Why a small agriculture tech company is big business

An agricultural startup called Indigo says it just received the largest single financing round for a business in the private ag-tech sector.

LM Otero/AP/File
The sun sets on a cotton field south of Lubbock, Texas in 2007. Cotton seeds primed to withstand dry conditions are being tested on 50,000 acres of land, mostly in western Texas. They are the product of Indigo, an ag-tech company that today received $100 million in funding.

Agriculture is in a tough spot.

The population is expected to teeter over 9.6 billion in 2050, and feeding this global citizenry will require a staggering 70 percent more food than the world produces now, says the United Nations.

For agriculture, this means increasing production while also contending with the effects of climate change, which have already caused drought around the world.

This essential dilemma has spurred innovation and investment in the agricultural industry, including a record $100 million in second-round funds for Indigo, an agriculture technology start-up. The money, awarded Thursday, represents the largest single financing round in the history of the private ag-tech sector, says the company.

This investment points to growing investor interest in the ag-tech industry, particularly companies that are targeting the challenges of 21st century farming.

In this case, investor interest in Indigo centers around something very, very small: microbes that make seeds more resilient to water shortages – a trait that could help agriculture fight the global trend toward a hotter (and drier) climate in coming decades.

The microbe-infused seed product is currently being tested in more than 50,000 acres of cotton, growing mostly in western Texas.

Boston-based Indigo plans to see how their reformulated wheat seeds fare this coming fall when they are planted in 20 million acres of water-limited fields in Oklahoma, Kansas, and Colorado, Reuters reports.

The theory behind the microbe technology is not new: researchers began noting how plant roots interact with bacterial microbes – which can add boons to plant growth like increased nitrogen absorption – decades ago. More recently, scientists’ ability to evaluate the effects of different microbes has vastly improved with DNA sequencing and data processing technology.

Indigo, along with other ag-tech companies, uses these tools to evaluate different microbes – around 40,000 so far, all logged into a database.

“Right now there’s a lot of low-hanging fruit” in the landscape of microbial research, Indigo's chief executive David Perry told Tech Crunch. “But increasingly, success will come to those who are the most sophisticated about how to do microbial isolation and sequencing and computational biology. That’s what we’re really investing in.”

He said that part of Indigo's distinction comes from paying attention to the biology of the plant and using that to find the right microbes. With that approach, the company has identified microbes that will help plants resist climate change stressors.

Seeds that can respond to these stressors will be vital in coming years. For example, research indicates that Mato Grosso, a key agricultural state in Brazil, will experience an 18 to 23 percent decrease in soy and corn production by 2050, because of climate change. Similar fates may face the American midwest and eastern Australia – other key breadbaskets.

William Nganje, the department chair of Agribusiness and Applied Economics at North Dakota State University, says that water shortages have already caused agricultural shifts in the United States. One example: some avocado production that was once based in drought-stricken California has been shifted to Peru, he says.

“Water is a big problem in agriculture, so any technology that is going to help with using less water and increasing productivity will be very welcome, especially as we struggle to produce more food,” he tells The Christian Science Monitor, saying that he believes scientific advancements like genetic modification techniques hold the key to agricultural challenges like drought, yield, and even levels of food nutrition.

However, he says, resistance to GMO technology has stymied some of the momentum of commercial investment in this research.

The microbe technology, used by Indigo and other companies, is a different approach.

“Microbes may become biological software for plants that can improve them much more quickly than can breeding or more potently than genetic modification can provide,” said Indigo cofounder Geoffrey von Maltzahn in a 2014 interview with Chemical and Engineering News.

Now that investors are on board, the next step is convincing farmers to try the seeds. Indigo is employing a unique business model for this: Instead of asking for any payment up front, the company is betting on its results, taking only a cut of the additional profit from increased yield.

It is too early to tell if cotton yields will reach the 10 percent bonus growth that the company has pitched.

"Ultimately we will judge our success on the yields at harvest,” Mr. Perry tells Reuters.

But Indigo is not waiting idly for the results, Perry says, but actively working to reformulate seeds for two other major food products: soy and corn.

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