22.02.2018 - 09:25
Isabelle is a star contributor for Tech in Asia and publishes exclusive, high-value content that serves the Asian tech community. Read more from star contributors here.
The term open innovation (a mindset of increased “inter-firm cooperation in R&D”) was coined back in the 1960s and is more fashionable than ever. There is abundant literature for startups on how to navigate the pitfalls of collaborating with corporates. However, for agritech and foodtech startups across the APAC region, a generic understanding of what makes it work or fail is not sufficient.
US business intelligence sees the urgency for corporates to embrace open innovation as it relates to food. According to Harvard Business Review, out of the 2.3 percent annual growth rate of US grocery stores’ food and beverage category, only 0.1 percent was contributed by the largest 25 food and beverage companies.
While Western multinational companies are now becoming deliberate in their efforts for cooperation, how does this translate in the region?
I work for Future Food Asia, a platform looking to accelerate open innovation in agritech and foodtech across the APAC region. Out of the 35 food and agriculture (F&A) corporations actively or more distantly engaged with our program, 40 percent are Asian. Yet their path to adopting open innovation is consistently different from what we have noticed with Western corporations.
A very clear pattern emerges: Promoters often invest in tech startups in the US and sometimes in China. As the Silicon Valley and a growing number of US and European innovation hubs are jumping on the “sustainable food” bandwagon, early VCs are starting to consider this new vertical as meaningful and sensible to their business.
When we launched Future Food Asia back in 2016, the common thinking was that good startups were to be found outside Asia. But things are moving fast. Localization is paramount in F&A, and senior corporate executives are beginning to show interest for Asian startups. Over the last six months, we’ve facilitated 20 collaborations between APAC startups and corporates, of which one-third are currently at the pilot stage. Overall, 60 percent of these collaborations take place in Asia.
From our experience, Asian F&A corporations rarely have an open innovation framework but are very willing to give it a try.
With this context, I would like to share a few pieces of advice for Asian agripreneurs.
Asian corporations—not to mention Western ones—will still want to know how your innovation, technology, or business model compares with its Western peers. Get to know your competition outside the region. They will be for many more years the mental benchmark amongst your potential investors.
Know also that compliance with US regulations, like US Food and Drug Administration (FDA) approval or achieving generally recognized as safe (GRAS) status, is seen as a passport for your startup.
Be careful if executives find your startup just “interesting.”
In our program, we try to make both parties define what a successful outcome will look like and shy away from situations where none of them can define it simply. This is because the territory of open innovation is often adjacent to a corporate’s core business. So, both parties need to give some thought into how they can work together.
For instance, we see the entire feed industry eager to implement solutions to make precision feeding the new standard. But other stakeholders might have a different idea in mind: corporates may want to drive stickiness to its product; the user may want to improve their yield without the environmental damages; insurance and banking institutions may be interested in the access to data.
Design your pilot trial thoroughly, as this helps all parties understand the others’ interests and makes it easier for all of you to work together.
Think about your international expansion plans and go-to-market strategy wisely. It’s easy to add a few buzzwords to catch an investor’s attention in a pitch deck, but executing it in Asia and in the F&A sector can be daunting—there is a lack of a unified regulatory framework, amplified by different languages.
A novel agrochemical input company, for example, needs to know that it will take two years to register in Thailand and three in Indonesia. One does not help expedite the other. The same goes with the IP protection. The undisputed value of a corporate partner is to help the startup navigate through all this—albeit it comes with strings attached.
Take time to reflect on your fundraising strategy. Most investors put a premium on startups who have demonstrated their ability to open in at least one foreign market, especially in Asia. It proves the startup’s scalability and sends a reassuring signal that they will be able to tap a wider pool of potential investors in the next round.
But conversely, there is no harm in realizing that you’re happy developing your domestic market for the next three years. We see a number of Chinese startups choosing this option, especially in agritech. This is because funding is abundant in China and the domestic market is large. India is quite different, on the other hand, as VC money does not easily go to agritech startups. And in Indonesia, despite a sizable domestic market and large F&A corporations, there is still a small number of agritech and foodtech startups to lend itself to analysis.
Plan your testbed strategically. Define a gated process with the corporate partner and stick to it. Pilots typically take no less than three months and sometimes extend to a year. You need to be able to pull out if results are not satisfactory.
Be particularly aware of what it means to bundle R&D and pilot trials with corporations who cannot be as agile as your startup.
***
There is no silver bullet to make the collaboration fruitful between a corporate and a startup. Reciprocal empathy goes a long way toward making it work. So, understand the context of the other party and it will help you persevere smartly and pull out adequately.
