WP Global Partners Transcript

So in terms of the market, your question is really our opinions on the ag-tech. And I wanted to make sure that you knew who we were or who we are. So in terms of WP Global Partners, my partners and I have been together since 1997, we have been investors in all stages of companies from early-stage to later-stage buyouts. We traditionally have been more opportunistic in our investment approach. our key program is really the build up a diversified portfolio in the smaller end of the market. Our institutional clients include sovereign governments and large institutional investors. So we've always been in a niche. About a third of our 4 billion of assets under management are in direct and co-investments. So in addition to investing through funds, a fund to funds model to build up our portfolios, we also do direct investment and that direct investment can be in early-stage companies or later-stage.

As part of our direct investment, I developed some opinions and ideas around the agricultural markets that I want to focus on because I felt like we had food, we had exposure to consumers, but we didn't have exposure to food and agriculture production. and so we created a specific program for Ag that included a range of sectors within the agriculture and technology area with the idea of getting exposure to food, production, and manufacturing. And so we have about 200 million that we've put to work in later-stage companies and everything from Ag technology and production-related technologies to mundey farm in Vietnam to Peruvian blueberry farm in great farm to citrus in central Valley to hydroponic greenhouses to LED seed companies, et cetera.

So the question is how have we seen ag-tech evolve over the years? Our initial premise is that if you look at the green revolution that started in the fifties, there was a concern, there was  concern that we would run out of food that those fears continue to stay. The green revolution was all about adding food production to the planet. Only 25% of that food production came from the addition of new land. The rest of it all came from technology. They came from better farming practices, the ability to fix nitrogen and create fertilizer, better ways to control disease and laws to better, tighter farming in the soil with irrigation to mechanized machinery, automation of machinery. 

So our view was that in the first version of Ag tech, we saw a lot of chemicals and we saw a lot of machinery, which was taking out the labor costs. and that were primary areas where you saw Ag tech and I'm going back many years ago. Today what we're doing is we're trying to take the cognitive element and the risk out of farming and we're manufacturing food, the same way we are. Our farms are today becoming. our manufacturing, not a vo-tech operation. it's not a generational inheritance of the family farm and continuation of that. It's improving through scale and size and the ability to create a uniform production of food that your lettuce can be produced the same way you produce a widget. That efficiency and then taking out the variability is the only way to do it. So Ag tech has evolved from the days where we were applying mechanization and taking out labor to more taking out the cognitive side. So where Ag tech is going the biggest area in is in artificial intelligence and AI has the ability that I don't have to have my father, my grandfather teach me how to grow something or be a better farmer. That's how farming used to be done. And I don't have to do it necessarily at the whims of whether I can now afford to create lighting and food and things. And I'm going from a loom or a piece of very simplistic machinery to very sophisticated machinery. And so Ag tech, we saw Ag tech, it's not innovative. Ag tech is simply taking, has always taken other things and approaches, and brought it into the application, with exception of fixed nitrogen, right after the war, where they converted basically explosives into fertilizer, even that was an application or portability of a technology. so let's think about what was the big thing in the late nineties and early two thousands was applied materials. We were able to take materials that allowed us to create smaller semiconductors and computers that allowed us to apply, do new sheeting and cloth, and control the tarp houses, the containers. we went from applied materials. We started to evolve more into genomics and became very much a chemical, but not in the case of pesticides, but actually rebuilding and reconfiguring genetically, the food itself. So, one option I have is a farm farmer is I can pick a greenhouse and I can try to control the environment and with lighting and food and fertilizer, I can control the quality and size and color and flavor of the food, but I can also do that genetically with CRISPR and other things. I can start to take a process that took evolution and hybridization over years, I can condense in a very small period of time, and I can start to, again have more control over that production of that product. So applied materials gave way to genetics and I think that that has been a big area and that branches into a disease, into a variety in pace, and productivity. 

so a lot of the evolution is not coming from fertilizer anymore, but it's coming from the genetic side. The other thing that you're going to see in Ag tech is the application of AI. and that's been common that's in combination with LADR and in combination with topography and the ability to analyze on the fly, or very quickly the genetics of the soil and the condition of the soil. And, going back to that loom concept that we're now that the rug that we're building is that it's that farm itself, that land, I can start to create color and texture within the productivity through these technologies. 

The big hurdle in Ag tech is getting it to the farmer and getting the farmer to pay the price of that technology. So a lot of this technology in the old days to the farmer was very seasonal. And so farmers are used to seasonality and their income and their expenses. They would pay for the seed this year. They would get their crop and pay off the seed next year. So the bank plays a big role and in the farm and location plays a big role. with technology, we're creating more of a less seasonal production of food. And you have to put the farmer has to still view the value proposition and say what does it mean to me from a production side? How do I translate that into better dollars? And one of the things that we've seen with the farming is that what I'm seeing in technology, is that farm technology has to evolve more and more into a per-unit cost. so the guys that are creating seed or LED or fertilizer, you can't think about it in ounces or gallons, but you have to think about it in square foot or metrics. so you're starting to see technologies, how do you price that technology and sell that is still evolving and that's been the big challenge for the technologies is how do you price and sell that technology? because the farmer isn't like the millennial consumer that's used to pay as you go and leasing everything to the farmer, it's about cash flow. So you have to be able to apply the technology to that cashflow. There's the other aspect of technology I missed. And it's an important one because it leads to AI and to big data. All of a sudden, we had the portability of ideas and farming practices that I didn't have to remember what I did the season before, what my dad taught me about seasonality. I now have these incredible databases that I can refine and mine for information and data. 

Challenges as an investor

As an investor, valuations are tricky and that's not unique to this industry, but it's still a problem. And what happens is when a climate Corp, gets bought out, by Syngenta, and when you have these big transactions, like a blue Indigo, or a climate corporate, it tends to make people believe that anything that looks similar, it's like somebody buys a race car, and you say, well, I have a car. So my car is now worth more because look, how much this race car sold for. when the Climate Corp core was sold people got very funky on their valuations. by the way that reminds me of it. but I think the big challenges are valuations. I think in the area of genetics, the big thing is getting people comfortable, with genetics, and not being fearful of genetics because eating is very personal. What I put into my body, I have a lot of concerns about it. So, there are people who are more sensitive to the materials that made their food than they are about the materials that are in their sneakers. So, consumption means that people worry about genetics and that's going to be a big challenge for people and there'll be more and more generationally to become comfortable with the manufacturing of foods, genetically changing the technology side.

And then some of that's just a little, a little bit of marketing. can you tell the difference between lettuce that's grown in drawers and in a field, that is local, or can you taste the difference between genetic and non-genetic food? Probably not. there's a more soft, slippery feel to hydroponics because the lettuce is grown in a saturated market water environment whereas from the field tends to be crunchier. but I can change with genetically. I can change with righties. I can change the crunchiness or all those aspects. 

I think the biggest height is vertical farming. I think vertical farming is a fascinating, popular science cover. it makes for interesting reading, it's like reading about robots. It sounds really exciting but the productivity of indoor farming and the efficiency of indoor farming. I don't think that the costs have yet made sense from an investment standpoint unless you have limited land if you're going to be harvesting on the moon or in Japan where you have limited arable land, it makes sense from a food security standpoint, if I'm in the middle of the desert, I'm a middle Eastern country and I need to be able to produce food efficiently with water. 

Then a container makes a lot of sense, but does a container make sense, putting it on the roof of a supermarket? it's like putting, going to be showroom cars in the middle of an airport. They're fun and they're exciting, but they're not really functional. the other area that you're going to start to see more influence is in the area of consumer demand and likes. So, what you'll find is it's not the technology that makes the consumer like something or dislike something it's more of the peace of mind. So again, with food, because it goes into your body, not on your body, food safety is very important. food safety is important for the foodservice industry. It's important for the public investors in foodservice because what we learned is that a cantaloupe farmer could kill four or five people with food by getting it infected or romaine lettuce, which was supposed to be good for you can harm you. 

And so food safety is going to become more and more of an issue because of things like COVID-19. And, so with Tylenol became the first to seal their medical bottles with tamper-proof foil and many if you're under a certain age, you probably don't remember ever having food that wasn't properly sealed or medicines that were properly sealed. You're gonna see a move towards food that gives that lets me know that it gives me a sense of comfort and safety. and then the other trend we think that you'll see is probably more convergence of medicine and food. through that genetics, there's the ability from a certain university right now that I could give you a head of lettuce that heads as many antioxidants in it as blueberries. 

Food is medicine is going to be more and more important. I don't think in the near term, people are gonna drink astronaut light shakes instead of food. I think that people are going to look for food to have the nutrients and that you can get all your nutrients in a salad as opposed to taking vitamins in a salad.

About your team

And then Jeff is a very good visionary in terms of seeing the relative trends in the Ag tech market through the lens of what has happened in other technologies. So, Jeff came into our life as the CEO of a company called Aluna Tech out of Austin that was on LED and he quickly, not only did he improve the technology of the lighting, but he also realized that the story wasn't about the lights, it was about the management of the crop. And what started originally is we said, look, the airspace between the growing bed and the lights, you can't put anything between that. So we own that airspace, what do we do with that airspace? And we started to focus on creating our cameras to monitor the growth of the plants and putting sensors and what we learned was that it wasn't the lighting. That was interesting. It was all the things that we were attaching to the lights that became very interesting. The lighting was a commodity, it's like an exit sign. But what was more important is I could put sensors and collect data. And what farm vision did is to then take AI, and to help the indoor farmer manage the square inches and square footage, down to the square inch, be able to monitor things, one from a monitoring standpoint and a management standpoint, that's pretty fundamental. You could pay somebody to walk back and forth and do that, but the human eye isn't trained, uh, is very easily distracted for a lot of reasons. The way that we process information and a machine is able to go in and measure and see things, for example, with infrared. So, um, using a common accommodate example, I, if you came into my office for ritual, uh, if I didn't see press Federation or our, your body language can tell me you were sick, I can't tell you the sick, but I can use an infrared camera and know what your temperature is. And, and, and, and, and right. And, uh, and so if I use the imaging that same technology with a plan, now I can tell where their plan is feeling well or not. Well, that may not even be, uh, evident and so that a I we're using to help make the production better.

Now here we go back to the same problem I was talking about earlier is that there's a, there's a cost benefit for farmer. so if I'm growing lettuce and I'm growing crops and I'm making a couple thousand dollars an acre, that's one thing, but the people that really saw value in that was the cannabis industry, because they're saying, it's a difference of hundreds of thousands of dollars. But if my cause my crop is a high value crop and so we started with in the cannabis business, but have now gravitated into the other horticulture, let us know sort of things. What we found was there really is only one other company out there that is really involved in tracking and using imagery to track the farm production. So again, but it's said at the very beginning of some in there, early in the fifties, I worried about mechanization and taking labor out. Now I'm trying to take the cognitive side out and the human error out, and his name is Jeff Pittsburgh.

Now it's moved into either manipulation of the species through genetics, but also taking the cognitive part of farming out. So, I used to, in the old days, rely on my grandfather, teach me how to grow, whatever I'm growing today. I can super learn and not only in the same way I can compress hybridization of plants. I can condense thousands of hours or hundreds of days of knowledge into a compressed fashion that I can organize and analyze through big data and AI. And I was also mentioning a little bit about your background and the last point I wanted to make Jeff that I had mentioned If you come into my office today, I can't tell if you're sick. I can ask you, or I can examine you. I can look for signs, maybe press operation, but with infrared cameras, I can analyze you and tell whether you're sick or not without ever meeting you. And in the same way with plants today, using all this technology and AI, we can determine the health of a plant that may not be visible to the eyes. So this isn't about taking out the labor part. We're not trying to reduce people walking up and down the aisles and looking, we're trying to improve the analysis and the data. So with that this is a smart guy was telling me about his Jeff, I can let you talk a little bit about yourself and then Rachel thought she would then follow up with a separate phone call with you.

We're much more specific. Greg has that figured view. I am a serial entrepreneur. I'm been to maybe a half a dozen plus startups. My last startup, I sold to GE and Greg recruited me to come down here and take a little bit text from vision AI to the next level. And I think he nailed it on the head where, if you continue to produce enough food to feed the world is it's going to increase the quality of food where people want to maintain the security of food. I think have to change progress and move forward. And historically that information was locked up beside very few people's brains and to grow with scale, it's just not feasible in this next level is as we try to grow and the tools that are available really just have not been available before these digital tools, even two, three years ago. 

So really what we're looking at is applying the digital revolution to, ag space, to very high value crops, and to deliver intelligence at the level of his grandfather and multiple generations of grandfathers to many growers to enable them to grow that high quality and quantity of crop at scale for a lot of people. And the key piece that has been missing, look at all the data that's required in order to do this there's input data process data. The key piece that's been missing to deliver on this vision is output data. That is what the plant is doing every minute, every second. And that's kind of what Greg was referring to with the cameras. And we're collecting that instantaneous output data, and we connect it with the input data and the process data. We can tell exactly how well the plant is doing even before the farmer knows. we can apply generations worth of intelligence to that information, and then make recommendations that will really improve the quality of the grow and the profitability for the farmers, so that that's kind of our vision and what we're delivering on. we have multiple grows online where we can tell you exactly how it's working.