What BioDiscovery (and other agricultural tech firms) will find in Davis, California

It’s hard to describe Davis, California, to people who have never been there.

It’s the dichotomy of community members (think Waiheke Island) who want to keep genetically modified organisms away from their organic gardens, and they happen to live next to one of the largest agricultural research centres in the US, if not the world.

As a former business journalist in the area for six years, I’ve sat in intimate conversations between Monsanto lobbyists and politicians, toured a native-plant sanctuary and seed farm and, five minutes away, trudged through fields of genetically modified tomatoes.

This month it was announced the research and development of a New Zealand agricultural tech firm is poised for growth, but taking its brain trust to Davis.

Biotech firm BioConsortia has raised $US15 million in series B funding from Silicon Valley to further the research and development of crop-selection technology.

The company was formed last month to become the parent company of Parnell-based BioDiscovery, which invented the original technology in New Zealand and, in January, was awarded a $5 million grant by Callaghan Innovation, also known as taxpayer money.

The move across the Pacific is just one sparking debate about New Zealand-grown firms taking government grants then flocking to US shores.

It reminds me of the time my mom yelled at me for moving six hours away from home to attend university. The university I chose was fiercely competitive, had more applicants than desks, and a fantastic track record of job placement with Big Five accounting firms (yes, there were five back then).

In fact, my old university was equal distance from San Francisco and Los Angeles, and none of us was from that tiny university town. We went there for the education, then left.

The university next to our home pretty much took every person who filled out their names correctly on the application, then graduates went to work for the government or In-N-Out Burger.

So back to BioDiscovery. It's not gone forever. Think of it as a teenager going away to summer camp. 

There are two things that make me think this deal is going to be a hit on a global scale.

First, Silicon Valley doesn’t invest in agriculture. It invests in software companies first and foremost, with biotech a distant second. Even then, agriculture is a tiny subset of biotechnology venture funding.

The huge life science companies — Monsanto, Bayer CropScience and DuPont Pioneer, for example — invest in agricultural research and sometimes gobble up an ag startup to gain control of some sort of intellectual property, invention or technology.

But most venture firms and angel investors can’t be bothered with feeding the world if there is a company out there that can make their Internet faster.

In the fourth quarter of 2013, Silicon Valley investors made 133 deals, totalling $1.34 billion, involving software companies. By contrast, those investors only inked 29 deals totaling $428 million for the entire biotech sector, according to the latest PwC MoneyTree report.

The second reason the BioConsortium deal should be a hit is the management. The $US15 million came from Khosla Ventures and Otter Capital, both of Silicon Valley, who appointed Marcus Meadows-Smith as chief executive.

Mr Meadows-Smith is the former chief executive of AgraQuest, which was later acquired by Bayer CropScience.

But he wasn’t the founder of AgraQuest, which makes biopesticides.

The idea was born in a university lab by scientist Pam Marrone in Davis. The startup was fostered by the university’s intellectual property and burgeoning entrepreneurial partnerships, then placed into the care of Mr Meadows-Smith.

And he delivered.

The Bayer CropScience deal – worth close to $500 million – marked the first time a global giant has purchased a biopesticide company.

This isn’t a case of big, bad America luring away a Kiwi firm. Mr Meadows-Smith isn’t even American. He is an Englishman.

This is about globalisation and the agricultural sector’s competition for venture dollars. Davis, for decades now, has been cementing the infrastructure needed to foster biotech companies.

What is New Zealand doing to foster growth for innovation in the ag sector? I still don’t understand AgResearch’s rationale for moving jobs away from Hamilton which, to me, has the makings of a perfect laboratory for ag research.

I would have centralised operations in Hamilton, snatched up land in Waikato, and started fostering relationships with financiers and entrepreneurs in Auckland and abroad.

So far, the so-called Waikato Agricultural Research Hub has showed little interest from the private sector. It needs a leader with business acumen and a clear business plan on how research and innovations are to be commercialised.

Take Davis, for example.

At the heart of the tiny town of 66,000 residents is the Davis campus of the University of California (UC).

A 2003 study of California’s biotech firms found that University of California scientists founded one-third of all biotech firms and one-fourth of all biotech firms are located within 35 miles of a UC campus.

In 2012, 19 new startups were formed between Sacramento and San Francisco, roughly the same distance between Auckland and Hamilton.

This wasn’t an accident.

For the past decade or so, biotech companies have set up shop along the main expressway connecting San Francisco to Sacramento, Interstate 80.

The biotech bonanza all started when life sciences company Genentech acquired about 100 acres in the mid-’90s along Interstate 80.

Back then, it was surrounded by cow paddocks and orchards. (Remember when I said I’d snatch up land in Waikato a few paragraphs ago and you probably thought I was crazy. What’s going to happen when Auckland encroaches south of the Bombays a couple of decades from now?)

Now, the Genentech site is one of the world's largest biotech manufacturing plants for the large-scale production of pharmaceutical proteins from mammals.

Between spin-off companies from Genentech employees and research coming out of the UC Davis labs, the university saw an opportunity for commercialisation.

UC Davis Innovation Access is a programme that not only helps scientists with securing their intellectual property but also links scientists with entrepreneurs (MBA students) to create startups.

This isn’t just a Davis programme, other campuses leverage innovation as well. Combined, the University of California campuses receive more US patents than any other university in the world, and reap millions in royalties.

New Zealand has the components but they are too spread out and disjointed to serve as proper infrastructure to foster many startups, particularly in agricultural innovation.

Another hurdle is the country's transportation network. I've heard the argument for Palmerston North and Massey University to serve as the hub, but it is too far from Auckland, New Zealand's gateway to the world. With the Waikato Expressway underway and major boon to connecting regional economies, this puts Auckland-Hamilton in the same position that San Francisco-Davis was in 20 years ago.

What any agricultural research firm from around the world will find in Davis is a well-established research centre, a two-hour drive to capital, collaboration between an idea factory and the business community and enough land for crop research.

Some will argue that it’s not just BioDiscovery that is taking its Callaghan Innovation grants then jet-setting. Software, medical device firms and other tech sectors each come with their own sets of challenges.

But New Zealand, if you don’t start connecting the dots soon, agricultural innovation is going to be yours to lose.

More facts about Davis, California:

• The city of Davis built a tunnel for toads and frogs to pass through so they wouldn’t get squished on the motorway. When they didn’t use the tunnel, lamps were installed in a bid to attract frogs with a well-lit thoroughfare. Some frogs died by the heat generated from the lamps.

• Amid the agricultural fields, the city used to have a drive-in theatre specialising in pornography.

• My ex-husband is from Davis, and one of his favourite topics of conversation was the old drive-in theatre.

• Davis is a cyclists’ paradise. The city has so many bicycles, the traffic lights feature bicycle insignias rather than that of a pedestrian when it’s time to cross the road.

• In addition to agriculture and biotech, UC Davis has several unrelated research centres, including transportation, neurology, energy and primates.

• In 1980, a young university couple was abducted in Davis and their bodies were found in another town. Coined “The UC Davis Sweetheart Murders,” the case went cold for decades until a local author and journalist, Joel Davis, started snooping around the dusty boxes of evidence. DNA technology, not available at the time of the murders, has since matched the crime scene to an inmate already in prison for unrelated crimes.   

sflores@nbr.co.nz