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.