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May 26, 2019
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Drone delivery startup Zipline launches UAV medical program in Ghana

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Zipline, the San Francisco-based UAV manufacturer and logistics services provider, has launched a program in Ghana today for drone delivery of medical supplies.

Working with the Ghanaian government, Zipline will operate 30 drones out of four distribution centers to distribute vaccines, blood, and life-saving medications to 2000 health facilities across the West African nation daily.

“We’ll do 600 flights day…and serve 12 million people. This is going to be the largest drone delivery network on the planet,” Zipline CEO Keller Rinaudo told TechCrunch on a call from Accra.

“No one in Ghana should die because they can’t access the medicine they need in an emergency,” Ghana’s President Nana Akufo-Addo said in a statement. “That’s why Ghana is launching the world’s largest drone delivery service…a major step towards giving everyone in this country universal access to lifesaving medicine.”

The Ghana program adds a second country to Zipline’s live operations. Zipline got off the ground in Rwanda and has leveraged its experience in East Africa to begin testing medical delivery services in the United States.

Zipline has been making moves in Africa since at least 2016 — after it raised capital and solidified its mission to carve out a global revenue-generating business around UAV delivery of critical medical supplies.

To date, the startup has raised $41 million from investors including Sequoia Capital, Google Ventures, Microsoft co-founder Paul Allen, Yahoo co-founder Jerry Yang, and Subtraction Capital.

Founded in 2014, Zipline designs and manufactures its own UAVs, launch and landing systems, and logistics software. After a testing period in coordination with the government of Rwanda, Zipline went live in the East African country in 2016, claiming the first national drone-delivery program at scale in the world.

Through its non-profit foundation, the logistics giant UPS came in to partner with Zipline on the Rwanda program, and that support continues.

“They’re providing funding to build a lot of the infrastructure required, they are an adviser to us, and they provide some logistical support in moving equipment,” Rinaudo said of Zipline’s collaboration with the UPS Foundation. Zipline has also received grants and support from from The Bill and Melinda Gates Foundation, and Pfizer .

Zipline then carried its experience in Africa to the U.S. In May 2018 the startup was accepted into the U.S. Department of Transportation’s Unmanned Aircraft Systems Integration Pilot Program (UAS IPP). Out of 149 applicants, the Africa focused startup was one of 10 selected to participate in a drone pilot in the U.S.—and started testing beyond visual line of sight medical delivery services in North Carolina.

“Healthcare logistics is a $70 billion global industry, and it’s still only serving a golden billion on the planet,” says Rinaudo. “The economics of our business is pretty simple. We’re using small, electric, fully autonomous vehicles…these kinds of systems are much more efficient than the analog way of delivering things.”

Zipline is eyeing additional countries for delivery operations beyond Ghana, Rwanda, and its pilot operations in the U.S. “We’ll be launching in several additional countries, not all of which are in Africa,” said Rinaudo, though he declined to disclose specifics.

Zipline is well aware that its drone logistics systems have applications beyond medical supply chain services and Rinaudo confirmed moving cargo other than medical supplies is something Zipline has considered.

If the company moves toward other commercial applications, it could leverage its programs and relationships in Africa. The continent has become testbed for commercial drone delivery and regulatory structures.

Over the last two years South Africa passed commercial drone legislation to train and license pilots and Malawi opened a Drone Test Corridor to African and global partners. Over the same period, Kenya, Ghana, and Tanzania have issued or updated drone regulatory guidelines and announced future UAV initiatives. The government of Tanzania launched a medical drone delivery program in 2019, with DHL as one of the main partners.

In addition to its launch today in Ghana, Zipline plans to move from pilot-phase to live-delivery of medical supplies in the U.S. sometime this summer, a company spokesperson confirmed.

Up to $818 million deal between J&J and Locus Biosciences points to a new path for CRISPR therapies

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The up to $818 million deal between Locus Biosciences and Janssen Pharmaceuticals (a division of Johnson & Johnson) that was announced yesterday points toward a new path for CRISPR gene editing technologies and (potentially) the whole field of microbiome-targeted therapies.

Based in Research Triangle Park, N.C., Locus is commercializing research initially developed by scientists at North Carolina State University that focused on Cas3 proteins, which devour DNA Pac-Man-style, rather than edit it like the more well-known Cas9-based CRISPR technologies being used by companies like Caribou Biosciences, Editas Medicine, Synthego, Intellia Therapeutics, CRISPR Therapeutics and Beam Therapeutics.

While the Cas9 CRISPR technologies can edit targeted DNA — either deleting specific genetic material or replacing it with different genetic code — Cas3 simply removes DNA strains. “Its purpose is the destruction of invading DNA,” says Locus chief executive, Paul Garofolo.

The exclusive deal between Janssen Pharmaceuticals and Locus gives Janssen the exclusive license to develop, manufacture and commercialize CRISPR-Cas3-enhanced products targeting bacterial pathogens for the potential treatment of respiratory and other organ infections.

Under the terms of the deal, Locus is getting $20 million in upfront payments and could receive up to $798 million in potential future development and commercial milestone payments and any royalties on potential product sales.

A former executive at Valiant Pharmaceuticals and Paytheon, Garofolo was first introduced to the technology that would form the core of Locus as an executive in residence at North Carolina State University. It was there that he met Dr. Chase Beisel and Rodolphe Barrangou, whose research into Cas3 proteins would eventually be productized by Locus.

The company spun out of NC State in 2015 and raised its first cash from the North Carolina Biotech Center a year later.

Locus is already commercializing a version of its technology with bacteriophages designed to target e coli bacteria to treat urinary tract infections. The company is on target to begin its first clinical trials in the third quarter of the year.

The focus on bacterial infection and removing harmful bacteria while ensuring that the rest of a patient’s microbiome is intact is a huge step forward for treating diseases that scientists believe could be linked to bacterial health in a body, according to Garofolo.

“Most microbiome companies are about adding probiotics to your body,” says Garofolo, representing a thesis that introducing “good” bacteria to the body can offset any harmful pathogens that have infected it.

“Things you’re exposed to are creating the groundwork for an infection or disease, or exacerbating an existing disease,” says Garofolo. And while he believes that the microbiome is the next big field for scientific discovery, the approach of adding probiotics to a system seems less targeted and effective to him.

Already, Garofolo has managed to convince investors of his approach. In addition to the initial outside investment from the North Carolina Biotech Center, Locus has attracted $25 million in financing from investors, including Artis Ventures and the venture capital arm of the Chinese internet giant, Tencent.

Meanwhile, investors have spent millions backing alternative approaches to improving human health through the manipulation of the microbiome.

Companies like Second Genome, Viome and Ubiome are all using approaches that identify bacteria in the human body and try to regulate the production of that bacteria through diet and probiotic pills. It’s an approach that allows these companies to skirt the more stringent requirements the Food and Drug Administration has put in place for drugs.

That doesn’t mean that extensive amounts of research haven’t gone into the development of these probiotics. Seed, a Los Angeles-based startup that launched last year, has recruited as its chief scientist George Reid, the leading scientist on microbial health and the microbiome.

Founded by Raja Dhir, a graduate from the University of Southern California and a leading researcher on microbiotics in his own right, and Ara Katz, the former chief marketing officer of BeachMint and an MIT Media Lab fellow, Seed focuses on developing probiotic treatments using well-established research.

“Foundational to our approach is that it’s not which microbes are present in your gut… It’s based on looking at what specific microbes can do to a healthy individual to improve that status of health independent of what is already present,” Dhir said in an interview around the company’s launch last June. “It’s a little bit less exciting from a tech perspective, but it’s hardcore grounded in basic science… The question is, does this have changes and effects in validated bio-makers in a controlled and placebo setting?”

Dhir said that a basic understanding of how different bacteria can influence health is necessary before getting into the benefits of personalization.

These things can dance between drugs and nutrition,” Dhir said. “Probacteria are an additional lever that people should pull… like diet and exercise and cessation of smoking… In every correspondence we always have been and need to be clear that this should never be seen as a replacement of therapies.”

By contrast, the tools that Locus is developing are very much therapies with potentially far-reaching implications for illnesses, from irritable bowel syndrome to gastrointestinal cancers and even neurological disorders.

“The science [around the microbiome] is early, but it is very well-known that a potentially deadly pathogen should be removed from your body,” Garofolo said.

Foxconn or Foxgone? Tariffs, Wisconsin and iPhone fires

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First some notes on SoftBank’s rumored expansion into China and its weird fund math, then Foxconn, and then quick notes on tech depression, Huawei, and more.

TechCrunch is experimenting with new content forms. This is a rough draft of something new – provide your feedback directly to the author (Danny at danny@techcrunch.com) if you like or hate something here.

SoftBank has fund visions (and a Vision Fund) for China? That, and more money

Kane Wu at Reuters reported over night that SoftBank is looking to open an office and hire an investment team in China, which Wu says will be based in Shanghai. That’s following the fund’s recent global expansion with new targeted offices in Saudi Arabia and India.

When I saw this, I sort of did a double-take: SoftBank doesn’t have a presence in China? The fund has reportedly been seeking investments in some of China’s leading unicorn stars, including controversial face recognition startup SenseTime, and leading edtech startup Zuoyebang (作业帮, which literally translates as “school assignment help”). (Hat tips to Selina Wang at Bloomberg, who seems to just be sitting in Vision Fund partner meetings). And of course, it dumped a pretty penny into WeWork China, where it was part of a $500 million syndicate, and is a huge investor in Didi.

It’s sort of obvious that SoftBank would expand to China. What will be interesting though is to see how the fund structures itself long-term. As far as I know, the Vision Fund is a singular “fund” that invests worldwide (send me an email if I am wrong on this count). China has a thicket of regulations on funds and companies, which is one of several reasons we see specifically China-focused vehicles (such as Lightspeed and Lightspeed China or Sequoia and Sequoia China). If the Vision Fund continues to be a unified fund, that would be a notable strategy shift that might be cloned by other trans-Pacific funds.

Aside: SoftBank Vision Fund math is complicated

Rajeev Misra, board director of SoftBank Group and CEO of SoftBank Investment Advisors. Photo by Drew Angerer/Getty Images.

When it first closed the Vision Fund, SoftBank explained they had raised just over $93 billion in committed capital or, more precisely, around $93.15-$93.2 billion according to the initial investor presentations and its annual Form D filings. In those docs, SoftBank said that the fund was financed with $28 billion from SoftBank and $65 billion from third-party investors.

On top of the $93 billion raised for the Vision Fund, SoftBank detailed that it had committed $4.5 billion of its own capital to a separate “Delta Fund,” which was used to alleviate conflicts around SoftBank’s Didi investment. Thus, SoftBank’s total VC funding aggregates to around $97.7 billion.

To add a complication, SoftBank later shifted $1.6 billion of the Vision Fund’s previously disclosed $65 billion in third-party capital over to the Delta Fund. In current disclosures, SoftBank shows $91.7 billion of committed capital for the Vision Fund ($28.1 billion from SoftBank and $63.6 billion from third-party investors). For the Delta Fund, SoftBank shows $6 billion in committed capital ($4.5 billion SoftBank contribution and $1.6 billion from third-party investors).

Here is where it gets even more complicated. In its latest filings, SoftBank also notes that it completed the interim closing of an additional $5 billion for the Vision Fund in mid-October, “intended for the installment of an incentive scheme for operations of SoftBank Vision Fund.” That additional cash would bring Vision Fund’s total committed capital to $96.7 billion, and $102.7 billion together with the Delta Fund.

While it wouldn’t be included in the committed equity capital total, SoftBank is also rumored to be raising a $4 billion credit facility to help finance additional acquisitions.

So, it’s probably best to say that the Vision Fund — as constituted right now — is $97 billion or $96.7 billion with precision, assuming this $5 billion reaches a final close.

SoftBank IPO

We have of course covered SoftBank quite obsessively, particularly its debt situation (Part 1, Part 2, Part 3, Part 4, and Part 5). What we haven’t covered more recently is the latest developments in SoftBank’s IPO, which is slated for December 19th and expected to bring in a haul of $21 billion. More to come on that front in the coming days.

Foxconn or Foxgone?

US President Donald Trump and Foxconn Chairman Terry Gou. BRENDAN SMIALOWSKI/AFP/Getty Images

The South China Morning Post reported yesterday that Foxconn is investigating expanding its factories to Vietnam in order to avoid tariffs. Makes sense, and I have some calls this week and next trying to suss out how much hardware supply chains have really changed in response to the trade conflict.

That decision though isn’t just about the trade conflict, but also about the quickly increasing wages of Chinese laborers as well as political interference from Beijing. The Trump administration’s trade policies are just the excuse Foxconn needs to (at least partially) extricate itself from China, while saving face in the process.

What’s interesting is that Foxconn is also dealing with a massive brush fire in Wisconsin, where it received one of the largest economic development incentives ever offered by an American government, a whopping $3 billion package that was expected to drive manufacturing employment in the state.

Over night, Republicans in the state legislature passed a bill that would place large restrictions on incoming Democratic governor Tony Evers. Jessie Opoien for the (Madison) Cap Times:

Under the bill, legislators would have increased influence over the Wisconsin Economic Development Corporation, and the WEDC board, not the governor, would appoint the job creation agency’s CEO. However, the governor’s power to appoint a CEO would be restored in September 2019.

That is the agency that provided the Foxconn funding, which has become a political football in Wisconsin politics. Republicans are trying to protect one of the major economic legacies of outgoing governor Scott Walker, as well as what they believe is the future direction of manufacturing work in the state. Democrats smell a boondoggle in the making.

If that wasn’t all, rumored skimpy sales for iPhones is putting enormous pressure on Foxconn’s bottom line. Debby Wu at Bloomberg reported two weeks ago that:

The contract manufacturer aims to cut 20 billion yuan ($2.9 billion) from expenses in 2019 as it faces “a very difficult and competitive year,” according to an internal document obtained by Bloomberg. The company’s spending in the past 12 months is about NT$206 billion ($6.7 billion).

Foxconn is a very dynamic organization that has weathered repeated crises over the years. It is pretty much unique in what it does today: very few other companies can scale up and down hundreds of thousands of workers to meet iPhone and other device demands with such alacrity.

But, the fundamentals of the mobile device market have apparently changed dramatically this year, and Foxconn is likely to be the company most harmed as the assembler of those devices. That could destroy not just the Chinese dream of leading in manufacturing, but also the Vietnam and Wisconsin dreams as well.

Also: If you haven’t read it, this poetry by a Foxconn worker who committed suicide really resonated with me. Foxconn’s suicide problem is well-documented, but we often don’t hear from the individuals themselves.

Quick bites

Which big tech companies are most depressed?

Blind, the anonymous enterprise chatting app that has taken the tech world by storm, published survey results asking tech employees “I believe I am depressed.” Roughly 40% of employees responded yes. Interestingly, there wasn’t too much variation between companies. Amazon had the highest rate at 43% and Apple had the lowest rate at 30%. It’s an informal survey, probably without high scientific validation, but it is a reminder for all of us in the community that mental health and burnout is very real in the startup and tech ecosystems and we should be vigilant in helping each other when times are rough.

More bad news for Huawei as British Telecom bans its equipment

This is one of those stories that we are just going to keep on hearing about. After bans in Australia and New Zealand, British Telecom has announced they will not just ban Huawei’s 5G equipment, but also its 3G and 4G equipment. Britain, like Aus/NZ, Canada and the US are part of the Five Eyes intelligence network, and national security officials have been leading the crusade against Huawei infrastructure. What’s interesting is not just the rapidity of the bans, but also that the bans haven’t (from what I have seen) migrated outside the Five Eyes community yet.

Pendo commits to hometown of Raleigh

Raleigh skyline. Photo by James Willamor used under Creative Commons via Flickr.

Pendo is a digital product management platform that has had quite a bit of success with customers and has raised more than $100 million in VC funding, most recently a Series D from Sapphire. The company announced that they have received a grant from home state North Carolina’s economic development department to grow in the Raleigh region. Pendo is committing $34.5 million to its headquarters (with the potential of creating 590 jobs), while the state will offer around $8.8 million in potential reimbursements over the next 12 years.

Given what I wrote yesterday about Wes McKinney leaving NYC and heading to Nashville and the work Chattanooga is doing to aid startups, it’s great to see other hotspots like Raleigh, NC invest to build out their ecosystems in a compelling way.

Todd Olson, CEO of Pendo, explained to me by email that, “Office rents in our downtown are a fraction of the cost of operating in other cities, and the cost of living is appealing to our employees. They can afford to buy a house here. In some markets around the country, that is becoming more difficult. It’s also just a nice place to live and work.”

Creative work is increasingly going to have to find a lower cost home.

What’s next

I am still obsessing about next-gen semiconductors. If you have thoughts there, give me a ring: danny@techcrunch.com.

Thoughts on Articles

The LP Anti-Portfolio – Great short read. Lindel Eakman, former managing director at UTIMCO, the University of Texas/Texas A&M endowment, gives a list of funds that he passed on that he now regrets. Unfortunately, this is pretty rare coming from an LP, albeit a former one. It would be great to get more public discussion on what funds were missed and why by LP investors.

Hopefully more reading time tomorrow.

Reading docket

What I’m reading (or at least, trying to read)

  • Huge long list of articles on next-gen semiconductors. More to come shortly.

African experiments with drone technologies could leapfrog decades of infrastructure neglect

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A drone revolution is coming to sub-Saharan Africa.

Countries across the continent are experimenting with this 21st century technology as a way to leapfrog decades of neglect of 20th century infrastructure.

Over the last two years, San Francisco-based startup Zipline launched a national UAV delivery program in East Africa; South Africa passed commercial drone legislation to train and license pilots; and Malawi even opened a Drone Test Corridor to African and its global partners. 

In Rwanda, the country’s government became one of the first adopters of performance-based regulations for all drones earlier this year. The country’s progressive UAV programs drew special attention from the White House and two U.S. Secretaries of Transportation.

Some experts believe Africa’s drone space could contribute to UAV development in the U.S. and elsewhere around the globe.

“The fact that [global drone] companies can operate in Africa and showcase amazing use cases…is a big benefit,” said Lisa Ellsman, co-executive director of the Commercial Drone Alliance.

Test in Africa

It’s clear that the UAV programs in Malawi and Rwanda are getting attention from international drone companies.

Opened in 2017, Malawi’s Drone Test Corridor has been accepting global applications. The program is managed by the country’s Civil Aviation Authority in partnership with UNICEF.

The primary purpose is to test UAV’s for humanitarian purposes, but the program “was designed to provide a controlled platform for… governments…and other partners…to explore how UAV’s can help deliver services,” according to Michael Scheibenreif, UNICEF’s drone lead in Malawi.

That decision to include the private sector opened the launch pads for commercial drones. Swedish firm GLOBEHE has tested using the corridor and reps from Chinese e-commerce company JD have toured the site. Other companies to test in Malawi’s corridor include Belgian UAV air traffic systems company Unifly and U.S. delivery drone manufacturer Vayu, according to Scheibenreif.

Though the government of Rwanda is most visible for its Zipline partnership, it shaping a national testing program for multiple drone actors. 

“We don’t want to limit ourselves with just one operator,” said Claudette Irere, Director General of the Ministry of Information Technology and Communications (MiTEC).

“When we started with Zipline it was more of a pilot to see if this could work,” she said. “As we’ve gotten more interest and have grown the program…this gives us an opportunity to open up to other drone operators, and give space to our local UAV operators.”

Irere said Rwanda has been approached by 16 drone operators, “some of them big names”—but could not reveal them due to temporary NDAs. She also highlighted Charis UAS, a Rwandan drone company, that’s used the country’s test program, and is now operating commercially in and outside of Rwanda.

UAV Policy

Africa’s commercial drone history is largely compressed to a handful of projects and countries within the last 5-7 years. Several governments have jumped out ahead on UAV policy.

In 2016, South Africa passed drone legislation regulating the sector under the country’s Civil Aviation Authority. The guidelines set training requirements for commercial drone pilots to receive Remote Pilot Licenses (RPLs) for Remotely Piloted Aircraft Systems. At the end of 2017 South Africa had registered 686 RPLs and 663 drone aircraft systems, according to a recent State of Drone Report.

Over the last year and a half Kenya, Ghana, and Tanzania have issued or updated drone regulatory guidelines and announced future UAV initiatives.  

In 2018, Rwanda extended its leadership role on drone policy when it adopted performance-based regulations for all drones—claiming to be the first country in the world to do so.

So what does this mean?

“In performance-based regulation the government states this is our safety threshold and you companies tell us the combination of technologies and operational mitigations you’re going to use to meet it,” said Timothy Reuter, Civil Drones Project Head at the World Economic Forum.

Lisa Ellsman, shared a similar interpretation.

“Rather than the government saying ‘you have to use this kind of technology to stop your drone,’ they would say, ‘your drone needs to be able to stop in so many seconds,’” she said.

This gives the drone operators flexibility to build drones around performance targets, vs. “prescriptively requiring a certain type of technology,” according to Ellsman.

Rwanda is still working out the implementation of its performance-based regulations, according to MiTEC’s Claudette Irere. They’ve entered a partnership with the World Economic Forum to further build out best practices. Rwanda will also soon release an online portal for global drone operators to apply to test there.

As for Rwanda being first to release performance-based regulations, that’s disputable. “Many States around the world have been developing and implementing performance-based regulations for unmanned aircraft,” said Leslie Cary, Program Manager for the International Civil Aviation Authority’s Remotely Piloted Aircraft System. “ICAO has not monitored all of these States to determine which was first,” she added.

Other governments have done bits and pieces of Rwanda’s drone policy, according to Timothy Reuter, the head of the civil drones project at the World Economic Forum. “But as currently written in Rwanda, it’s the broadest implementation of performance based regulations in the world.”

Commercial Use Cases

As the UAV programs across Africa mature, there are a handful of strong examples and several projects to watch.

With Zipline as the most robust and visible drone use case in Sub-Saharan Africa.

While the startup’s primary focus is delivery of critical medical supplies, execs repeatedly underscore that Zipline is a for-profit venture backed by $41 million in VC.

The San Francisco-based robotics company — that also manufactures its own UAVs — was one of the earliest drone partners of the government of Rwanda.

Zipline demonstration

The alliance also brought UPS and the UPS Foundation into the mix, who supports Zipline with financial and logistical support.

After several test rounds, Zipline went live with the program in October, becoming the world’s first national drone delivery program at scale.

“We’ve since completed over 6000 deliveries and logged 500,000 flight kilometers,” Zipline co-founder Keenan Wyrobek told TechCrunch. “We’re planning to go live in Tanzania soon and talking to some other African countries.”  

In May Zipline was accepted into the U.S. Department of Transportation’s Unmanned Aircraft Systems Integration Pilot Program (UAS IPP). Out of 149 applicants, the Africa focused startup was one of 10 selected to participate in a drone pilot in the U.S.– to operate beyond visual line of sight medical delivery services in North Carolina.    

In a non-delivery commercial use case, South Africa’s Rocketmine has built out a UAV survey business in 5 countries. The company looks to book $2 million in revenue in 2018 for its “aerial data solutions” services in mining, agriculture, forestry, and civil engineering.

“We have over 50 aircraft now, compared to 15 a couple years ago,” Rocketmine CEO Christopher Clark told TechCrunch. “We operate in South Africa, Namibia, Ghana, Ivory Coast, and moved into Mexico.”

Rocketmine doesn’t plan to enter delivery services, but is looking to expand into the surveillance and security market. “After the survey market that’s probably the biggest request we get from our customers,” said Clark.

More African use cases are likely to come from the Lake Victoria Challenge — a mission specific drone operator challenge set in Tanzania’s Mwanza testing corridor. WeRobotics has also opened FlyingLabs in Kenya, Tanzania, and Benin. And the government of Zambia is reportedly working with Sony’s Aerosense on a drone delivery pilot program.

Africa and Global UAV

With Europe, Asia, and the U.S. rapidly developing drone regulations and testing (or already operating) delivery programs (see JD.com in China), Africa may not take the sole position as the leader in global UAV development — but these pilot projects in the particularly challenging environments these geographies (and economies) represent will shape the development of the drone industry. 

The continent’s test programs — and Rwanda’s performance-based drone regulations in particular — could advance beyond visual line of sight UAV technology at a quicker pace. This could set the stage for faster development of automated drone fleets for remote internet access, commercial and medical delivery, and even give Africa a lead in testing flying autonomous taxis.

“With drones, Africa is willing to take more bold steps more quickly because the benefits are there and the countries have been willing to move in a more agile manner around regulation,” said the WEF’s Reuter.

“There’s an opportunity for Africa to maintain its leadership in this space,” he said. “But the countries need to be willing to take calculated risk to enable technology companies to deploy their solutions there.”

Reuter also underscored the potential for “drone companies that originate in Africa increasingly developing services.”

There’s a case to be made this is already happening with Zipline. Though founded in California, the startup honed its UAVs and delivery model in Rwanda.

“We’re absolutely leveraging our experience built in Africa as we now test through the UAS IPP program to deliver in the U.S.,” said Zipline co-founder Keenan Wyrobek.

Porter Road was to herd the meat industry in a new direction

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Down a two lane road on the outskirts of Princeton, Ky., next to a cemetery and past the Light of Truth Church is the Porter Road Butcher Meat Co. facility — a staging ground for what the Nashville-based startup Porter Road hopes will be a revolution in the American meatpacking industry.

For the company’s co-founders, James Peisker and Chris Carter, the refashioning of the meat business in America is the next step in a nearly decade-long journey since the former chefs first met working in the restaurant of Nashville’s historic Hermitage Hotel. 

The two men started their butcher business, selling locally sourced meat from the East Nashville Farmer’s Market in 2010 and eventually moved to a storefront in the same neighborhood a year later.

“We ended up going around and raising funds and opened the brick and mortar shop in 2011,” Peisker said. “Chris worked a job at a friend of ours’ deli in the morning and I worked at a restaurant at night.”

But from the beginning the two men had bigger ambitions, and as the business became increasingly successful, they began thinking about how to bring their approach to the meat industry to the entire country.

“What we see the future is is being able to reach as many people as we can in the country and offer them the best quality most sustainably raised products,” said Carter in an interview. 

As they began building the business in earnest, the two men realized that there was a critical part of the process over which they had no control — the meat processing itself.

“I would love to be Omaha Steaks,” said Carter. “But I would love to bring change to the system that Omaha Steaks buys into.” To do that meant not just sourcing from sustainable farms, but making sure that their slaughterhouse and processing facility was operating to standards that the two co-founders set for themselves.

“They put up the curtain to hide what’s happening,” said Peisker of the meat industry — although the dirty side of industrial animal husbandry is well known. “99% of the meat is coming from these really disgusting places where the animals are near death and kept alive with injections… Tyson can say they get their chickens from family farm but] they sell the farmers feed, and chicks… small family farms are raising these animals but are doing it in a way that harms the animal. And our beef is born in the same matter. It’s how they spend the end of their lives. They’re force fed chickenshit, chicken feathers, scrap and harvested in a manner that’s doing 60,000 head a day.”

Peisker and Carter envision a different path, one that’s decentralizing the commodity meat industry. Instead of industrial farms producing thousands of head, smaller sustainable farms could raise livestock in the hundreds. Those sustainably raised animals could then be sent to local processing plants and slaughtered in facilities that are better for workers and (more) humane for animals.

“One of the first things we did was to take away the electric prod sticks and cattle paddles,” said Peisker. Ultimately the men recognize that there’s only so much that can be done to make the industry operate more efficiently and humanely, but every little bit helps.

The alternative is continuing to operate at scales that are toxic for the entire country. For example, earlier this month a jury in North Carolina awarded residents near a Smithfield Farms hog farm $470 million to address their complaints about the stench and the industrial pollution coming from the farm.

In all, industrial animal farms operated by just four companies produce 80% of the meat U.S. consumers eat. And the environmental impact of these industrial farms is well understood.

For Ryan Darnell, a managing partner of Max Ventures (and childhood friend of Carter’s), the Porter Road business makes good business sense beyond its social and environmental benefits.

“In this category there’s roughly $55 billion of revenue tied up in the traditional supply chain,” Darnell wrote in an email. “Porter Road isn’t just selling meat online. They are rearchitecting the back-end system to eliminate a lot of the things we don’t like (and aren’t good for us). They are building an entirely new meat company from the ground up.”

Companies like CrowdCow and ButcherBox offer organic meat for sale, but Darnell said that the vertical integration that Porter Road has built makes it a fundamentally different company from those startups.

“Most of the competitors in this space have a digital storefront (for distribution) and buy out of the existing supply chain. A few will try to backwards integrate, but it’s difficult to learn how to accurately evaluate farmers and implement best practices in a processing facility,” Darnell wrote.

All of this attention to detail in the process is also reflected in the price of Porter Road’s meats (they aren’t cheap). But the notion for Peisker is that people can eat fewer, higher quality meat meals with Porter Road products (which may also be better for the environment too).

You should eat less meat but better meat,” said Peisker. “There’s a movement across the country of people who want flavor back in their food…. And people who want to make a choice with their dollar about what they buy.”

Porter Road’s evolution — which culminated in the company launching an online presence in 2017 — is coming at a time when shifting consumption patterns are changing the ways Americans shop and eat.

The Amazon acquisition of Whole Foods has changed the organic market as the once-mighty grocery chain becomes more incorporated into the Seattle e-commerce giant’s commercial operations. That’s opened the doors for direct to consumer competitors to come in — including companies like Thrive Market, Crowd Cow and Porter Road.

“Whole Foods, post-Amazon is just another grocery store now,” said Peisker. 

And Americans continue to love organic foods. Sales of organic food products hit a record $45.2 billion in 2017, according to the Organic Trade Association. While growth slowed to 6.7% from 9% in 2016, the overall numbers are still surpassing the anemic 1% growth of the U.S. food business overall, according to the report.

Porter Road’s founders say those numbers are reflected in its own business. “We get busier every day,” said Carter. Over the summer the company was averaging 60 boxes shipped per-day with roughly 5-8 pounds of meat in a box.

With the boost from the $3.7 million in venture funding it received earlier in the year backed by investors including Max Ventures, Slow Ventures, BoxGroup, Tribeca Venture Partners, Collaborative Fund, and Great Oaks VC, Porter Road is hoping to expand its operations.

“Our plan is to build,” Carter said. “We’ve built this amazing model in this location. We have a year or two before we see ourselves busting at the seams here. And we will move to communities across the country.”

The co-founders of Porter Road see opportunities to open a similar processing facility to the one already operating in Princeton — and ideally will be able to build a network of abattoirs around the country. “If we can make a better life for the animals that go into our food system and better food for consumers why wouldn’t we do it?” said Peisker. 

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