Agricultural-focused startups are blossoming in the Triangle

From left, on the shelves of the BRI animal nutrition lab are samples of ground corn, whole grain sorghum and pelleted feed that are the medium to which BRI labs adds its specialized enzymes to enhance the chicken and swine digestive process Tuesday, November 10, 2015.
From left, on the shelves of the BRI animal nutrition lab are samples of ground corn, whole grain sorghum and pelleted feed that are the medium to which BRI labs adds its specialized enzymes to enhance the chicken and swine digestive process Tuesday, November 10, 2015.

North Carolina, and the Triangle in particular, has quietly blossomed into a hotbed of startups that are applying cutting-edge technology to agriculture.

The state is home to at least 50 entrepreneurial agricultural technology companies, with 28 of those companies based in the Triangle, according to data compiled by the nonprofit Council for Entrepreneurial Development.

“I think when people think about ag biotech and ag biotech startups, they think about really three geographies: here in North Carolina, St. Louis, Mo., and UC-Davis near Sacramento, Calif.,” said Scott Johnson, vice president of agricultural biotechnology at the state-funded N.C. Biotechnology Center.

Comparing the size of these startup clusters, Johnson added, is problematic “because everybody talks about ag biotech with a little bit different definition.”

Indeed, CED talks about ag tech companies while the Biotech Center focuses on ag biotech companies, which it defines as applying the tools of biotechnology “to crops, livestock, forestry and marine life to produce more food, fuels, fiber and goods.”

Whichever way you cut it, the Triangle’s crop of entrepreneurial companies in this sector runs the gamut from A to Z – AgBiome to Zoion Pharma.

AgBiome, which has raised more than $50 million from investors, has 44 full-time and 14 part-time employees and recently submitted an application to market its first product – a natural, or biological, fungicide that could be used by organic farmers. Zoion Pharma is a virtual company nurtured by $80,000 in Biotech Center loans that is developing a treatment for canine dry eye and is seeking a corporate partner.

These homegrown companies complement industry giants such as BASF, Bayer CropScience and Syngenta that each have hundreds of employees in the Triangle.

Altogether, according to the Biotech Center, more than 80 ag biotech companies of all sizes employ more than 8,700 workers across the state, making North Carolina “the global hub of ag biotech.” In 2010, the Biotech Center launched an initiative to facilitate the growth of the ag biotech sector which, it notes, combines “the state’s two largest industries – agriculture and biotechnology.”

Big magnet

The local presence of these ag biotech giants, as well as smaller but still significant industry players, has made the Triangle a fertile ground for startups. So has the ability to collaborate with research universities Duke, N.C. State and UNC-Chapel Hill.

“This is indisputably the world center for agricultural biotechnology,” said Eric Ward, co-CEO of AgBiome. “Our business development activities in a lot of cases can involve getting in the car and driving 5 miles instead of flying to another country.”

AgBiome has forged five partnerships with companies that have a local presence, Ward said.

The startups strengthen the Triangle’s magnetic pull for biotech talent, said Jim Blome, CEO of Bayer CropScience, which has nearly 900 employees in the Triangle.

“Our overall opinion is, we absolutely love it,” Blome said. “The bigger the magnet, the stronger the pull.”

Blome also noted that Bayer CropScience also keeps a close eye on startups that could enhance its efforts to be innovative. In 2009, it acquired Athenix, a Research Triangle Park-based company that genetically engineered corn and soybeans to resist bugs and chemicals, for $365 million.

The Triangle doesn’t offer everything these entrepreneurial companies need to grow, however. As is the case with other startups, they generally have to look outside the region to find outside investors to fund their research and help commercialize their products.

And the plant science startups view the lack of greenhouse space available for lease as a handicap. “It’s a desperate need if North Carolina and RTP want to remain relevant in the ag biotech startup scene,” said Matthew Crisp, CEO of Benson Hill Biosystems, which is co-located in St. Louis and RTP.

Jay Bigelow, director of entrepreneurship at CED, said he was surprised when the organization did a deep dive into its data a few months ago and found out just how many entrepreneurial companies locally and across the state fall into the ag tech category.

Those companies include startups formed just in the past few years as well as companies that have existed for a decade or more.

Friendly ecosystem

Among the latter is Advanced Animal Diagnostics, which has more than 30 employees and has raised more than $17 million in funding since it was founded in 2001. Its first product enables dairy farmers to perform tests themselves to detect mastitis, a disease that limits a cow’s ability to produce milk and costs the U.S. dairy industry an estimated $2 billion a year.

“I would say that RTP has an ecosystem that is friendly, certainly, for any startup, but more and more so for ag-related startups,” said CEO Joy Parr Drach.

When BioResource International was formed in 1999, said CEO Giles Shih, you could probably count the number of ag biotech startups in the region on one hand. Shih co-founded the company with his father, a retired N.C. State professor, and its core technology was licensed from the university.

BioResource, which uses biotechnology to create feed additives for the poultry and swine industries, has 34 employees and its compounded annual revenue growth has exceeded 20 percent in recent years.

“We actually hire a lot of folks out of N.C. State that have technical backgrounds,” Shih said. “Not only that, but this area attracts a lot of very qualified scientists. ... There are some people that move to this area even before they have a job because they know they can get a job in biotechnology.”

That’s how BioResource found its director of research, who moved his family here from Pennsylvania without a job.

Among the newer companies that have made a splash by raising significant amounts of funding are AgBiome and Benson Hill, both of which were founded in 2012.

Benson Hill has 25 employees and already has raised more than $10 million from investors. It’s focused on genetic traits that will improve photosynthesis and therefore boost the productivity of farm crops.

“The private investment community, institutional capital, is realizing that ag tech provides (venture capital) level returns,” said Crisp, the company’s CEO. “So folks are starting to deploy more capital into this space.”

Incubating startups

Some believe startup activity in the Triangle is poised to accelerate thanks to, among other things, new advances in technology and plans for a couple of local ag biotech-focused accelerators that are in the works – plus one that’s already operating.

Ag TechInventures, which incorporated last year, is incubating two startups: Edison Agrosciences, which is working to make sunflower seeds a viable source of natural rubber and is seeking funding from investors; and Rx Maker, which aims to use crop and soil data to help farmers select the best crop varieties, crop protection products and fertilizers to maximize productivity.

“We expect we’ll have four to six companies at any one time as we go forward,” said CEO Tom Christensen.

The business model calls for Ag TechInventures executives, including Christensen – the former president of a San Diego company whose crop productivity technology was acquired by Monsanto – and co-founder Karen LeVert to run and nurture the startups after licensing technology from universities and elsewhere.

Eventually, Christensen added, “we’ll put a permanent management team around these companies, and we’ll retain a significant share of the equity.”

There also are macro factors that are expected to trigger more Triangle startups.

The world’s population is steadily increasing, but “we’re not going to have any more agricultural land to grow crops on,” said the Biotech Center’s Johnson. “So we have to have improved crops and improved production to feed the world.”

David Ranii: 919-829-4877, @dranii