On stage! Plug and Play Japan’s Food and Beverage accelerator showcases its first cohort

Meros was thrilled to be invited to the final pitch event of Plug and Play Japan‘s Food and Beverage accelerator program, with Meros’ managing director Chisa Ogura on stage as a commentator. Plug and Play Japan is a subsidiary of Plug and Play Tech Center, the global innovation platform headquartered in Silicon Valley.

The 10 start-ups on stage on September 13th were the members of the Food and Beverage accelerator’s first cohort and included both Japanese and international start-ups.

The event was an exciting chance to see the strong interest in food tech among the Japanese industry, as well as the high level of interest in the Japan market among overseas startups.

Here are some of the highlights!

1 There is a high level of interest in sustainable packaging and bio-plastics

Of the 10 companies showcased by Plug and Play, four were related to sustainable packaging. Among the various fields related to food tech, the growing focus on sustainable packaging over the past year or two is very interesting, especially considering the interest from food-related companies in Japan.

Interesting start-ups included Phaxtec, which uses biogas powered by microorganisms to produce PHA, allowing high production efficiency and low emissions. The end product has high biodegradability but the high price remains a bottleneck for the company. The company says they are addressing this issue. From our chats with visitors at the event, we could sense a high level of interest in sustainable packaging and bioplastic technology.

2 From upcycling to precision fermentation?

There were four startups working on upcycling using fungi and bacteria, utilizing by-products of the food industry. They produced end-products ranging from bioplastics to food ingredients and alcohol.

However, the biggest challenge for these companies in scaling up is securing sufficient volumes of raw materials.

One company, Mi Terro, is looking to overcome this challenge by avoiding a focus on sourcing a specific food waste as it scales up its protein film/fiber products, and instead produces protein from microbial cultures. This is potentially a very interesting direction.

3 It all comes down to health!

Out of all the interesting companies in the Plug and Play lineup, the pitch winner was….. was Tait Labs!

Taking inspiration from the dried mandarin orange peels used in Chinese medicine, Tait Labs has developed a prebiotic supplement that reduces inflammation in the digestive tract and promotes digestion. They have a patented extraction technology and utilize mandarin peel waste from juice and canning factories. They are planning to link this with digital-based health management.

Tait Labs’ concept was easy to understand and its potential for future development as a medicine was also interesting. Importantly, this business concept seemed to resonated with the broader audience, beyond just those in food-related fields.

Bees, Wines and Rice: Three Japanese Agtech Start-ups to Watch

At the recent Nikkei Ag/Sum Agritech Summit, Tokyo welcomed agtech and food tech start-ups from around the world to exhibit and present.  However, some of the highlights were Japan’s own homegrown start-ups, who may have gotten less attention because less information was available in English.

In the global agtech universe, if you mention Japan, the immediate association is usually hydroponic vertical farming technology (called “plant factories” in Japanese) and robotics/drones. This is not surprising. Japan is a country where nearly 50% of the country lives in one of three densely packed metro areas (Tokyo-Yokahama, Osaka-Kobe-Kyoto and Nagoya). In rural areas, the number of farmers is dropping dramatically, farm land increasingly lies uncultivated and the average age of a Japanese farmer is 66. Japan’s food self-sufficiency rate is now less than 40%.

Japan’s tech, engineering, machinery and robotics industries have been increasingly active in agtech R&D, aiming for potential solutions to the hot button Japanese issues of decreasing farm production, aging farmers and food security.  Hydroponic farming, led by names such as Spread and Mirai, and robotics and drones being developed by universities and research institutes as well as companies like Yamaha, Fujitsu or Panasonic, have received significant media attention.

But indoor farming and drones are far from the only agtech innovation in Japan. Below are three interesting  Japanese start-ups that recently exhibited at Nikkei’s Ag/Sum Agritech Summit.

ad-dice Co., Ltd.’s Bee Sensing

Bee Sensing offers an IoT sensor device that allows bee keepers to remotely monitor bee health and activity. Through a smartphone app, beekeepers can check temperature, humidly and how active bees are as well as receive alerts and record memos.  Bee hives are often placed in distant or remote areas, making it difficult for farmers to visit them every day. This IoT sensor system is expected to increase beekeeper productivity by freeing them from constant patrolling of distant beehives. It will also allow timely reactions to changes in bee health and decrease beekeeper worry about the health of their remote apiaries.  It also creates honey production data records to share with customers who are increasingly interested in the differences in local honeys and their different tastes and colors.

Bee Sensing’s patented technology was a collaboration between Japanese IT company, ad-dice, founded by Daisuke Ito and featured as one of Toyo Keizai Magazine’s Top 100 Ventures That Will Change Japan in Feb 2017, and innovative beekeeper Hideki Matsubara from Hiroshima.

Bee sensing technology may be a niche industry within agtech but these emerging technologies can serve an extremely important industry. According to FAO statistics, honey production is around 1.2 million metric tons globally, mainly concentrated in China, North Eastern Europe and the US.  It is a high value industry. For example, the US retail price of natural honey is around 5-7 US$/pound and bee by-products, like propolis, are even more expensive. In addition to those products, the bee industry itself is also creating extremely important economic value – pollination.

There are now number of bee hive remote monitoring technologies being developed around the world, from the UK, US and Bulgaria among others as interest in this high value agricultural industry increases.

Kisvin Science’s Sap Flow Sensor

Kisvin Science’s sap flow sensor was developed to support the grape-growing and wine making industry. Japan may be better known for its beer or sake, but Japan actually also has a significant wine industry, centered in Yamanashi prefecture.  The sap flow sensors monitor grape stem heat and soil moisture.

Co-founder Kazuhiro Nishioka originally established a small sap flow sensor manufacturing company, Nissy Instruments, as a side-business when he was a PhD student. He then created Team Kisvin, an initiative with two wine grape farmers (Hitoshi Ikegawa of i-vines and Yasuhiro Ogihara founder of the Kisvin winery) to study and improve viticulture in Yamanashi.  They have been using the with sap sensors to produce premium wine grapes now for 10 years ago.

With the increasing number of cooperative farms, they have released their own branded Kisvin wines.  In 2015, Team Kisvin decided to found Kisvin Science in order to support other wine grape farmers and wineries around the world. Their first new market target is California.

There are several sap flow sensors in the market, but Kisvin Science feels its strength is its low cost achieved with cutting-edge printing technology, Nishioka and his team’s aggregate knowledge of plant physiology and its relationship to wine grape farming. His team is aiming to raise its next round of funding soon, and is considering whether to target Japanese or US funds.

Rice Technology Kawachi’s Rice Gel

Some of the best inventions are accidents. Dr. Junichi Sugiyama unintentionally developed a new food ingredient – a type of rice gel – when he was a senior researcher  under the Ministry of Agriculture, Forestry and Fisheries. He found an innovative way to convert cooked rice into a gel-like paste which retains moisture well. Since retiring from the institute, Dr Sugiyama has dedicated his energy to commercializing this product, with the strong support from the local rice-growing community in Kawachi, Ibaraki, and leading agriculture machinery manufacturer Yanmar.

Dr Sugiyama’s rice gel is a smooth white paste, which can be produced in any level of solidity or density, depending on customer needs. The product is made only from rice and water, so it is free from major allergens.

This rice gel food technology addresses two major problems the food industry in Japan and overseas has found when using rice flour.  First, rice flour has low absorption capacity for water, meaning most rice flour breads and cakes also have add wheat in order to improve moisture absorption. Second, rice flour usually is also more expensive than wheat or other flours, as rice production costs are high.

However the rice gel retains moisture, meaning bakers can eliminate wheat, which can be an allergen for some consumers. It has been particularly attractive to cake and confectionery bakers who aim for moist, fluffy creations.

In addition, Kawachi is able to produce for a competitive price, because they use rice which is high in amylose (a type of starch component that forms a solid gel at room temperature) which is a high yield type of rice. High amylose rice production for non-table rice can currently receive subsidies under the rice acreage reduction policy of the Japanese government which is helping Kawachi Rice Technology maintain lower costs than rice flour producers.

Full disclosure, Nikkei Ag/Sum event was not the first time Meros has encountered Kawachi rice gel.  Last year Team Meros’ Lucia Vancura discussed the product as a panelist on NHK World’s Biz Buzz Japan when the gel was still in its R&D stage. This is why we were even more pleased to get an update from Dr Sugiyama and see his progress in commercializing this product.  There is hope that this ingredient will have opportunities in the global baking industry, especially in the gluten free baking market, where rice flour is usually too expensive to use as the main substitute for wheat flour.

View from Japan: Where is Agtech Investment Headed?

The May 23-25 Ag/Sum Agritech Summit in Tokyo brought together start-ups, agtech consulting and investors from overseas with start-ups, food and agri-industrial companies, IT companies, banks, government representatives from Japan.

This was the third start-up event organized by Nikkei, and this time it focused on agtech and “the ways that disruptive technology is fusing with agriculture to share our future.”  The event drew hundreds of participants– large symposium sessions, workshops and an innovation stage, all going at the same time for three days.

The strength was that the event brought well-known international agtech players to Japan, many of whom had never been to Japan before and did not know much yet about the Japan agtech or food innovation market.

Considering Japan’s potential as both a funder as well as a source of global food and agtech innovation, this event was an important opportunity for the audience (80% Japanese by our estimate) to hear directly from some of these industry leaders.  Key US and EU participants included AgFunder, Rabobank Start-up Innovation, RWA/ Agrotech Innovation Lab. Speakers and exhibitors also attended from Israel, India, Singapore, Vietnam and Australia.

The event provided some insights on key topics of interest to our clients and partners here in Japan:

  1. Agtech is a hot topic- but where are we going and is there an agtech bubble?
  2. What are some of the technologies that are receiving interest among the Japanese industry and investors?
  3. What is the role of Japanese investors going forward in the agtech space? Where are the gaps between expectations in Japan and overseas?

We’ll outline some of our impressions below.

Where are we headed?

The event was a showcase for many of the hot topics in the industry.  Several VC and investment advisors gave their ideas on the key areas to watch in the next 4-5 years.

  • Doug Cameron from First Green Partners mentioned: food waste, protein, urban food (not only vertical LED farming), healthy soils, better herbicides and water issues.
  • Rob LeClerc from AgFunder is looking at: robotics and digital agronomy/smart phone farming in emerging markets such as China and India. With AgFunder about to launch its own investment fund, it will be interesting to see how it acts on these trends in the coming months.
  • Sanjeev Krishnan from S2G Ventures in Chicago noted several social and demographic issues with major impact on agtech – the impact of social media on supply chains in terms of traceability pressure, the decline of the megabrands in nearly all food retail categories and the market power of millennials and aging consumers.
  • Austrian Cooperative RWA’s Agro Innovation Lab saw the main EU agtech innovation trends as 1) smart farming (M2M, IoT, optimization of resources and cost); 2) Irrigation (especially in Europe, where summer is becoming hotter and winter is becoming less rainy); 3) Urban farming; and 4) Innovative Business Model (e-commerce, machinery sharing, etc)

It was interesting to note that “the future” is not defined as a specific type of product or technology, but as the trend of current technologies adapting to new markets and social trends, and being applied to critical environmental issues.

Foodtech: Alternative proteins, molecular biology and the Japan market

The diversity of alternative proteins and food ingredients was striking and particularly of interest to many of the Japanese participants. These included insect protein start-ups like Ynsect and Go-Terra. While they admitted that marketing insect protein for human food products still has challenges, insect protein is intriguing to the aquaculture industry. Already nearly 50% of the seafood consumed in the world is from aquaculture and it is an important industry for Japan. Current sources of protein for fish meal, such as meal processed from wild catch of smaller fish, are not a sustainable source of protein for a growing industry. This makes insect protein an attractive idea.

In addition, companies ljke Miraculex and MycoTechnology offer natural biotechnologies that can reduce sugar content and Algama offers high protein microalgae. For a country like Japan, where food tech innovation is already strong and where an aging population is inspiring food manufacturers to develop new products that appeal to this demographic’s health needs, these food technologies appeared to be particularly interesting to Japanese attendees.

Investment Strategies: Where is Japan now in agtech investing?

Global ag investment watchers expressed interest in seeing more seed and Series A investors in agtech. It was mentioned that many of the larger, more mature (and therefore lower risk) companies have already been fully invested.

However, Japanese investors, including the large trading conglomerates and banks who attended the conference, are infamous for their low tolerance for risk. The traditional Japanese investors also have few experienced funds or teams looking at  small scale seed investing in agtech.

Japanese investors were criticized by some for their lack of engagement in early stage, seed, incubation, acceleration ventures. Two of the start-up VCs we talked to dismissed Japanese investors as partners because of their image that Japanese investors are not interested in fostering innovation, only in safe late-stage investments.

This image may not be entirely correct, but it impacts the development of potentially interesting partnerships between Japanese investors and overseas partners.

Nevertheless, investors worldwide now are looking for evidence that agtech investing can yield the kind of returns they are looking for.  AgFunder mentioned that the agtech industry now needs to see some successful EXITS of first round investors. Without some successful, profitable exits it will become harder to attract new investors.  And without more successful exits, the 1 billion valuation of The Climate Corporation (acquired by Monsanto) will likely continue to be an exception in the agtech industry.

What we’d love to see at the future Agtech Summits in Japan

The focus on the event for the foreign players was seed investments, innovation and start-ups.  However, Japanese attendees, especially ones from large corporations tend to be more familiar with medium and large size investment and they are still nervous about supporting early stage projects. Other large Japanese companies, some of whom presented in workshops, are mostly focusing on internal innovation (Kubota, Fujitsu etc).

We would love to see more chances to connect these worlds.

  • Bring in discussions from major Japanese players experienced in funding seed companies (in non-agtech sectors as well)
  • Invite some of the more experienced, successfully funded US companies (Farmers Network, FarmLogs) to discuss their path from start-up to mid-size.
  • Bring in the global ag majors who are the counterparts of the Japanese ag and tech powerhouses, to discuss their experiences in developing external or internal technologies from seed to maturity.

Ag and food technologies are not limited to one market or language, but they do face differences in agricultural industry issues and investor expectations in different countries.  We look forward to more agtech summits in Japan that allow even deeper comparisons and discussions about Japanese models and challenges in agtech versus lessons of success from overseas markets.