Global AgInvesting: Does the GMO experience hold a lesson for CRISPR investors?

Companies involved in gene editing using CRISPR or other technologies are attracting a lot of attention from investors of late. Just this week Pontifax AgTech and Five Seasons Ventures led a $10 million Series A round for Tropic Biosciences, a startup which uses CRISPR gene editing to develop new plant varieties in the tropical agriculture sector.

In March, gene-editing company Inscripta announced the close of a $55.5 million Series C funding round; and that same month, California-based agtech startup Pairwise Plants secured a total of $125 million, including a $100 million technology collaboration with Monsanto to work together on gene-editing corn, soybeans, wheat, cotton, and canola crops. Pairwise also recently closed a $25 million Series A financing.

CRISPR gene editing technology enables geneticists and researchers to edit parts of a genome by removing, adding, or altering sections of the DNA sequence without needing to involve genes from other species. It can be applied to make plants more resistant to abiotic threats such as pests or drought, or to enhance flavor.

This is in contrast to genetic modification (GMOs), in which genes from other organisms are inserted into the genome. Gene editing, or CRISPR, is a technique that is considered to be more precise, less expensive, easier to use, and compresses the development cycle.

Where Will the Market Go?

Much like GMOs, however, the ultimate barometer of success for CRISPR startups is going to be consumer acceptance. Will the market accept foods from plants that have been genetically edited?

The U.S. and the EU both heavily regulate the use of GMO plant strains. As of 2010, the EU treats all GMO crops as "new food" subject to extensive, case-by-case, science-based food evaluation by the European Food Safety Authority (EFSA).

In the United States, GMO use is regulated by three agencies - the FDA, which handles food destined for human or animal consumption; the Environmental Protection Agency, which regulates the use of pesticides; and the APHIS, which evaluates and regulates GMOs through their Biotechnology Regulatory Services Program. Last month, the FDA proposed new rules requiring that food labels disclose the use of GMO ingredients (the EU already requires such labeling).

Despite this level of regulation, and scientific studies showing GMO crops to be safe, consumer skepticism remains high. According to the Pew Research Center, nearly 40 percent of Americans believe GMOs are bad for their health. Gene editing, on the other hand, is still nascent and mostly unknown to consumers.

It is also largely unregulated and not subject to current or proposed labeling rules. These facts lead many to hope that gene editing will enjoy a smoother path to acceptance by consumers and that its relative ease of use and lower cost will boost both market opportunities and investor returns.

Ultimately, how these early stage CRISPR investments perform will be a complex mix of technology, science, regulations, and public opinion. However it plays out, we're sure to see more deals in the near term as scientists and entrepreneurs continue find new solutions to age old agricultural challenges.