It was a great week at the Salinas Biological Summit last week at the Salinas Rodeo Grounds. A full day of workshops and a VIP gathering on Monday, a full day of bio-controls content on Tuesday, and a full day of bio-stimulants on Wednesday. From a content perspective, I believe it was the best Summit yet. One of the topics that continually came up in content and conversations was the need for more tests for bio-controls to measure their results relative to pesticides, herbicides, and fungicides.

I was talking to Pam Marrone about this topic. As one of the pre-eminent founders and advisors in the biologicals space, few are more familiar with the requirements and costs and processes for successful tests than Pam. I asked her what she thought the current cost for a test was for a bio-control and she estimated $25,000-$30,000. That is in line with what we have seen at Western Growers from a variety of Contract Research Organizations (CROs). I then asked how many tests the average product required to get to registration and ready for commercialization. She estimated 80-100 and leaned toward 100 as the right number because products need to be tested in a wide variety of soil, water, and crop conditions.

So basic math suggests that $30,000 per test times 100 tests is … $3,000,000. That means that every product (and startups are usually built to go beyond one product after the first one works and begins to commercialize), a startup will need to come up with $2,500,000 – $3,000,000 just for testing before they can raise an A round. Let’s walk through the expectations for general startups and then for AgTech startups.

For most startups (any tech segment), the fundraising progression and expectations looks like this:

Pre-seed: Can this be real?
Series A: Is it working?
Series B: Can it scale?

For AgTech, it’s a slightly different:

Pre-seed: Can this solve a specific farm problem?
Series A: Does it work in real commercial field conditions and produce measurable grower ROI?
Series B: Can it be deployed, supported, and expanded at scale with improving unit economics?

Among the challenges an AgTech startup must address before raising an A round is whether you can solve a specific farm problem. In this case, that means proving that the bio-control can solve the specific problem of replacing a chemical application that has been restricted or banned. To prove that, the startup has to get through the trials process mentioned above. This means that before most startups get to an A round, they need to complete 100 trials and come up with $2.5-$3.0 million in capital.

I believe the AgTech ecosystem needs to work on developing platforms that can help reduce both the number of trials required for registration and the cost of each trial. Pam and I and others are going to start working on some strategic options for reducing both numbers. Here are my early thoughts on that process:

• Reducing the cost of each test

There are hard costs associated with each test, and the $25,000 – $30,000 number includes the cost of preparing the test acreage, planting it, growing it, and harvesting it so that the ground is put back into it’s original state before the trial. Many of the tests are done by Contract Research Organizations (CROs) and can happen on a variety of acreage types, depending on what the requirements are for each test. Western Growers works with multiple CROs, and that cost range is what we are used to paying with some variance due to complexity or unexpected challenges of a particular test.

I believe there are two primary options for reducing the per-test price. First, you can secure testing across a large number of acres to support a large number of tests. This will reduce the per test cost. That of course requires access to acreage that can be leased or purchased and used partially to primarily for testing purposes. This will require significant capital. Second, you can reduce the price by finding a partner that can help subsidize the testing cost. For example, would a genetics company be interested in subsidizing the costs to reduce the costs to the bio-control startup or to many separate bio-control startups?

• Reducing the number of tests required

Reducing the number of required tests may prove harder. Needing to do 100 tests is not an absolute hard-line rule but it is a number that many subject matter experts in the field have mentioned (sometimes as a range – i.e. 80-100 tests need to be run). I need to dive into the rationale for the 100 number. My limited understanding so far is that you need to test both for the results you hope for (i.e. that the bio-control does indeed act as a pesticide alternative) in different circumstances (i.e. different soil conditions, water conditions, weather conditions) and than make sure you do not deliver any unintended consequences that can be tied back to the product being tested. So it’s a two-sided test – does it do what it’s supposed to do in multiple types of conditions and does it avoid doing things you don’t want it to do in similar conditions?

Some of the effort to reduce the number of tests required would involve re-examining the required test conditions and trying to maintain a reasonable confidence level while using fewer tests. The other option is to get a platform partner to support some of the trial costs under the theory that if more startups make it because they underwrite the tests, there will be more options to sell down the road, and that can be more effective than purely relying on internal R&D efforts.

The bottom line is this – we need to figure out a way to reduce the per product testing costs from $2.5 – $3.0 million to something 40-60% less than that. This will reduce the cost burden on startups on getting to their first product and getting through the certification process. I’ll be writing more about this objective as we make progress. In short, what we are doing with Reservoir Farms to reduce automation MVP time and capital requirements by 30-50% (or more) also needs to happen with biological (specifically bio-controls) startups.