Financieele Dagblad - "Will the Netherlands miss the next Green Revolution?"
An entrepreneurial ecosystem to convert promising research into commercially viable products is urgently needed.
Sixty years after the cocktail of high yield seeds mixed with synthetic fertilizers, pesticides and herbicides started to push crop yields to once unthinkable heights, the world is gearing up for a second Green Revolution. Due to factors like climate change, rapid population growth and dwindling crop yields the world again faces huge challenges to provide enough food for its population without depleting the earth’s resources and destroying biodiversity.
This will be impossible to achieve without major innovative breakthroughs. Luckily companies, many of them start-ups, are rising to the occasion with innovations that will radically transform how we produce, process, package and handle food: from precision farming and development of drought-resistant crops to preservation methods to cut food waste and the extend shelf life of fresh food.
Venture capital funds like ours have joined the fray: global investment activity in the sector has soared from $300 million in 2011 to $2.4 billion in 2014, according to investment platform AgFunder; and the first half of this year another $2 billion found its way to young food and agriculture companies with bright ideas.
You would expect Dutch start-ups to play an outsized role. In the last Green Revolution, Dutch companies led the way, making this country the second biggest exporter of agricultural products in the world. The Netherlands also leads in production efficiency in a host of agricultural sectors, from plant breeding to piggeries, and is home to the world’s largest agriculture focused bank (Rabobank) and some of the world’s best academic agricultural institutions (led by Wageningen).
But in reality the Dutch food and agriculture sector seems to have lost its innovative steam. According to the recent report Working on Innovation Together by the Dutch Ministry of Economic Affairs, investments in R&D by the Dutch chemical, life sciences and water sectors are much higher: in 2013 they invested 83%, 56% and 47% more, respectively, than the 430 million euros the food and agriculture sector spent on R&D. At the same time their added value to the Dutch economy as a whole is much smaller: food and agriculture added 17 billion euros compared to 12 billion for the chemical sector and just 5 billion for both water and life sciences.
Possibly even more worrying, Dutch innovative start-ups seem to be few and far between. AgFunder could only identify two transactions in 2015, indicating that less than 1% of global venture capital activity in the sector is invested in Dutch start-ups. The Netherlands also failed to make Agfunder’s list of top 10 countries leading investment activity in the sector for 2014/15. This corresponds with our own experience: even though we are based in the Netherlands, we are having difficulty finding suitable Dutch investment opportunities.
Why is this? What we see is that even though the Netherlands is clearly a center of excellence for food and agriculture innovation, it lacks the entrepreneurial ecosystem to convert promising research into commercially viable products. Another unhelpful factor is that government financial support for innovation is seldomly targeted at start-ups and mainly focuses on academic institutions and large traditional food and agriculture companies.
A concerted effort to improve the entrepreneurial ecosystem and a more active government role in supporting food and agriculture start-ups could both be excellent ways to unlock the vast innovative potential of the Netherlands. A closer collaboration between traditional food and agriculture companies and young and eager entrepreneurs could be another valuable contribution.