"We want to do good things, not just make money"

Ohad Zuckerman, Eyal Cohen  PR

Copia Agricultural Technologies Venture Capital seeks to commercialize Israel's outstanding agricultural research, and solve some pressing global problems.

Cherry tomatoes were invented in Israel by two professors at the Rehovot campus of the Hebrew University of Jerusalem agricultural faculty. Drip irrigation was invented by Israeli company Netafim Ltd., a global leader, and baby cucumbers were also created in Israel.

It is therefore no wonder that the Agricultural Research Organization Volcani Center is one of the world's leading agricultural research institutes, nor does it come as any surprise that the Volcani Center and similar institutions are commercializing as many of their inventions as possible in order to generate revenue to fund their next research project, invention, and technology. That is how an economy makes progress.

"Globes" reported last January for the first time the Israeli activity of US commercialization company NRS H&W, which was launched through the signing of an framework agreement with the Volcani Center for commercialization of some of the latter's research projects. Even before NRS H&W, however, the Volcani Center had similar cooperative efforts with Copia Agricultural Technologies Venture Capital, a new Israeli investment fund, revealed here now for the first time. The fund is now embarking on a $50 million financing round for research projects at Volcani and other research institutes in Israel. Like NRS H&W, its activity highlights not only the big foreign money invested in Israeli technologies, but also Israel's major presence in agricultural research, in addition to autonomous cars and cyber security.

Founded in late 2014, Copia is only now starting to raise capital from international investors. The fund has three founders: Jonathan Berger, CEO of the The Kitchen, the Strauss Group Ltd.'s (TASE:STRS) food-tech incubator, and former CEO of Itzhar Teth Beth Industries; angel investor and Yad Chaim Weizmann chairman Edly Dollar, a former trustee of Yeda R&D Company Ltd., the technology transfer arm of the Weizmann Institute of Science; and former SAP senior VP Ziv Carthy. The fund is led by managing partners Ohad Zuckerman and Eyal Cohen. Cohen began his entrepreneurial career 20 years ago by founding and managing MEA, which developed a system for testing electrical engines. He later joined 3M as VP sales and marketing, moved to Ellara as VP business development, and later to APM in the same position.

In contrast, Zuckerman is from the agricultural sector. His father was among the founders of Zeraim Gedera, one of the world's leading seeds companies. Ohad Zuckerman began by working on a tractor at the company before being appointed CEO and leading the sale of the company by the founding families in 2005 to the Markstone Fund, which later sold it to US company Syngenta. He joined the board of directors of a number of Israeli technology companies, in some of which he still serves, before getting the offer from Berger.

"It comes from necessity," Zuckerman says in explaining, Israel's preeminence in agricultural research. "Israel is a small isolated country that must be efficient. It has difficult climatic challenges, and must therefore think outside the box. Copia is focusing on the basics - a solution for problems that traditional agriculture has not solved, rather than buzz like big data. I'm not belittling big data, but that's not what will solve problems in the global food chain. Nature always wins, and will always overcome any solution invented by man."

"Globes": Nature always wins? That does not sound optimistic.

Zuckerman: "On the contrary; that's the only way that competition can be generated. Just like one person writes code and somebody else breaks it, and so on. Nature always generates resistance, and the market changes according to it."

Zuckerman and Cohen assert that where the agro-tech (companies developing agricultural technologies) market is involved, Copia's goal is to create a "blue ocean" (a phrase describing the creation of a new market by thinking outside the box, in contrast to a "red ocean," meaning activity in an existing market by taking market share away from competitors). "Venture capital funds invest in companies, not research projects, and they invest almost nothing in the agro-tech market, which is just beginning, and doesn't have the same financing opportunities that high-tech companies have. Israel is a leader in agricultural research, and has research institutes developing really nice technologies, but the main problem is that the industry doesn't know how to explain itself to academic institutions."

Explain.

Zuckerman: "Communications between the two sides is less than optimal. You often see industrialists and academics in one room nodding 'yes' with their heads, but they don't really understand each other. The industry is unable to explain to academics what it needs, while the academics are focusing on research that may be very exciting, but can't be applied."

Cohen: "This communication is relatively good in Israel, in comparison with the rest of the world - perhaps because of the mentality, and perhaps because of the Volcani Center's presence, which by definition is more application-oriented. Outside of Israel, however, it's a really acute problem. Only a small proportion of the agricultural technologies reach the market, i.e. become products. Most of them wind up in some agricultural magazine, meaning that they die in academic institutions."

Zuckerman: "We want to utilize our abilities to speak both languages: that of the industry and that of academic institutions."

Copia, which is seeking to raise $50 million, already has a commitment for $5 million in investment. "We started to call for the money we already raised, in other words, to invest it, and now we're approaching family offices, food and agriculture companies, funds that invest in venture capital funds, and institutions in Israel and overseas," Zuckerman says, declaring, "By the end of 2017, we'll close a $20 million financing round, and in less than six months after that, we'll close a $30 million financing round," giving the fund $50 million.

As Cohen explains, the fund selects its projects (as of now, it works mainly with the Volcani Center and a little with the Weizmann Institute of Science, Tel Aviv University, the Hebrew University of Jerusalem, and Ben Gurion University of the Negev) according to the commercial readiness of the technology (proof of concept), "when we conclude that this technology will reach the market within two-four years, and this is a critical criterion, because it delineates the timetable for turning the technology into a product." In every entry into a research project, the fund cooperates with an industrial partner for which the technology complements its other products. The fund buys a license to use the technology from the research institute, and grants the industrial partner a sub-license. The eventual goal is for every project to become a limited company, but until it does, there's no CEO and all that kind of thing for the project, and we allocate resources to it as needed." According to Zuckerman, Copia's industrial partners are Tier 2-3 companies - smaller companies than those that will buy the license, "but strong enough financially to pay for a sub-license, and more agile in their day-to-day business."

The fund has already invested in six Volcani Center projects, about which Cohen says, "Some of the technologies are very advanced, and some are real breakthroughs in their fields; as soon as these reach the market, they will solve global problems." The fund allocates $500,000-$2.5 million per project, and plans to manage 50 projects simultaneously, which is not a small number. "We're involved in every project from the beginning until the end, together with the industrial partner," Zuckerman says. "We regard ourselves as an impact fund, meaning that we want to do good things, not just make money."

Not only money, but money too.

Zuckerman: "Correct. We're still a 10-year fund, plus one year and another year, and it’s clear that at some stage in every project, we get out, meaning make an exit. Even before the exit, however, we have two sources of revenue, and that's good for our investors. The first is when the industrial partner pays us for a sub-license, so that it can use the technology. The second is when the product is sold and we receive royalties on its sales. The third is when we sell the license, in other words, an exit. The first two sources have a material effect on the fund's internal rate of return (IRR), so this is a unique model that doesn't exist in Israel."

"The Volcani Center has the most applied research and is the biggest, and was the first to realize the advantage of working with a fund like ours, but it works with several funds simultaneously, and that bothers neither us nor them," Cohen says. "The Volcani Center can't put all of its eggs in one basket, and it has hundreds of projects at any given moment. It happened that we lost a project in which we wanted to invest to some other partner of the Volcani Center." At this point, Zuckerman stresses that every project is discussed by the fund's investment committee after a positive recommendation is received from one of the fund's scientific advisors. "If the advisor says, 'The science doesn't hold water,' we won't invest in the project," Zuckerman explains. "Four of our six projects already have an industrial partner, and one of these is likely to become commercial as early as 2018."

Copia's six projects are:

Smart Plant Valve Technology - the discovery of a gene that accelerates the closing of the stoma - the openings in the plant's leaves that regulate the exchanges of gases between the plant and the environment, through which water from the leaf evaporates. This technology can reduce water use by up to 20% and improve the crop and the plant's resistance.

Bio-Pesticides against Phloem Pathogens - the development of bacteria for treatment of diseases in the plant tissue, such as the greening disease, which attacks mainly citrus fruit;

Bio-Nematicide against the Root-Knot Nematode Based on a Predatory Nematode;

Innovative Bio-Stimulant Disposable Devices;

FRK Technology - Increasing Biomass - technology for improving the metabolism of sugar enzymes;

Novel Endophytic Fungus for Pre and Post-Harvest Solutions - detecting harmful fungus that attacks mainly potato crops.

About the second project, Cohen says, "There is a variety of plant diseases caused by bacteria that penetrate the plant, damage its crop, or in the worst case, kill the plant. There are diseases that amount to a global plague, for which there is no solution. One of them is greening disease - a disease that attacks mainly citrus fruit, especially oranges, and which is known for the green color it gives the fruit, from which its name is derived. In recent years, this disease has spread rapidly, particularly to the US. 80% of the US citrus crop has been damaged and 50% in China. We contacted the US National Institute of Food and Agriculture, and they told us that they would leave no stone unturned to find a solution to this problem, which is causing huge damage to the US and global economies.

"The bacteria developed at the Volcani Center are friendly probiotic bacteria living within the plant. They expel the harmful bacteria from the plant. We are currently conducting field trials of diseases in grapevines, and the initial results are really promising. We're cooperating with two global companies, one in the US and one from Denmark, in this project. There is another disease from the same family that attacks coconuts and bananas, which are important sources of income in developing countries, and we are therefore examining a strain of these bacteria for dealing with them. As soon as we prove that our bacteria are effective, we spray them right on the plant, just like a biological pesticide. In this way, we both refrain from using chemicals and improve the crop."

The plan to move the Volcani Center to the north: "A death blow to agricultural research in Israel"

It was recently learned that the government is planning to move the Volcani Center from its current location in Rishon Lezion to the north. This government initiative is currently being heard in court, after Supreme Court Justice Anat Baron last week ruled that the petition against Minister of Agriculture Uri Ariel's initiative to transfer the Volcani Center would be heard by a panel of judges, and the work of a special team formed by Prime Minister Benjamin Netanyahu to make a recommendation on the matter will be delayed. The petition was filed following a story in "Globes" about the existence of a secret report by the National Council for Research and Development against the initiative that has been concealed from the public.

Zuckerman is very disturbed about the possibility that the Volcani Center will be moved to the north. "It really disturbs me. We regard it as a death blow to agricultural research in Israel. The Center's researchers won't move to the north, because it means uprooting entire families of even two or three generations, and it's very likely that they won't want to move. A great deal of knowledge will be lost this way, and quite a few cooperative ventures between the Volcani Center and the Weizmann Institute and the Hebrew University agricultural faculty, both of which are located in Rehovot, won't work well, if at all. Moving the Volcani Center could cause irreversible damage to the agro-tech industry, and we'll all be the losers in the end."

Published by Globes [online], Israel Business News - www.globes-online.com - on March 27, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Ohad Zuckerman, Eyal Cohen  PR
Ohad Zuckerman, Eyal Cohen PR
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