Aquaculture, palm oil ripe for disruption in Asia, says Trendlines’ Sarai Kemp

Sarai Kemp

Singapore tends to have a knack for next-gen technology, and the flavour in season is agtech.

For now, most of the country’s efforts tend to revolve around planting vegetables and herbs on high-rise rooftops. Time to time, you’ll come across urban farming projects aiming to foster some sense of community between environmentally-conscious city folks who are sick and tired of the nation’s relentless consumption of plastic bags.

If everyone would just gather round to buy lots of locally grown produce, urban farmers may stand a better chance of standing on their own two feet. Last April, a local vertical farming company announced Singapore’s first ever commercially grown strawberries. The public was thrilled.

That’s where it pretty much ends.

According to James Tan, managing partner of Quest Ventures, there are gaping holes in the food supply chain ripe for venture investments to solve and make more efficient.

Tan said: “After planting, where do they go? Do farmers plant at volume or not? We need to get the supply chain ready first. When it comes to sourcing, farmers may not be using healthy fertiliser, and are getting ripped off by all the middle men in-between, shipping from Ipoh all the way here. So why isn’t there an equivalent in China or in Singapore that does the same thing?”

Agtech also encompasses a lot more than vertical farming.

In an interview with DEALSTREETASIA, Sarai Kemp, VP of Business Development, Trendlines Agtech shared that Singapore has the potential to produce great startups in aquaculture and palm oil.

Nearly 60 per cent of aquaculture (farmed shrimps and fish) globally is farmed from the Asia Pacific. Over 80 per cent of the world’s palm oil output is from two countries alone – Indonesia and Malaysia.

“Aquaculture is the next available protein. You have beef where production and demand are going to increase, but it’s not sustainable because you use a lot of land and water. Aquaculture offers you more or less the same level of protein through more sustainable means,” said Kemp.

Trendlines hopes that its upcoming $40-million agtech fund will capture some of these opportunities. The deal flow has already caught the Israeli-headquartered company by surprise.

“I would say 5 to 10 startups have already approached us (for investment),” said Kemp. “That’s not bad, considering that we’ve not even started anything.”

Kemp added: “So far we’ve seen startups in areas like soil, seed solutions. We see a lot of biotech startups, as well as precision agri. Precision agri involves devices like sensors, AI, drone, robotics and AI but applied in agriculture. These are fields that Singapore is strong in.”

Nitza Kardish, VP of Trendlines Group, will relocate to Singapore from Israel to manage the new fund.

Trendlines’ Agrifood fund plans to hit its first close by April-end and begin operating in Q2 this year. A “prominent Singapore investment fund” has committed 25 per cent or up to $10 million to the kitty.

Trendlines declined to reveal the identity of the investor or verify if it was Temasek.

The fund will include participation from Enterprise Singapore and SEEDS Capital, which will see one-third of the fund invested in early-stage agtech startups in Southeast Asia. The remaining two-thirds will be invested in commercialisation-stage agtech startups in Israel and around the world.

Edited interview excerpts with Sarai Kemp, VP of Business Development, Trendlines Agtech

What led to this new agtech fund and why now?

One year ago, Temasek and other government agencies like Enterprise Singapore approached us to find out what fund structures we can do to promote agri food tech in Singapore. We decided it was a good opportunity after a few discussions with them.

There’s a worldwide need for agri food technology. By 2050, there will be a food crisis. The output of agriculture needs to expand by 70% – this is a lot. You can imagine that land is not going to increase, in fact, it’ll be just the opposite. Water resources are also going to be more scarce. Because of that, the only solution is the intensive use of technology in different agriculture fields. This activity has been taking place in other regions – the US, Israel, Australia.

Since 2012, we have witnessed a huge increase in investments in agri food tech startups. In 2015, the total venture investment in this sector was $900 million. That’s almost nothing. In 2017, it was $10 billion. So the increase has been dramatic. The number of startups and the number of investment arms has also increased. When we started in Israel 8 years ago, there were two investment arms focused on this sector and we were one of them. There were 30 to 40 startups in Israel. Today there are 800 startups and many more local VCs, with foreign VC interest growing as well. So this has become an investment scene, not just something trendy someone has heard of.

Another testimonial for the maturity of this sector is that we’re seeing startups turn into unicorns. You also have startups that are exiting through M&As. Last year we had the biggest exit in this sector – Merck acquired a livestock company called Antelliq for $2.4 billion.  We’ve also seen some smaller exits – a few hundred million dollars in the beginning stage of revenues. You also see some unicorns becoming large companies with very large market share. One of them is Plenti, a vertical farming company. Last year they raised $200 million and they were just at the beginning of sales.

These are all good signs for us that this is a good business to be in. There are specific food technology and agri-technology that is only relevant to this region. Aquaculture is one. Did you know that 60 per cent of aquaculture or farmed shrimps or fish is farmed in this region? Most of them are exported to Western countries. When you go to the supermarket in Israel and you buy frozen fish, they come from China. Frozen shrimps probably come from Indonesia.

Aquaculture is the next available protein. You have beef where production and demand are going to increase, but it’s not sustainable because you use a lot of land and water. Aquaculture offers you more or less the same level of protein through more sustainable means.

If you also look at the types of farming like the open fields in the US, their land plots are very different. In the US, you have very large fields of corn and soya. If you wanted to collect data on these crops, you can fly a plane and collect data to analyse it. But when you go to a small farm-owner in India or Indonesia or China, you wouldn’t use a plane. They use smaller land masses, so it’s not cost effective for them to have a plane fly over to collect data. You need something different – maybe a drone which is cheaper but still has the same technology capabilities for the farmer.

Another is palm oil. About 90 per cent of palm oil globally is from Indonesia and Malaysia. That’s another one where not a lot of technology is being used.

In your investment slides, Trendlines indicated that you have a hard cap of $60 million for this agtech fund. Have you received any additional commitments yet?

No, not yet. We’re focusing on the first close at $15 million. We already have a lead investor that has committed to 25 per cent of the fund which is a large, prominent investor in Singapore.

Is this investor Temasek?

(laughs) Unfortunately, I’m not able to disclose this! But we are aiming to secure our first close by April or May.

You also listed a number of strategic investors. Have you approached them to invest?

Yes. To date, we have another fund with Bayer Crop Science. Bayer is the largest agriculture company in the world. They bought Monsanto. We have a small fund with them in Israel which is a follow-on fund with companies in Israel.

Are they participating in this fund?

No. We already have a fund with them focused on Israel, but they could potentially be co-investors in the fund, so we’ve been approaching other strategic partners. It is very important to have strategic partners join the fund. We think it’s more likely that this will be a regional strategic fund.

That would make sense especially if this is an Asia-focused fund. I would imagine you are looking for a mix of Israel and Asia-focused investors.

Yes definitely.

So what kind of investor profile are you targeting?

We are looking at multinationals, family offices and institutional investors.

Some of them might be looking to invest in an impact fund. Today when you invest in agrifood technology, it’s not just about increasing yield but doing that in a more sustainable way. It’s not because we’re tree huggers but because this is a reality.

There’s not enough land or water and you cannot continue polluting the ground anymore. It’s just not sustainable if you want longer term yield. Even if you talk about crop protection, a lot of the traditional chemical products are not effective anymore. So we need to think of new solutions that are more sustainable.

The agritech sector is still very new in Asia. Are you seeing any kind of pipeline yet?

We were actually very pleasantly surprised when we first started here. There are a number of startups from this region already approaching us, asking for investments.

How many?

We haven’t seen a lot because we’re not ready to make investments, but I would say 5-10 startups have already approached us. That’s not bad, considering that we’ve not even started anything.

We will be sourcing startups from local universities like NUS, and we are in close contact with them. So far we’ve seen startups in areas like soil, seed solutions. We see a lot of biotech startups, as well as precision agri. Precision agri involves devices like sensors, AI, drone, robotics and AI but applied in agriculture. These are fields that Singapore is strong in. Not everyone is into using optical sensors for agriculture, but that’s our expertise.

What kind of ticket sizes are you looking at?

We’re targeting $1.5 million. Half will be from the fund, half from Enterprise Singapore. They have a programme targeting young startups. We also have a budget from Enterprise Singapore for later stage startups in Series A. Through SEEDS Capital, they will focus on five groups focusing on agrifood technology in Singapore. They allocated a budget for each of those groups to use as matching funds in investments. At the later stage companies sourcing internationally, those will be $2.5 million with additional follow-on investments.

You also plan to launch a Singapore incubator. When will that take place?

Very soon. Once we reach our first close, we will set that up. We have already recruited a local CEO. He has not started working yet. The fund manager will be Dr Nitza Kardish, who will relocate from Israel to manage the fund here in Singapore.

How many startups are you planning to incubate?

For the seed stage, we are targeting five startups. We will also provide support to seven later stage startups in terms of business development and providing office space to operate. This will be per fund.

In the agtech industry, it’s dominated by many large, traditional players like Monsanto, Cargill. Do you think there will ever be a chance where a startup can grow big enough to give these guys a run for their money?

For sure, especially in new technologies like precision agri. Many traditional companies have new divisions dealing with that, but startups usually work at a much quicker pace. It’s just a matter of gaining market share and customer base. Smaller startups are also showing potential in specific biotech fields like micronutrients in the soil.

Aquaculture is another potential sector as well. There are many big companies in this field, but they’re mainly feed companies which are not so involved in innovation. They may have their own internal innovations labs but most are focused on their line of products.

We recently invested in one Israeli company called ViAqua that deals with viruses in shrimp. It has developed an orally administrated treatment preventing a prevalent virus found in shrimps. It is a very sophisticated technology, and science-based. It is not easy at all to reach that type of feeding that is stable both in the aquatic system and in the digestive system of the shrimp. On one hand, this can be very relevant for feed companies, many of which don’t have such a solution even they’re in the business. This is one example of a company disrupting a traditional industry in a huge way.

Also Read:

SGX Catalist-listed Trendlines Group to launch $40m agtech venture fund

SG’s SEEDS Capital, partners to co-invest $66.6m in agtech startups

SG’s Visvires New Protein invests in Israeli aquaculture startup ViAqua

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.