In a previous article, we discussed the challenges that go along with bringing an idea from academia to industry and making it a profitable company. Aphea.Bio is an agriculture startup, originating from the VIB and flourishing underneath the wings of V-Bio Ventures. Steven Vandenabeele (CTO at Aphea.Bio and previously working at BASF-CropDesign) and Willem Broekaert (managing director of V-Bio Ventures) explain how they found the necessary budget to give this company a head start.
We are convinced that, in parallel with the global awareness that agriculture needs to become more sustainable, the market share of biologicals will expand incessantly and that Aphea.Bio will have an impactful contribution to this shift.
Manipulating a crop’s microbiome for disease control and growth promotion
Vandenabeele: Aphea.Bio focuses on the development of agro-biologicals for biocontrol and growth stimulation of two important crops, wheat and maize, by mapping and subsequent optimization of the microbiome of these crops in the soil. For that, we use special algorithms, which were developed by Jeroen Raes. Jeroen is a VIB scientist and renowned for his microbiome mapping in the human gut and in oceans. We also have a special in-house technology that enables us to culture a large number of these soil organisms. Standard technologies only allow culturing 10 to 15% of the different specimens, but we can grow up to 40% of them. This percentage may even increase after continued optimization. This gives us access to a much larger pool of microorganisms and provides an important competitive advantage.
The use of microorganisms in agriculture is not new, but novel insights leveraged by recent technology leaps pave the way for the development of a second generation of products with improved efficacy and specificity. We are convinced that, in parallel with the global awareness that agriculture needs to become more sustainable, the market share of biologicals will expand incessantly and that Aphea.Bio will have an impactful contribution to this shift.
A VIB spin-off
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Vandenabeele: The company is a spin-off from the VIB lab of Sofie Goormachtig, and we still have a strong collaboration with her. We received a research grant of 1.3 million euros from VLAIO, which will be used in part by her lab to reveal the mode of action and molecular mechanisms of microorganisms affecting crops.
There are different ways that a microbiome can affect plant growth. For example, there are microorganisms that stimulate plant growth by producing certain signaling molecules. Alternatively, certain microorganisms can process nutrients in the soil that are initially not absorbable by the crop but become bioavailable after metabolization. This is important for the absorption of, for instance, phosphorous and nitrogen compounds.
V-Bio Ventures guided Aphea.Bio to the right investors
Broekaert: Back in 2014, the VIB took the initiative to set up a proof-of-concept research program in the lab of Sofie Goormachtig. The program focused on the application of novel microbiome and bioinformatics approaches to agricultural crops. As the research delivered promising results, VIB decided in 2015 to appoint Steven to develop a business plan around this topic, and we provided him with strategic advice right from the beginning. Once the business plan was ready, V-Bio Ventures became the lead investor of Aphea.Bio, and we helped to find co-investors. We needed at least 6 to 7 million euros, which is a lot for a startup in agriculture. There are not many companies in Europe in the agricultural space that can start with such a strong capital base.
This has been a good example of how an intensive interaction between VIB’s Technology Transfer Office and V-Bio Ventures, sustained over a two-year period, led to the successful launch of a well-financed startup company.
V-Bio Ventures and VIB made an initial seed investment of 300,000 euros in Aphea.Bio in 2016. This move allowed us to initiate the first R&D programs and to maintain momentum while we were building a broader investment syndicate for a larger series A financing round. Meanwhile, the team was reinforced when Isabel Vercauteren was appointed as CEO. She is a perfect match as she gained a lot of experience in agriculture companies like Bayer and Devgen, and she brings expertise and insights that are complementary to those of Steven. Having both Isabel and Steven on board helped us convince seven other investors to gather the necessary capital for a 7.4 million-euro series A round, which closed in June 2017.
What I want to make clear here is that at the start of this project, most initiatives originated from VIB, but the closer we came to an investing round, the more active V-Bio Ventures became on the forefront. This has been a good example of how an intensive interaction between VIB’s Technology Transfer Office and V-Bio Ventures, sustained over a two-year period, led to the successful launch of a well-financed startup company.
Vandenabeele: Aphea.Bio is now in the R&D phase, but we envision bringing our first products to the market in about six years. Thanks to our investors, we now have a budget for the next three years in place. During that time, we first want to obtain field-validated lead products. Then we will need a new capital injection to bring these products to the market.
A startup in agriculture is not the same as one in healthcare
Broekaert: Finding money for a startup in agriculture has some specific challenges compared to a startup in healthcare. There are a couple of venture funds that are specialized in agriculture, but these are rarer than funds specialized in healthcare. Also, the agriculture market is much smaller than that of healthcare, so investors tend to put less money on the table for startups. For Aphea.Bio, we needed eight investors to gather about 7 million euros; for a similarly sized healthcare-related dossier, we would probably have needed only three investors. Having to deal with many investors obviously complicates the negotiations, but eventually we succeeded in aligning all parties.
For V-Bio Ventures, this is our first investment in an agriculture company. In general, we see fewer projects in agriculture than in healthcare. This reflects the difference in the amounts of research money spent in these sectors. Another difference is that there are only five agriculture/fertilizer companies with a turnover of over 10 billion USD, whereas there are more than 20 companies of that size in the pharma sector. As a consequence, the pool of companies that might acquire agriculture startup companies is much smaller than it is for the healthcare sector. On the other hand, there are fewer agriculture startups in the ecosystem, so all in all, the chances for success are not significantly different than they are for a healthcare startup.