There aren’t many things that unite the Israeli public more than seeing farmers being forced to destroy produce. Stories of tons of crops destroyed in recent months due to the coronavirus crisis, have tugged at the heartstrings of most Israelis - who have a hard time finding things they can agree on these days. Every post posted by a farmer in distress is shared, and channels through which consumers can buy produce directly from growers have become commonplace.
This is happening not only because it hurts us to see such blatant waste - tens of thousands of tons of agricultural produce are destroyed every year, with 33% of domestic food production thrown in the trash - but also, probably, because of how hard it is to witness the downfall of an industry that was once a symbol of Israeli national pride. The ethos of pioneering agriculture was among the strongest upon which the state was established. But in recent years, the agricultural sector has become battered and shrunken, with Covid-19 only exacerbating the situation.
We have largely come to terms with the thought that Israel is less and less engaged in agriculture, and has ceded the stage to other countries, some of which once needed agronomic assistance from us.
Still, we may have bid adieu to our national ethos too soon. In recent years, under the radar, a different kind of vanguard has developed here: agricultural technological innovation. A report by AgFunder, the world's leading information company in the field of innovative developments in agriculture and food, ranked Israel among the top five countries in the world this year in innovation initiatives and breakthroughs in the industry.
The Israeli ecosystem has about 800 companies in this area. About half of them are classified as innovators in agriculture, and the other half are engaged in innovation in food. The umbrella overall name for the two categories is agri-foodtech. Today, by the way, these two categories are closer than ever, and are commonly termed "farm-to-fork" - a continuum ranging from traditional agricultural products to alternatives for meat, milk and eggs. Israeli start-ups in this area are catching investors’ eyes, from angel investors, on through dedicated agricultural investment funds, to private equity funds.
This boom began in earnest only recently. Until a few years ago, there were very few agri-foodtech players. But over the past three to four years, the picture has changed: new funds were established, and investment entities developed specializations in the field. In foodtech, two of Israel’s major food producers, Strauss Group and Tnuva, are partners in incubators (Strauss is a partner in The Kitchen FoodTech Hub and Tnuva is a partner, together with beverage manufacturer Tempo, in the Fresh Start Incubator and Finistere Ventures.
Is Israel on its way to becoming a technology powerhouse in food and agriculture? According to Zachi Schnarch, deputy director and CTO of the Israel Innovation Authority, this is definitely the trend: "Israel can certainly be ranked among the world’s leading countries in many foodtech areas, especially in those connecting agritech with foodtech. For several years now, Israel has been an incubator for innovation in alternative proteins, in particular cultured meat, and is among the world leaders. In our opinion, through continued government and private support, Israel has the potential to be among the first to enter the market for such products and could even become a leader. "
"There is an interesting process of building up and development in this area," agrees Dr. Nitza Kardish, CEO of the Trendlines Agrifood Fund and vice chair of the Trendlines Agrifood Innovation Centre. "For a long time, Israel has brought change to traditional, classical agriculture, in methods, seeds, and irrigation. Over the years, as circumstances in Israel and around the world have driven the need to produce food from fewer resources, the idea developed of bringing in technologies from other disciplines."
This field is relatively new outside Israel as well. About ten years ago, when agricultural innovation started to become a topic of conversation, the total global investment in the field was about $100 million. "That’s a joke," says Kardish, "Nowadays, we’re talking about almost $6 billion." Around the world, there are 35 privately-owned foodtech companies valued at $1 billion and more ("unicorns"), with a total value of €169 billion.
2020 marks a year of growth for the industry; According to a new report by US-based venture capital fund Finistere Ventures, investment in agri-foodtech amounted to $7 billion in the first half of 2020 alone, (which included the global Covid-19 economic crisis).
Farmers born again
And what of the farmers themselves? Will this advanced agricultural industry now beginning to flourish in Israel leave them behind? "Today, there are entrepreneurs who come from farming families in which the great-grandfather would record the weather each day so that he could forecast what would happen at that time the following season," says Kardish. "Today’s farmer doesn’t need to go to the vineyard to count yellow leaves. You fly a drone overhead that transmits data to an information center which sends the result to the farmer."
There are also farmers who go one step further and become entrepreneurs themselves. Take, for example, Shlomi Kadosh, 66, co-founder of start-up Vanilla Vida. Kadosh is a fourth-generation farmer. His mother's grandfather, Shlomo Mizrahi, left Safed in 1872 for what later became the Yesud HaMa'ala, one of the Jewish agricultural settlements founded during the First Aliyah period, where he cultivated the family’s land. In the early years, Kadosh relates, "The family grew vegetables - rain-dependent crops because there was no irrigation system." The family later moved over to orchards. "That's still pretty basic agriculture," Kadosh recalls, "and as a kid I was mostly transferring irrigation pipes from one place to another, because there was no drip irrigation yet."
After the army and agricultural studies, Kadosh moved to greenhouses - already more controlled growing conditions than the family's fields and orchards - beginning with seedlings for local flower growers, and then expanding to the export market. Today, he is an entrepreneur. His company, Vanilla Vida, aims to cultivate natural vanilla beans improved through agricultural and technological methods. "These days, we control the temperature, water, light, humidity and everything else, and actually 'fool' the plant," he says. "I’ve been involved in development for many years, but this is the first time I’ve done it so intensively. At my age, it provides a challenge and interest.
"My own background is in farming, I’m a graduate of the Mikve Israel agricultural school, and I remember the days when I would go out to the field at four in the morning, counting how many leafworms per square meter there were, and according to that, deciding how much pesticide to spray. That goes on to this day, but we’ve got to find other ways," says Kardish. "Nowadays, there are sensors that can detect a single leafworm in Field C, and then you can spray right there and not flood the entire field with unreasonable amounts of pesticide.
"That's part of precision agriculture, which is also aided by sensors that can detect exactly how much water to use, both for saving water and for achieving higher yields, and when is it exactly right to pick the fruit so that it has the longest possible shelf life, and more."
And what effect has Covid-19 had on the sector? According to Kardish, it hurt both farmers and growers by creating a manpower shortage. "Workers could not get to slaughterhouses, either because they were sick, or because they were afraid. There was no one to slaughter the calves, so they just shot and killed hundreds of thousands of heads of cattle. There was also a serious problem with milk because there was no one to do the milking. This has further illustrated the need for automation. In general, today we’re dealing with things that we’ve never dealt with before, and without mobilizing technologies for the benefit of agriculture, it’s doubtful whether we’ll be able to produce enough food that will be sufficiently healthy, while also preserving the planet."
The climate crisis is the catalyst
In truth, what has really accelerated technological developments in agriculture is the idea that climate change will harm it, and thus harm the food supply for the planet’s ever-growing population. In 30 years, 10 billion people will live on our planet. There will be many more mouths to feed, and there will be fewer and fewer cultivatable land resources in an unstable climate causing damage to arable land around the world.
According to UN data, 40% of the earth's land is currently used for growing food, while the food industry is responsible for about 30% of the greenhouse gases emitted and consumes about 70% of the potable water. Meaning, the way we grow food causes unprecedented ecological damage. Meanwhile, the climate crisis will further impair our ability to produce food in the future.
Over the years, heat waves have become longer and more numerous, as have droughts. The UN predicts that, by 2050, feeding the world will require a 20% increase in global agricultural water use. But water use is already limited in many places: aquifers are disappearing, rivers are failing to reach the sea. Glaciers that supply water to half the population of Asia are rapidly receding.
Global warming may reduce the amount of rainfall in areas where much food is grown, and turn fertile plains into dust bowls. Other agricultural areas are losing their fertility due to erosion and pollution, while the supply of phosphates - essential for agriculture - is declining.
In light of these circumstances, the agri-food technology challenge has become a race against time. The way we grow and consume food must change rapidly and become more efficient and sustainable, in order to continue feeding us all. This industry is promoting, among other things, technological developments to reduce food waste (1.3 billion tons of food are wasted every year, exacting a huge price from the planet), streamline supply chains, reduce resource use, meet health challenges, create environmentally-friendly packaging, and more.
"Agri-food technology is the key to future foods," says Dr. Kardish. "All of the resources that served the farmer of yesteryear - water, soil, predictable weather conditions (meaning that summer is summer and winter is winter) - have changed. Even the population growth rate, which was slow until the 1950s, has accelerated phenomenally since then.
"In addition, people have started flocking to the city. A great many second and third generation farmers no longer want to do this hard work; they despise traditional agriculture, thus reducing the number of people who grow food. Another trend is that the middle class, around the world, wants better quality food. This means we face a triple challenge: we need more food, we have fewer resources with which to produce it, and we also want to save the planet.
"Previously, there was no answer to these challenges. Now, a combination of artificial intelligence, image processing, data collection and analysis, can do much faster and more accurately what the farmer's great-grandfather would do."
NIS 10-20 million from the government
One of the first start-ups in the field was US-based Google offshoot The Climate Corporation, founded in 2006, which brought big data tools to agriculture. It was acquired by seed company Monsanto in 2013, for $ 1.1 billion. Since then the field has evolved. "We’ve begun seeing IDF Unit 8-200 graduate entrepreneurs, people who’ve already made it in high-tech, and now want to do something interesting that’s also beneficial to the world," says Kardish.
Most investment in the field is private, but there is also government support. The two entities that support this industry on behalf of the state, through grants and promotion, are the Innovation Authority and the Ministry of Agriculture. Three and a half years ago, the ministry also created a new position, deputy director for agriculture innovation, a position filled by Dr. Michal Levy.
"My activities," says Levy, "focus on the initial phases of entrepreneurship: technology transfer from academic institutions to industry, cooperation between early-stage companies and large companies, and also working with governments from other countries." Naturally, the ministry concentrates more on agricultural innovation rather than foodtech. "We’ve made an informed choice, and are not yet participating in the area of animal protein alternatives," says Levy, "but there’s a very fine line between agriculture and food, and we may expand our activities later."
Levy says that since entering the field, she has already witnessed accelerated activity. "Most of the 400 start-ups in agricultural innovation were established during the last three years. When I arrived, one of the first things I did was contact the Innovation Authority, and together we began looking at what was happening in agriculture. For years, they were focused on high-tech, while agriculture had been neglected to the point where most agricultural start-ups didn’t even try to get funding from them."
Why is that? After all, that too is innovation.
"Technological innovation is a very important yardstick for the Innovation Authority, and many agricultural innovations seem to fall short of their criteria. For example, the development of different strains, even using innovative techniques, or new - and harmless - compounds, doesn’t necessarily fall under the definition of technological innovation."
In light of this, she says, "We have jointly established a new qualitative standard called ‘impact’. Meaning, what significance can this invention or product have for the development of the field. And this has opened the door for many companies to apply and receive funding from the Innovation Authority. The budget is shared equally between us, in all NIS 10-20 million per year. True, it’s not a large amount, but it should be remembered that it finances up to 50% of the requested budget (after a young company presents an additional funder such as an incubator or fund), and that it is a fairly early-stage investment."
Steak without cows, omelets without eggs
At the forefront of the agri-food tech world today are mainly the dairy and meat industries, meaning the animal protein industries. There is a fascinating race to invent an alternative to those proteins currently derived from animals. A JP Morgan analysis estimates that, within a decade, the alternative protein sector will take at least 10% of the global meat market, currently worth $2 trillion annually. The meat alternative market has grown significantly in recent years, with revenue nearing $6.6 billion in 2018.
The reasons for this boom in alternative proteins are mainly environmental benefits and climate change. According to the UN Food and Agriculture Organization, livestock farming - including the growing of grain and other necessary feed crops - is directly responsible for about 18%-39% of the overall greenhouse effect. This is higher than the total amount of greenhouse gases emitted from all global transport.
Undoubtedly, the star standout is Beyond Meat, maker of the meat-like patty that has doubled in value since the beginning of 2020, and is currently traded at a $9.5 billion market cap (although the share price is still far from its peak of July 2019, shortly after the IPO). Beyond Meat's main competitor, Impossible Foods, has already raised close to $800 million. The two companies are now competing to win over carnivorous consumers, and persuade them to abandon the meat industry in favor of their products.
The milk alternatives market is also looking towards a bright future, and is one of the world’s fastest growing markets. But these days, the most intriguing race is probably the steak race. This is not a protein alternative - not a plant-based analogue that mimics meat - but the real thing: real meat, but without polluting farms, animal suffering, or health drawbacks. This is laboratory-grown "cultured meat".
Unlike alternative protein patties such as Beyond Meat, "cultured meat" is not yet available in supermarkets. There are already several companies in the world with prototypes, but as yet there is still no industrial process or the economic justification for large-scale production. The global industry leaders expect to market products as early as next year. The Innovation Authority expects that commercialization of laboratory meat will begin over the next five years - first at prestigious restaurants - and that, within a decade, cultured meat will begin competing with regular meat.
There are currently four Israeli start-up companies in the field: Aleph Farms, Super Meat, MeaTech 3D and Future Meat Technologies (which also appears in the list of start-ups to watch published in this issue). The companies benefit from investments by food corporations such as Tyson Foods, Cargill, supermarkets giant Migros of Switzerland, Israel’s Rami Levy and Neto, and the Strauss Group.
"The alternative protein market is expected to grow at a very rapid pace in the coming years and overtake other significant markets in size," says Schnarch of the Innovation Authority. "It’s expected that this market, which is currently estimated at $27 billion worldwide, will reach sales of about $280 billion by 2030." The Innovation Authority believes that Israel has the potential to be one of the first countries in the world to commercialize such products. "While there are still technological challenges to mass-produced cultured meat, we believe these will gradually be resolved and that price levels will reach those of meat - perhaps even less - by as early as 2030," says Schnarch.
11 Israeli agri-food tech start-ups
Following is a list of 11 Israeli agri-food technology start-ups. Naturally, it is very difficult to choose from the 800 companies operating in this field, and of course, such a limited list does not purport to represent the entire activity of the industry. However, our selection seeks to focus on intriguing companies operating in different disciplines that seem to have a significant year ahead of them.
We’ve tried to choose, among other things, lesser-known start-ups that have not yet had exposure, especially those with real potential and benefit not only for investors but also for health, the environment, and the preservation of the planet. The selections were based on information from the Ministry of Agriculture, the Israel Innovation Authority, and leading incubators in both areas.
(Full-length articles on these startups appear in the original Hebrew version of this project)
- Entrepreneurs: Eyal Afergan, Prof. Tamir Tuller
- Product: Cultured milk production using fermentation and genetic engineering methods.
- Founded: 2020
- Funding to date: About $1.5 million from The Kitchen and other entities
- No. of employees: 6
Entrepreneurs: Dr. Yossi Kofman, CEO; Dan Grotsky, VP Sales and Marketing; Danny Levy, VP R&D and Production
- Product: Mycorrhizae - fungi that form symbiotic relationships with plants, and improve agricultural products.
- Founded: 2014
- Funding to date: Millions of dollars (the company declines to specify the amount) from dedicated agricultural investment funds: MoreVC, Middleland Capital, AgriNation, and other funds
- No. of employees: 45
- Entrepreneur: Prof. Yaakov Nahmias
- Product: Cultured meat from connective tissue that can be converted into muscle tissue without the use of stem cells.
- Founded: 2018
- Funding to date: About $17 million. Investors include: Swiss fund S2G Ventures, Emerald Technology Ventures, Chinese fund Bits x Bites
- No. of employees: 25
- Entrepreneur: Dr. Ilan Samish
- Product: A natural protein that will serve as a healthier and cheaper substitute for sugar
- Founded: 2016
- Funding to date: $4 million, in part from The Kitchen, PepsiCo, Danone, Amazon, Google and the Israel Innovation Authority. Another funding round is currently being closed.
- No. of employees: 10
- Entrepreneurs: Dr. Meir Shlisel, Yohanan Gerber, Yaki Harel
- Product: Schnitzel and food products derived from wine production process residue.
- Founded: 2019
- Funding to date: NIS 1 million from IFF (Frutarom) and the Israel Innovation Authority. Currently holding another funding round to raise $1.25 million
- No. of employees: 4
- Entrepreneurs: Yuval Gilad, Yoav Politi and Idan Alyagor
- Product: Growing and freezing black soldier fly larvae as an animal feed alternative protein.
- Founded: 2018
- Funding to date: $500,000 plus another $250,000 in grants from the European Union and the Israel Innovation Authority. Currently closing a $2 million private placement.
- No. of employees: 8
- Entrepreneurs: Dr. Rca Godbole, Omar Massarwa, Dr. Sharon Devir. CEO: Dotan Borenstein.
- Product: Saline-tolerant seeds (soil and water)
- Founded: 2013
- Funding to date: Estimated at $1.5 million
- No. of employees: 6 full-time; dozens of freelancers
- Entrepreneur: Simcha Shor
- Product: Drone software replaces agronomists by using artificial intelligence and cloud services to detect pests and inform farmers as to how much pesticide and water are needed.
- Founded: 2017
- Funding to date: Nearly $4 million from Trendlines Group, Israel Innovation Authority, Kibbutz Yir’on, BIRD Foundation and ExitValley
- Entrepreneurs: Yael Alter and Nashat Haj Mohamad
- Product: Process to affect sex development of poultry embryos, turning genetic males into functional female chicks, preventing the destruction of male chicks in the egg industry.
- Founded: 2017
- Funding to date: $2.2 million from Israeli investment funds Southern Israel Bridging Fund (SIBF), Takwin Labs, and Michael Group. Another funding round is currently underway.
- No. of employees: 10
- Entrepreneurs: Dr. Tal Zeltzer, Dr. Halim Jubran, Dr. Guy Polturak
- Product: Natural yeast cell-based food colorants
- Founded: 2018
- Funding to date: $5.3 million, from the Trendlines Group, Millennium FoodTech, Agriline (controlled by real estate tycoon Vincent Tchenguiz), EIT-Food (an EU body that invests in the development of innovative and sustainable initiatives); Yossi Ackerman (former CEO of Elbit Systems), Israel Innovation Authority, and private investors
- No. of employees: 9
- Entrepreneurs: Shlomi Kadosh, Oren Zilberman and Raz Krizevski
- Product: Improved vanilla bean using agricultural and biotechnological methods.
- Founded: 2020
- Funding to date: $1.2 million from The Kitchen (owned by Strauss) and a private investor
- No. of employees: 5
Published by Globes, Israel business news - en.globes.co.il - on October 7, 2020
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