Plant Startups Find Fertile Ground

High-tech investors have long considered agriculture to be a losing proposition, scorning it as a backwater in favor of fast-growing biotech sectors focused on human health. But the budding success of the first generation of genetically engineered crops-and projections that growth will skyrocket over the next several years-is rapidly catching the attention of entrepreneurs and venture capitalists.

In the latest example, Burrill & Co., a San Francisco investment house, is raising a $100 million war chest earmarked for new agriculture startups. “This is a huge amount of money for ag biotech. There hasn’t been much money going into this sector at all,” says Roger Wyse, the former dean of the University of Wisconsin’s College of Agriculture and Life Sciences, who is directing Burrill’s investments. Backed by such corporate giants as Bayer and Hoechst, the managers of the fund see plenty of opportunity in this underfunded field.
The reason for all the interest is clear. Big agricultural chemical producers like Monsanto and DuPont and seed suppliers like Pioneer Hi-Bred International have looked into their farmers’ almanacs and concluded that biotech is the future. The ag giants are already selling seeds for herbicide-resistant soybeans and insect-fighting corn. First commercialized several years ago, these genetically engineered crops are proving to be blockbusters. And the projected growth numbers are staggering. Analysts predict that biotech crops will be worth $7 billion by 2005.

Companies are now looking for the next batch of genes to further engineer crops. Research groups are busily developing biotech plants that will be designed with “output” traits to, say, pack in more protein or more starch. A third wave of biotech crops is on the drawing board that will be engineered to produce nutritional supplements or raw materials for industrial processes.

But fulfilling such dreams is going to take extensive knowledge of plant genes. Which is where the startups hope to come in. The sudden influx of venture capital and the promise of more to come is fueling a slew of new plant biotech companies.

A number of the startups are borrowing well-tested genomics techniques (methods for identifying genes and their functions) from the pharmaceutical industry. Indeed, several established biotech players from the health care arena are already leveraging their know-how into plant biotech. Paris-based gene mapping firm Genset has sold rights to its technology for agricultural applications to a Los Angeles startup called Ceres. San Francisco’s AxyS Pharmaceuticals, a gene and drug specialist, says it could be next.

“I think that you’re going to see a huge number of startups, probably 20 to 30 new companies,” says John Ryals, founder and CEO of Paradigm Genetics, a new plant biotech firm based in Research Triangle Park, N.C. “It’s a wide-open opportunity right now.”