AgTech Revolution: Trends Driving Food Production

AgTech
ROGER ROYSE – ROYSE LAW
FIRM, PC
I R S C I R C U L A R 2 3 0 D I S C L O S U R E : T O E N S U R E C O M P L I A N C E W I T H T H E R E Q U I R E M E N T S I M P O S E D B Y T H E I R S , W E I N F O R M Y O U T H A T A N Y T A X A D V I C E
C O N T A I N E D I N T H I S C O M M U N I C A T I O N , I N C L U D I N G A N Y A T T A C H M E N T T O T H I S C O M M U N I C A T I O N , I N N O T I N T E N D E D O R W R I T T E N T O B E U S E D , A N D C A N N O T
B E U S E D , B Y A N Y T A X P A Y E R F O R T H E P U R P O S E O F ( 1 ) A V O I D I N G P E N A L T I E S U N D E R T H E I N T E R N A L R E V E N U E C O D E O R ( 2 ) P R O M O T I N G , M A R K E T I N G , O R
R E C O M M E N D I N G T O A N Y O T H E R P E R S O N A N Y T R A N S A C T I O N O R M A T T E R A D D R E S S E D H E R E I N .

Roger Royse
@rroyse00 | @royseagtech
www.rroyselaw.com
2

R O Y S E A G T E C H I N N O V A T I O N
N E T W O R K
The Eras of Agricultural
Technology Innovation
• Domestication
• Industrial Revolution
• Green Revolution
• Information Age
• AgTech Revolution
3

N E T W O R K
Dynamics
• Food Security
• Consumerism
• Labor
• Market Forces
• Funding
4

N E T W O R K
Food Security:
The Need for AgTech
• Total population by 2050: 9 billion
• 60-70% increase of food production needed to meet demand (UNFAO)
• 50% increase in prices
• 90% of crop production from higher yields on existing farmland
• More output, fewer inputs
5

N E T W O R K
By 2050
• 9 billion people
• 100% more food consumption
• 70% from technology
6

N E T W O R K
Consumerism
• Grow local movement
- Convenience
- Year-round food
- Urban and vertical farming
- Waste, transport, packaging
• Transparency
- Supply chain
• Sustainability
- Water, precision
• GMO and gene editing
• Environmental
• Animals and protein
• Growing middle class
• China
7

N E T W O R K
Farm Labor
“Larger farms usually perform better financially
[…] The differences reflect lower costs per unit of
production and not higher revenue. In turn, larger
farms appear to be able to realize more
production per unit of labor and capital.” *
“The average number of hired farmworkers has
steadily declined over the past century, from
roughly 3.4 million to just over 1 million.”*
8
*Statements from the USDA Economic Research Service

N E T W O R K
Shortage of Farm Labor
• Poor working conditions, back-breaking work
• Fewer undocumented migrants coming to the US
• No suitable alternative workforce
• Decreased supply, increased cost
9

N E T W O R K
Regulatory Effects on
Labor
Agriculture = low margin industry
Who absorbs cost?
• Consumers?
• Farmers?
Raised minimum wage ($15 by 2022)
• Competitive wage: >$15
• Farms still lose 5-10% of crop production
due to lack of labor
Overtime regulations
• Gov. Jerry Brown signed bill in September
2016 to be implemented by 2022
Immigration
• 2015 glitch in seasonal worker visas
delayed arrival of legal farm laborers in US
• Competition with other sectors for visas
(H2-A ag guest worker program v. H1-B
tech visa)
1 0

N E T W O R K
Regulatory Effects on
Labor
1 1

N E T W O R K
Markets:
Agriculture Economy
• Average farm in California is a
__$6 million to $10 million business
• California’s agriculture industry is a
__$46 billion per year industry
• In 2012, 70% of all farms had internet access
1 2
California is at the cutting edge of innovation within the agriculture sector, from water use
efficiency to research advancements and product development. Through social media and the
information age, we have the power to transform people’s relationship with government in a
positive way.
Secretary Karen Ross, CFDA

N E T W O R K
Funding AgTech
The market is still immature
• Most deals done at the seed stage
AgTech raised
• $100 million from 40 deals (2012)
• $4.6 billion from 526 deals (2015)
• $3.2 billion from 580 deals (2016)
1 3

N E T W O R K
Funding AgTech
• AgTech investment dropped 30% in 2016 year-over-year despite exponential growth for three
consecutive years
• Pullback in funding reflects declines in bioenergy, drone technology, and food delivery investment
• This decline comes after a 10% decrease across global VC markets after record-breaking highs in
2015
1 4

N E T W O R K
1 5
Source: AgFunder
Funding AgTech

N E T W O R K
Funding AgTech:
Key Stats for 2017
1 6

N E T W O R K
Investment Sources
• Angels
• Venture capitalists
• Corporate ventures
• Farmer-backed funds
• Private equity
• Accelerators/incubators
• Universities
• Government
• SBIR
• USDA
1 7

N E T W O R K
Investment Sources
1 8

N E T W O R K
New Innovations in
AgTech
• Precision Agriculture
• Big data and analytics
• Molecular and cell biology
• Soil
• Drones and satellites
• Farm management
• Supply chain
• Mobile
• Social media
1 9

N E T W O R K
Older Ag Innovations
• Combines
• Soil cultivators
• Harvesters
• Strawberry
• Tomato
• Oranges
• Almond sweepers
• Mechanical spinners
• Produce sorter
2 1

N E T W O R K
Precision Agriculture
Allows farmers to determine when, where, and
what to plant with an extreme level of accuracy.
Automated three-step process
1. Collect information
2. Creates a soil (field) map to analyze
3. Combines soil and yield information
Today, precision ag provides:
• Satellite navigation and guidance
• Monitoring and mapping of yields
• Live soil information through sensors installed
in vehicles
• Crop information through drones, bots, and
satellites
• Water and grow equipment
• Farm management and decision support
2 2

N E T W O R K
Base Ag Tech: Gathering
Data
Yield monitors
• Instantly records and displays crop yields from
farm equipment
Global positioning systems (GPS)
• Pinpoints exact locations of crops
• Produces precise maps (grid soil sampling),
marking exact latitude and longitude on a
gridded map
Remote sensing (RS)
• Data collected through satellite imagery
• Determines health and vigor of growing crops
• Provides better agricultural survey of field than
manual sampling
Geographic information systems (GIS)
• Maps data and analyzes relationships between
factors (Soil types, fertilization levels, crop
yields, etc.) in user-friendly way
Variable rate technology (VRT)
• Any tech that allows producers to vary the rate
of crop inputs
2 3

N E T W O R K
Big Data, Analytics, and
IoT in Precision Ag
Collects vast amounts of data
• Requires advanced technologies to analyze
Uploads results to the cloud
• Provides real-time information on land and crops
to farmers
Allows for better growing decisions
• Farmer management benefits
Ownership, access, use, and control of Ag data
is an important topic
Report times
• Batch
• Monthly
• Weekly
• Daily
• Hourly
• Near real time
• Real time
2 4

N E T W O R K
Farm Management,
Sensing, and IT
2 5

N E T W O R K
Social Media
2 6
The global agricultural community is:
• Connected
• Engaged

N E T W O R K
Mobile Only (and
Beyond)
2 7
The enterprise potential of mobile is greater than
today’s smartphone and tablet apps

N E T W O R K
Other Trending
Technologies
• Machine learning
• Satellite imagery
• Sustainable protein
• Big data
• Food safety
• Gene edited crops
• Robotics
• Plant sensors
• Smart farm devices
• Supply chain & analytics
• eCommerce &subscription
delivery
• Farm to business
marketplace & platforms
• Infrastructure
• Community building
• Regulator guidance
• Waste reduction & monitoring
• Biological crop protection
• Indoor agriculture
• Soil health
• Animal tech
• Product procurement
• Cellular agriculture
• Plant and pest identification
• UAVs
2 8

N E T W O R K
Farm Tech Examples
• Consider what can be automated?
• Possibly Harvest, transport, sort, grade,
inspect, or package
• Automate the low skilled, more dangerous or
unhealthy jobs and use current labor supply
for more meaningful positions.
2 9

N E T W O R K
Soft Robotics: Delicate
Produce Gripper
• “This is the most exciting project I’ve worked on in my career,”
says Alan Applonie, President of Taylor Farms Pacific.
• Octopus inspired robot fingers can handle delicate produce such
as cherry tomatoes and strawberries without damaging them.
• Taylor farms invested $1 million
• HQ in Cambridge, MA
3 0
Video Demo

N E T W O R K
Kray Technologies: Self-
Piloting Agriculture Drone
• Designed to replace aerial and ground sprayers at 1/10 the
cost
• Travels 70 MPH and enables farmers to spray up to 1,200
acres per day
• Flies 1 meter above crops to reduce spray drift
• Fully automatic and available 24/7
3 1
Video Demo

N E T W O R K
Crop Enhancement:
Sustainable Crop Protection
• Developed a sustainable and environmentally friendly
alternative to traditional pesticides.
• CropCoat forms a film that modifies plant surfaces (leaves,
stems, fruit, and seeds) to improve their resistance to pests
and diseases.
3 2
Video Demo

N E T W O R K
Teralytic: Soil Health
3 3
• Allows growers to easily monitor soil health.
• Probes contain 23 sensors reporting soil moisture,
salinity, aeration, respiration, NPK, air temperature,
and humidity - at three different depths.
• Requires minimal wiring. No Wi-Fi or internet
connection needed.
• Automatically sends alerts when sensors detect poor
soil conditions for crops.

N E T W O R K
AgBoost: Livestock
Insights
• Provides genetic profiles and assessments of
livestock
• Gives breeding suggestions, forecasting, lineage
tracking, and nutrition recommendations
• Data lives in the cloud
3 4
Video Demo

N E T W O R K
Ganaz: Connecting Growers
with Workers
3 5
• Enables employers to post jobs and connect with local farm
workers.
• Makes it easy to rehire workers from previous years.
• Allows supervisors to draft and translate messages / instructions
for workers.
Video Demo

N E T W O R K
FreshSurety: Freshness
Reporting
• Helps measure the freshness of produce with
low cost disposable sensors.
• Monitors and reports temperature, moisture, and
metabolite data.
• Allows measurement of cooling and packing
performance, pre-shipment quality assessment
and approval, in-transit quality tracking, and
incoming acceptance based upon shelf life.
3 6

N E T W O R K
Osmo: The Future of
Shrimp Farming
• Provides hardware and software for maximizing
shrimp production.
• Monitors dissolved oxygen, pH, NH3, nitrites,
nitrates, turbidity, temperature, and salinity
• Automates water quality and feed management
to optimize shrimp growth rates.
3 7

N E T W O R K
Legal Issues
• Farm data
• Data and privacy standards
• Drones
- Benefits/problems
- Legality
• IP Issues
• Antitrust
3 9

N E T W O R K
Issues in Big Data
Lack of data standards
• No standard today
• Makes data use/cooperation a challenge
• AgGateway, Open Ag Data Alliance, etc. are
working to solve this
Data privacy and security
Data ownership
• Who owns the data?
• Who controls the data?
• Is there intellectual property in the data?
4 0

N E T W O R K
Legal Issues: Data
Ownership and Privacy
Data ownership
• The AFBF warned that companies collecting
data from farmers may use it for their own
commercial advantage in ways not foreseen by
farmers
• AFBF advised farmers to consider data
ownership rights when storing data in the cloud
Privacy
• Environmental activist groups are demanding
information and transparency from farmers.
• With more data in the cloud, there is more
information for them to request.
• In 2012, the EPA released personal information
on farmers following a FOIA request.
Data can be sensitive; farmers want some
information kept private (e.g. pesticide use)
4 1

N E T W O R K
AgData: Ownership,
Access, & Use
Licenses: Startups using standard EULA
• SaaS, Terms of Services, Browser, Click Wrap
Issues
• Is digital data property, and who owns it?
• Who has rights to posses, use, enjoy, exclude,
transfer, consume?
• What are the rights and responsibilities of the
parties?
• How can growers access the data?
• Is the data accurate and presented in a useful
way?
• Trade secret protection (UTSA)
- Information
- Independent economic value from unknown
- Reasonable efforts to maintain secrecy
4 2

N E T W O R K
Issues in AgTech Data
Biggest Issues:
• Ownership
• Access
• Control of data
2013 EPA CAFO Data Incident*
• Earth Justice, the Natural Resources Defense
Council, and the Pew Charitable Trust made a
FOIA request
• Received information on ~80,000 farmers and
ranchers
• Included personal data
4 3
*Smart Farming May Increase Cyber Targeting Against US Food and Agriculture Sector, Joint Private Industry
Notification of USDA and FBI Cyber Division, March 31, 2016

N E T W O R K
Ownership, Use, and
Disclosure of Data
Farmers want to retain ownership of their data
• Can they take data with them if they no longer use the service?
Do all parties have the appropriate rights to use the data?
Farmers are concerned about who ends up with the data
• Wall Street traders could manipulate market prices
• EPA could look for potential regulatory violations
• Retailers could use the information to sell new parts when an existing part needs replacing or
to set prices
4 4

N E T W O R K
Blind Data
What is aggregated, or “blind,” data?
• Data combined from two or more sources
• “Anonymized”
Is it truly anonymized?
• Is all personal data removed?
• Are there enough sources to ensure
anonymization (especially for small startups)?
• Can the aggregated data be reverse
engineered to find out where the data
originated?
Aggregated data is required for software
companies, but precautions should be taken
to ensure true anonymity
4 5

N E T W O R K
Data and Privacy
Objectives
Farmers are increasingly becoming aware of the need to protect their data and enforce their
ownership rights through stakeholders
• Government
• Input providers
• Trade groups
• Startups
Stakeholders are trying to implement a common set of data and privacy standards to guide
Agriculture Technology Farmers (ATPs), farmers, and other contracting parties on appropriate
contract terms
4 6

N E T W O R K
Current AgTech Data
Standards
Open Ag Data Alliance (OADA)
• Open data sharing standards (API’s) and open source software libraries, March 2014
American Farm Bureau Federation (AFBF) Privacy and Security Principles of Farm Data
• Affirmed by 39 Ag entities as of April 1, 2016
• Originally known as the 2014 Farm Data Principles Agriculture Data Coalition
Agriculture Data Coalition (ADC)
• Partnership of agriculture stakeholders focused on building a “farmer-centric data repository where
farmers can securely store and control the information collected every day in the fields by their tractors,
harvesters, aerial imaging and other devices.” (March 2016)
4 7

N E T W O R K
Current AgTech Data
Standards
Farmobile, Inc. – Ag Data Collection Startup
• Farm Data MarketPlace where Farmobile collects offers from companies that want to use the farmer’s
data, whole transaction is governed by Farmobile’s legal agreements
“Guiding Principles” Independently Developed by Ag Companies
• Ex. Climate Corp, Farmer’s Business Network, John Deere
4 8

N E T W O R K
AFBF Privacy & Security
AFBF principles include the following key provisions that should be incorporated into contracts:
• Easy to understand language
• Farmers should own information generated through their farming activities and any use of that data by
the ATP is only with the explicit and affirmative consent of the farmer
• ATPs shall notify farmers how their data is to be used, with whom it will be shared, and for what purpose
• Farmers should be able to retrieve their data for use with other systems
• ATPs shall not sell or disclose a farmer’s data to other parties without notifying the farmer and without
that other party agreeing to the same terms as the farmer
• ATPs shall use reasonable security safeguards to protect against risk of loss or theft of data
4 9

N E T W O R K
Workable Standards?
Strong protections for farmers, but not always workable
• Many farmers are not able to negotiate terms
• May feel they are in “take it or leave it” position
• The business model of some ATPs is the collection and presentation of data (subscription model)
- The ATP doesn’t want to let farmers take this data with them when they no longer pay for the service
• Contract terms are complicated due to the multiple agreements in place
5 0

N E T W O R K
Problem: Lack of Formal
Agreement
Current Industry “M.O.”: Agriculture is a handshake industry
• Driven by personal interactions, not formal agreements
• Farmers often prefer to “kick the tires” for on-farm products
• Pre-revenue transactions, like field trials (including university trials), are done without agreements
Issue: Without a contract, different laws are implicated that these parties never anticipated
• Intellectual property: Trade secret disclosure, ownership of IP (patents, data, “results and
recommendations”)
• Contract law: Implied contract principles
• Torts: “Negligence” damages for startups who provide services
Solution: Education and information on importance of a formal agreement
5 1

Federal and State
Background• The current regulatory system for data protection in the United States resembles a patchwork quilt.
Unlike other jurisdictions, the United States does not have a dedicated data protection law, but instead
regulates primarily by industry, on a sector-by-sector basis.
• The House Agriculture Committee held a hearing on data practices in the agriculture industry in
October of 2015. Most panelists agreed that little to no government intervention was desired.
• Industry groups have attempted to come up with best practices regarding data privacy and security for
companies in the agriculture industry.
• These are voluntary standards which do not hold the force of law.
N E T W O R K

Precision Agriculture Connectivity Act of
2018• Passed House and included in 2018 Farm Bill
• Facilitate rural broadband internet access. Focused on telematics: technologies that
“upload” data via the internet
• Without fast upload speeds, telematics must use after the fact transfers of field data via
fiber optic connections
• Bill creates an FCC Task Force which would Identify current gaps in farm and ranch
broadband coverage
• Assemble a guide of federal resources devoted to broadband
• Develop policy recommendations for deployment
• Goal of 95% cropland coverage by 2025
• Submit annual reports to Congress
R O Y S E A G T E C H I N N O V A T I O N N E T W O R K

N E T W O R K
DMCA and Copyright
Exemptions
General right to maintain software
Digital Millennium Copyright Act (DMCA, 1998)
• Criminalizes acts of circumventing “digital locks”
• DRM rules designed to prevent copying a video
game or jailbreaking game console to play
unlicensed games
John Deere: “Ownership of equipment does
not include the right to copy, modify or
distribute software that is embedded in that
equipment.”
Exemption of automotive software
• Available on October 28, 2016
• When circumvention is a “necessary step […] to
allow the diagnosis, repair or lawful modification
of a vehicle function”
• Only available to “authorized owner” of vehicle
• Expires October 28, 2018
5 4

N E T W O R K
Agriculture Drones
5 5
The global market for agricultural
drones:
• Currently estimated at $494 million
• $3.69 billion by 2022

N E T W O R K
Agriculture Drones
5 6
Use of drones for agriculture
• Monitor land for weeds and weather damage
• Collect data on land
Concerns/problems with the use of drones
• Privacy issues - not a huge concern with
farmland
• Safety issues - collisions and crashes
• Use problems
- Cost of entry
- Battery life
- Connectivity
- Presentation of data

N E T W O R K
Drone & Satellite
Technology
5 7
Drones could revolutionize farming through
• Mass data collection
• Surveying land and planting seeds
• Surgical precision in the use of pesticides, fertilizer, and water
Brazil and Japan use drones in agriculture
• FAA issued new rules to regulate commercial use of drones in 2016
Safety and privacy concerns that affect urban areas may not apply to farms
• However, farmers are concerned that drones will be used by environmental groups to spy on and
monitor their operations

N E T W O R K
FAA Rules for Commercial
Drones
5 8
Part 107

N E T W O R K
Gene Edited Crops
5 9
• GEC is the new unregulated GMO
• No more foreign DNA or transgenic gene delivery
• CutDNA at targeted location in genome and insert desired genes in that place
• Cheaper and quicker than GMO technology
• CRISPR Cas-9 technique: Enables geneticists to edit parts of the genome by removing, adding, or
altering sections of the DNA sequence
• Who invented CRISPR? Any overlap?
- UC Berkeley (Filed first) - Broad Institute of MIT and Harvard (Approved first)
- Bacteria use - Use in higher organisms

N E T W O R K
Gene Edited Crops
6 0
Legality: There is none
• Proposed regulatory oversight for GECs EPA, FDA, and USDA
• Coordinated Framework for Regulation of Biotechnology only regulates GMO technology
April 2016: USDA confirmed twice that it cannot regulate GECs
• GM regulatory framework was written to only handle GM modified products
EU also considering how to class gene-edited plants
• Are they genetically modified or not?
Hope that new regulations will be science-based and more flexible to evolve with new
technologies, rather than piecemeal technology based legislation

N E T W O R K
Anti-Trust
6 1
May be anti-trust issues with ATPs that collect
and share data on prices of products or inputs
• Section 1 of the Sherman Act
- Collusion: “Unreasonably restrain competition”
- Agreement to fix price; agreement to allocate
___markets; agreements to boycott particular
___customers, suppliers, competitors, etc.
- Knowledge of prices to reduce competition and
___stabilize prices
• Section 2 of the Sherman Act
- Monopolization or attempt to monopolize
___(although, not easy to find monopolization)
• Clayton Act
- Anticompetitive mergers
- Bayer-Monsanto merger: Shareholders of
___Monsanto approved on 12/12/2016
- ChemChina-Syngenta merger
- Dow Chemical-DuPont merger

N E T W O R K
IP Issues
6 2
Contracts
• ATPs must balance complex contracts with need
to provide farmers with straightforward information
• Lots of inherent complexity, especially when an
ATP sells combined hardware and software
- There could be software on the hardware,
___separate software sold to the farmer for use on
___personal computer, and SaaS subscription (all as
___one service)
- All software will have different terms of use
• Farmers often work with dealers
- Dealers sometimes collect and input the data
- Who has the relationship with the dealer?
___- Need to ensure all the parties have correct
____licenses
• ATPs should consider using FAQs on website to
answer questions from farmers
- Need to ensure answers are consistent with
____privacy policy, end user agreements, etc.

N E T W O R K
IP Issues
6 3
Monetization
• Sale of software and add-ones
• Patents
- Hardware and software
• Big Data
- Reports
- Aggregated data
- Must have rights to use the data in this way
• Subscription services

N E T W O R K
Royse Law Firm
6 4
1. Premier AgTech law practice
2. Tech startup network
3. Full-service firm

N E T W O R K
Royse AgTech Accelerator
Fund
6 5
Silicon Valley based AgTech Accelerator and Fund
Stage 1: Seed Fund
Stage 2: Follow-on Early Stage Fund
LP Access to latest tech and deal flow
Company access to AgTech mentor network and strategic partners

N E T W O R K
Free eBook
6 6
Dead on Arrival
How to Avoid the Legal Mistakes That Could Kill Your Start-Up
Visit: RRoyseLaw.com/book

N E T W O R K
Contact Us
6 7
Silicon Valley
149 Commonwealth Drive
Suite 1001
Menlo Park, CA 94025
San Francisco
135 Main Street
12th Floor
San Francisco, CA 94105
Los Angeles
12121 Wilshire Blvd
Suite 600
Los Angeles, CA 90025
Orange County
135 S. State College Blvd
Suite 200
Brea, CA 92821
rroyselaw.comRoyseAgtech.com

AgTech Revolution: Trends Driving Food Production

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