 7.7 percentage points and undernourishment by up to 4.4 percentage points.

On top of this, the nutritional value of agricultural products is challenged in our current mode of production: wheat protein content has declined by almost 1/4, alongside significant reductions in the availability of manganese, iron, zinc, and magnesium. Looking ahead, double-digit percentage decreases in nutritional value over the next decades are projected across central food sources like potatoes, rice, wheat, and barley, ultimately leading to further protein deficiency for hundreds of millions of people.

Climate change and conventional agriculture form a vicious cycle

While the consequences of climate change are already here, tackling the severe challenges related to productivity and food security faces potential obstacles due to the industry’s commoditized and, to some extent, oligopolistic nature. Consolidation in markets such as seed and agrochemicals has seen entire markets being split between a few major global players, allowing them to set the standard for conventional agriculture. Frankly, this standard has become to optimize for short-term yield gains, for example, through monocropping, tilling, and the use of agrochemical products such as synthetic fertilizers and pesticides. Ironically, although the innovation within the field has enabled an incredible historic productivity boost, its methods only exacerbate the underlying issues of securing agricultural resilience in the long run.

Applying agrochemicals and tilling mono-crop soils to achieve “immediate” productivity boosts leads to increased CO2. This increase comes from the lifecycle of producing, transporting, and applying agrochemicals, as well as from soil depletion. Conventional practices reduce the soil's capacity to hold water, CO2, and nutrients, making farmland more susceptible to flooding. The decreased carbon sink potential leads to a higher concentration of CO2 in the atmosphere. Monocropping and stripping the soil from microorganisms and a biodiverse environment increases the vulnerability to pests and diseases. Quite frankly, while these developments may initially lead to additional demand for agrochemical quick-fixes, the increased climate-induced disruptions to global agricultural systems call for breaking the vicious cycle and building the right conditions for productive and resilient agriculture instead.

In summary, conventional agriculture initiates a vicious cycle rather than ensuring food security: as climate change lowers yields, conventional agriculture responds by intensifying the use of agrochemicals. Between 2000 and 2020 alone, fertilizer use per hectare of cropland increased by 43%, exacerbating climate effects and further diminishing yields. Breaking this cycle requires a shift from optimizing for short-term yield gains to prioritizing ecosystem resilience.

Widening the lens to resilient agriculture and ecosystem health offers promising investment opportunities

Achieving long-term climate resilience requires an industry-wide shift towards a more holistic approach. When zooming out and considering the whole ecosystem surrounding agricultural production, we include water and ammonia cycles, mulch formation, soil health and resilience to climate-induced stressors such as heat, cold, shifts in precipitation patterns, floods, droughts, etc. Thanks to such a shift in perspective, opportunities to increase resilience and nature’s productivity unfold across various areas. We identify three main categories of innovation suitable for venture capital investment, some of which Look Up Ventures is actively investing in:

1. Biological Resilience Solutions that integrate directly into existing supply chains, often while promoting organic and regenerative practices

2. Alternative Farming Methods that free up nature while producing food in a resilient, low-carbon way

3. Enabling Innovations that can fuel the transition toward a resilient agricultural system

A short note about VC investing in agriculture

The agricultural industry is a commoditized and concentrated market. To achieve success and build a compelling business case, startups cannot just rely on the grand promise of a giant total addressable market. Instead, startups must consider how to capture a sufficient amount of value in the market. This can be done by branching out horizontally, for example, by developing a platform of solutions that target one (or several similar) markets. Alternatively, start-ups can consider how they can vertically integrate and capture more value across multiple steps of the value chain. While remaining laser-focused is always a balancing act, founders should keep this broader, long-term goal in mind when developing their business case.

1) Biological resilience solutions

Climate change impacts crops, plants, and soil through both biotic and abiotic stress factors. Biotic factors involve attacks by living organisms, such as pathogens and insects, while abiotic stress results from changes in the environment, such as increases in temperature, humidity, sunlight hours or wind, exemplified by, e.g., droughts, floods, or storms. Adapting to these challenges requires developing resistance to climate-related stress. This can involve enhancing the performance of existing crop variants or the health of the surrounding ecosystems through functional biologics or designing new crops through genome editing.

Functional Biologics

Functional biologics are a promising, future-proof response to the need for increasing resilience in agriculture. It also offers a platform for developing solutions supporting regenerative agriculture practices' much-needed growth. Functional biologics can increase crop protection and production by using natural organisms such as microbes, plant extracts, beneficial insects, proteins, and bioactives. Although their exact impact and interactions have been poorly understood for a long time, they have been integral to agriculture for millennia. The recent surge in advanced tools such as sequencing, genome editing, bioinformatics, and AI has significantly accelerated the promise of developing biological alternatives to harmful synthetic agricultural products.

The technological promise of functional biologics goes hand in hand with the underlying commercial opportunities:

• Functional biologics are 100% biological solutions that can boost the production of organic produce. They target an organic food market that doubled in sales between 2015 and 2020 within the EU.

• With its Farm to Fork (F2F) strategy, the EU is actively working towards sustainable agriculture by targeting a 50% reduction in synthetic pesticides and a 20% reduction in synthetic fertilizer use by 2030.

• Lastly, functional biologics solutions offer intriguing opportunities due to their potential for cost-effectiveness and quicker market entry: Biologicals are much less expensive to bring to market than conventional protection products, with total R&D costs of $10-$20m compared to >$300m for chemical counterparts according to Canaccord Genuity.

Broadly speaking, functional biologics can be categorized into three main groups, with biopesticides dominating the current market. Some solutions span across multiple areas:

- BIOPESTICIDES are biological agents or naturally derived substances used to manage biotic stress, such as pests, pathogens, and weeds, in agriculture, horticulture, and forestry.

Startups: BioPhero is a pioneer in providing low-cost bio-based pheromones for pest management. Solasta Bio develops peptides designed to target specific pest insect groups while remaining harmless to all non-targeted species within the environment – including essential pollinators, other wildlife, humans, and land itself.

- BIOSTIMULANTS are organic agents or microorganisms that enhance nutrient uptake, improve abiotic stress tolerance, and stimulate overall plant growth, development, and immunity when applied to plants or soil.

Startups: Puna Bio developed a seed treatment isolated from the Argentine Puna that improves yields by 10-15% in fertile soils and enables the cultivation of crops in extreme environments and degraded soil. SugaRox develops a natural plant sugar-based molecule that enables farmers to enhance carbon allocation in the crop and increase yield. Other noteworthy start-ups include Agrobiomics, Andes and Bioomix.

- BIOFERTILIZERS are natural or microbial products that boost yields by managing climate-related abiotic stress. They contain living microorganisms that enhance soil fertility by promoting nutrient availability and uptake for plants, reducing the need for chemical fertilizers.

Startups: Nourisol’s algae-based products deliver remarkable crop yield increases while enhancing mulch formation, soil carbon sink potential, and produce in-store shelf life. Azotic’s Encera is a sugarcane-derived bacterium that supplies nitrogen to leaves and roots throughout the growing season. Other noteworthy startups include Net Zero Nitrogen, CCm Technologies, and Bioomix.

1. Genome Editing

Genome editing enables the modification of specific DNA sequences within an organism's genome, enabling the addition, deletion, or replacement of genetic material. Therefore, it can be used to increase, e.g., plant tolerance to both abiotic and biotic stress.

While genetic engineering could hold the key to addressing global food security concerns, significant regulatory challenges, extended development timelines, and an unpredictable intellectual property landscape currently dampen its appeal to many investors.

Nevertheless, as the need for climate resilience increases, we expect genome discovery and editing to take an increasingly important role, e.g., inspired by exciting companies like Avalo that accelerates gene discovery without falling under GMO regulations. Secondly, exploring epigenetic priming, positioned between conventional breeding and highly regulated genetic engineering, could present a promising area of innovation.

Conventional breeding

Conventional breeding involves crossing plants with relevant characteristics and selecting offspring with desired traits. This enables farmers to enhance crop performance and equip the crops to better cope with environmental challenges, ultimately achieving higher yields. For instance, Bayer utilized conventional breeding to modify common traits in corn. Their short-stature corn, 30-40% shorter than traditional varieties, enhances stability, reducing the risk of breakage in strong winds and increasing yields. However, this traditional method is a time-consuming practice, taking five or more years to yield results.

Startups: Traitomic develops an efficient breeding platform rooted in traditional breeding mechanisms and the remarkable speed of next-gen screening tools.

Genetic engineering

The gene editing revolution led by CRISPR-Cas9 enhances crop breeding through precise genetic manipulation, facilitating small changes to a crop’s own DNA. It enables cost-effective insertion of new genes, rearrangement of existing ones, and control over gene expression. This technology is powerful for designing crops resistant to diseases and addressing environmental challenges by enhancing their efficiency in absorbing nitrogen or suppressing methane and nitrous oxide emissions. However, the modification of genes also leads to regulatory challenges in some geographies.

Startups: Cquesta designs seed traits that, e.g., enable deeper root growth with benefits such as increased carbon storage, nitrogen uptake, and drought resistance. Biocentis leverages the latest advancements in genome engineering, offering a unique technological platform for insect control and eliminating the need for chemical insecticides. Tropic uses leading technologies to improve traits like delayed ripening in bananas and reduced caffeine in coffee.

EPIGENETIC PRIMING

The emergence of alternative techniques like priming is a welcome response to the significant regulatory barriers faced by gene-modified crops. Epigenetic priming sits between advanced breeding techniques and genetic engineering. This non-invasive method activates or deactivates specific genes without modifying the genetic code, showing great potential in advancing the next generation of resilient agriculture. The scene is still at an early stage, but Look Up Ventures expects interesting developments to happen here.

Startups: Sound has developed an "on-demand” breeding technique that creates custom crop varieties ten times faster than current methods without altering the plant's genome.

2) Alternative Farming Methods

While many of the aforementioned examples of resilience plug into existing supply chains and promote regenerative practices, alternative farming methods offer an additional, diversified approach to achieving climate resilience. With the increased likelihood of climate-induced disruptions to the traditional supply chain, designing a predictable supply chain that is independent of weather events is essential. Areas such as indoor and vertical farming, precision fermentation solutions, and insect farming can become a (de)central part of securing resilience: they allow for controlled production close to the end consumer and provide the opportunity to optimize the nutritional profiles of foods more easily. Zooming out, decentralized alternative methods can also decouple some food production from arable land, working towards freeing up nature while ensuring global food security.

Precision Fermentation

Precision fermentation, an advanced biotechnological process that harnesses engineered microorganisms for targeted agriculture, offers compelling advantages, including resource efficiency, year-round production, and reductions in emissions and chemical inputs. The global precision fermentation market is poised to reach $11.8 billion by 2028, boasting a notable CAGR of 41.5% during the period. However, it is worth noting that challenges related to achieving high enough titers, navigating regulations, and managing high CAPEX may limit the broad investment potential in this area. Therefore, from our perspective, investing in this area may be best approached by targeting startups that efficiently and diligently manage their scale-up process and create high-value products.

Startups: C16 Biosciences delivers an alternative to palm oil based on a sugar-based precision fermentation process, targeting non-food high-value markets first before launching into food on a commercial scale, which is secured through a long-term agreement with a CMO. Arkeon uses a one-step fermentation process to harness CO2 and turn it into alternative protein ingredients for food. Enough feeds fungi with sustainable sugars found in grains to produce food ingredients rich in protein and fiber.

Insect Farming

Insect farming cultivates insects for human and animal consumption. It addresses global food security challenges by providing a low-cost, low-impact protein source that requires less land, water, and inputs. Utilizing organic waste, insect farms can produce low-cost protein with a significantly lower carbon footprint, generating up to 90% less greenhouse gas emissions compared to traditional landfill or composting methods. Insect farming also contributes to environmental conservation, saving about 100x the CO2 emissions and requiring 50-90% less land than conventional livestock farming. The insect protein market is projected to grow at a CAGR of 28.4%, reaching an estimated US$10 billion by 2030. While this area is a promising solution for addressing the commoditized, carbon- and land-intensive protein sources currently in use, challenges remain in the complex scale-up of facilities.

Startups: Volare and Enorm Bio specialize in producing high-quality ingredients from black soldier flies for applications in aquafeeds, pet food, agriculture, and oleochemicals. Ÿnsect employs vertical farms to cultivate mealworms, using 40x less land, 30x less water, and emitting 40x fewer CO2 emissions than cattle farming.

3) Enablers

Alongside novel inputs and production methods, we expect to see a wave of enabling solutions that can act as supporting agents in adopting resilient and attractive next-generation agricultural practices. Identifying and managing climate-related risks as well as measuring, reporting, and verifying the impact, for example, of the application of solutions outlined in the aforementioned innovation areas, these technologies will become an essential component in creating attractive markets where incentives and risks are aligned towards climate-resilient practices.

Climate and Weather Modeling

Climate and weather modeling can become an integral component of enhancing the resilience and efficiency of agricultural practices. By evaluating long-term climate trends, farmers and investors can determine the suitability of crops for a region etc., informing decisions on what and where to invest in resilient agricultural production. Short-term insights from weather forecasts and soil analysis enable informed and timed decisions on planting, irrigation, and harvesting, minimizing waste and optimizing resource use. The insights also serve as important data points to secure farmers against the risks of uninsurable, weather-induced crop failures.

Startups: Cordulus develops a platform that provides real-time weather data, advanced analytics, and forecasting models, empowering proactive decision-making and effective risk management for farmers. Arable develops a software for agriculture that helps digitize and optimize decisions from seed breeding to food production. Other noteworthy startups in this area include Metos, Tomorrow, Ranch Systems, and Agrology.

Measuring, Reporting, Verifying (MRV)

We cannot incentivize markets to double down on nature-positive solutions without quantifying both scientific and financial impacts of the resilient practices. Spearheaded by the boom of MRV-solutions for carbon removal, solutions that measure, report, and verify can play a foundational role in developing solutions that capture carbon, increase biodiversity, detect biomass change, or alter land to the better. Solutions in this space often combine software and hardware to capture and verify data from ground-level IoT devices, satellites, hyperspectral imaging, and deep learning models.

Startups: Agreena is a leading soil carbon program, providing farmers with high-quality certificates to generate income through regenerative agriculture practices and participation in the carbon market. Kuva Space provides hyperspectral insights into crop health, growth stages, carbon storage, and land change based on accurate biomass detection. Pivotal Future captures biodiversity data and links the insights to financial mechanisms to unlock financial flows to biodiversity-enhancing projects. Other noteworthy startups include Klim and Nature Metrics.