What Makes Food Tech Different

There are tons of terms and classifications for the different areas of innovation that cover our food system — biotech, agtech, precision ag, restaurant tech, farm tech, livestock tech, supply chain, sustainability, robotics, water tech, food AI and much more. I’m going to use one name to cover the solutions in these areas that are creating the future of how we grow, distribute and eat food: food tech.

Building genuinely disruptive technology is never easy. In food tech there are additional hurdles. From early stage entrepreneurs to Fortune 500 companies, Food Tech innovators need to be aware of these unique challenges when disrupting the food system.

And it’s a pretty big system to be disrupting. Besides the obvious human element and the issues of sustainability, food is big business. Take the issue of food safety — a report last year estimated the collective cost of food borne illnesses in the US at conservatively $55.5 billion annually. That’s one country. One issue.

Food tech is something we should be thinking and talking about even more publicly in the startup and innovation worlds. With the help of some friends and partners I’m going to do just that.

I’m Brett Brohl. A former founder myself, today I’m the Managing Director of Techstars Farm to Fork Accelerator and the Managing Partner of The Syndicate Fund, an early stage venture capital firm with a core focus of investing in food tech.

In my roles I look at several thousand food tech startups a year and speak with 700–800 of them. I’m also based in Minnesota, a hotbed for major companies in the food space. In addition to Cargill and Ecolab (our partners in the Farm to Fork accelerator) we’ve got Land O’Lakes, Target, General Mills, Schwans and more in our backyard.

I’ve learned from both the startup and corporate side about how hard innovation in food is — and face it, it’s hard in general. Harvard Business School Professor Clayton Christensen says 95% of new product innovation fails and McKinsey published a report that only 6% of execs are happy with innovation results.

This could be one reason 92 % of startups fail. That’s not just food tech startups obviously. For the record, I believe that 80% of entrepreneurship translates across all verticals. This means building teams, fundraising, developing product, and so many more aspects of the startup life holds true whether you’re building the next produce supply chain platform or an edtech solution for teaching high schoolers languages.

But when it comes to the world of food there are some major, and difficult, factors that are different than any other vertical:

Necessity

• Food isn’t a nice to have. People need to eat. Trying new things can have drastic impacts on the food system and thus our population. Something doesn’t work, someone doesn’t eat. Those are big stakes. Big stakes = major risk aversion.

Perishability

• Food is a physical good. I hope that much is obvious. And it is heavy! Anytime you work in a space with physical goods you have to deal with inventory and the cash flow management of that inventory. This is hard for most startups, regardless of the product, but with food not only do you have to move and store it but it is also a perishable good. There is a defined time limit to how long it lasts, something that impacts the entire system. Food loss is already a huge cost across the supply chain. Risking additional loss while trying something new is tough for organizations to stomach.

New Kid on the Block

• While advancements in our food system have technically been happening for thousands of years, what I refer to as “the modern era” of food tech is less than a decade old. It really came to fruition when Monsanto acquired Climate Corp in 2013 for about $1 billion. VC’s and entrepreneurs alike took notice and began to start and fund more companies.
• There may be more investors than even 5 years ago, but capital is still lacking. And many of the investors are generalists that are still learning the food world. Enterprises in the space are typically incredibly inexperienced at working with startups which slows down adoption and creates other issues. Plus there are fewer experienced tech founders that have had recent success in food tech to reach out to for advice and mentorship.

Regulatory Red-tape

• There continues to be an increasing number of regulatory hurdles for food entrepreneurs across the globe. You often can’t even start testing new things without approvals. While not all regulation is a bad thing, it can slow the process down which means startups have to raise more capital to cover longer runways.

Risk — Brand and Otherwise

• Many of the regulations mentioned above are tied to food safety issues. Let’s not forget that people eat food! But food safety creates another issue for innovators. If you adopt a new process or technology and it doesn’t work people can get sick or even die. On top of the human side, there are significant financial and brand repercussions to being responsible for a food safety event. This reality typically slows down enterprise adoption and hurts a startups ability to quickly iterate.

Cycles of Farming

• For most commodity crops there is one season a year. This creates a unique revenue cycle in food. Farmers typically have 1 chance a year to make money. Just one. If they adopt a new technology and it hurts their profitability or has a payback period longer than a season it can cause havoc in their own personal lives. To take this a step further farmers only have about 35 opportunities in their life to make money. They need to be confident in the technology they adopt.
• The cyclical nature of food also makes it difficult for entrepreneurs to iterate rapidly. You can’t always put tech on a farm for a week, see if it works and tweak it. You need the entire cycle to run its course. This has a tremendous impact on an entrepreneur’s ability to iterate quickly and creates the need for extended runways.

Emotion

• Finally, Food is emotional. People care about their food. I care about my food. Families, countries, and religions all have unique food traditions that make us who we are. How do you disrupt something that you are born into? That is often a core piece of you? It is always tough to change human behavior but changing human behavior around food? It is not always logical.

Yeah, these are some major challenges but I don’t want it to be all doom and gloom. You can build a huge startup in food. I am actively putting my money into food tech startups because I believe in it. Where there are unique challenges there tends to also be incredible opportunity.

One undeniable fact is that the global population is growing. The food system needs to be able to feed this population in a sustainable way. And despite the challenges that face food innovators, the need to feed the world combined with an often antiquated food system has created a vertical that is ripe for entrepreneurs to come in and build big companies.

The food tech ecosystem needs to support those innovators and hopefully this blog will be one small way to do so. In each post, I’ll dive into a topic within food tech — have a question or an idea you’re interested in, leave it below or shoot me a note.

I believe that no one effects change in the world like an entrepreneur. Let’s explore what that change looks like in food tech.