Tillable, an online marketplace that’s targeting the $32 billion farmland rental market, has completed an $8.25 million Series A funding round led by agtech investment holding company The Production Board with participation from seed-stage venture firm First Round Capital.
Tillable was co-founded by Corbett Kull, who sold his former startup business 640 Labs to Climate Corporation in 2014. Former Climate Corp CEO David Friedberg is director of The Production Board, which is now investing the Tillable. 640 Labs was an early mover in the digital agriculture space using GPS, wireless and mobile technologies to give farmers detailed data on their crops and equipment to improve operations. Climate Corp was acquired by Monsanto for $1 billion shortly before it acquired 640 Labs.
Tillable wants to help landowners optimize their leasing experiences by capturing multiple offers for leases and aggregating information on fair market prices to ensure that the landowner gets the best going rate. Farmers will likely benefit from having a curated list of available leases to scroll through, providing key information like acreage, soil type, and location in lieu of having to secure land through word-of-mouth or by hoping to pass a For Lease sign on the road.
And on the other side of the table, although landowners collect $32 billion in rent each year, Tillable estimates that they leave $8 billion on the table due to underpriced rent.
“Landowners don’t have good data about how much their farmland is worth from a rental standpoint. So while they most likely do have a tenant, they don’t really know what the market would pay to rent their land,” Corbett Kull, co-founder and CEO, told AgFunderNews. “Tillable solves that problem through a price discovery process. Furthermore, landowners don’t know where to find a good grower or how many growers might be interested in renting their farm. Tillable solves that problem. For farms on Tillable today, we already have over 50 verified growers within 30 miles of every farm on Tillable.”
AgFunder Co-Investment Fund III is now open for investment. Closing June 15, Spots are limited.
Tillage determines prices by a blind offer process. Growers submit offers during the offer period and landowners review the offers to select a grower based on price and the grower’s profile. The landowner is free to choose the grower of her choosing and is not required to choose the grower who offers the highest price. The right tenant doesn’t necessarily mean the one willing to pay the highest price, according to Kull.
Farmers and lease-seekers can create an account for free. If they complete a lease transaction, Tillable takes a fee of 2% of the rent. It also collects 30% of any increase the landower gets in rent during the first year. Landowners have the option of using a legally reviewed lease, or they can upload their own document to the Tillable website. Leases can be signed electronically, which is a plus for landowners who live in other cities.
Farmland Shortage Challenge
Farmers face a slew of challenges in today’s world, including declining commodity prices, increasingly unpredictable weather, and changing consumer demand. A problem that is less often discussed outside of farming circles, however, is the shortage of farmland for sale. One of the USDA’s most widely cited statistics reports that 40% of the US total farmland acreage is rented, making it more challenging for beginning farmers, and farmers looking to scale up to secure their own piece of land.
Further complicating things, a staggering 80% of rented farmland is owned by a non-operator landlord, meaning someone who owns farmland but who is not actively involved in farming.
Only 38% of the non-operator landowners are retired farmers, meaning that 42% of non-operator landlords have little-to-no farm experience whatsoever. The root cause of America’s growing legion of farm owners who don’t farm lies in pervasive succession planning practices among the agricultural community. Farmers tend to leave their land to their children as family inheritance regardless of whether the children intend to be actively engaged in farming. Much of this is driven my sentimental attachment to multi-generational farmsteads, while others see it as a way to leave their children with a valuable asset to either sell, rent out, or to serve as their retirement destination.
Although some tenants may prefer an absentee landowner, others may find it challenging to communicate about the land and the lease agreement with a landowner who lacks a sophisticated knowledge of farming. Commonplace practices such as burning pastures, tilling the soil, or applying chemical inputs may cause a landowner undue concern.
Tillable will use the funding to expand its engineering, sales, and marketing teams with the hopes of attracting more landowners and farmers to the platform before the 2020 growing season takes off.
“Tillable’s goal fits well with ours: to improve the efficiency and economics of global food and agriculture markets,” said David Friedberg, founder and CEO of The Production Board and former CEO of Climate Corp, in the same statement. “By applying sound economic principles and technology to an underserved market, Tillable is improving the information exchange between landowners and farmers, which will in turn help maximize both the value and responsible use of America’s farmland.”
Kull is no stranger to the agtech startup game.
“When I started 640 Labs back in 2013, I was constantly asked about usage of technology by farmers. There was a great deal of skepticism about farmers using smartphones and tablets. At least today, I don’t have to convince VCs of that,” he says.
Other Options on the Market
He’s also not alone in his efforts to help landowners and farmers modernize farm leasing. A variety of organizations including nonprofits have sprouted up in attempt to play matchmaker. The Center for Rural Affairs maintains a comprehensive database of land link programs offering everything from ownership in livestock to rent-to-own opportunities. The resources are listed by state.
Land For Good is a New England based organization working to address America’s farmland shortage through a variety of tools including a Build-A-Lease Tool. For organic-focused landowners and farmers, MOSES offers an online lease listing platform as well as properties that are for sale.
Farmland Information Center also offers an online platform where landowners and farmers can find each other as well as tools to help both parties understand leasing and to find the right mix. Some of its services are even tailored toward helping non-related persons create a multi-generational succession plan.
For many farmers, leasing land is a less desirable option due to the uncertainty that it brings. Without a multi-year lease, there’s no way to know whether the option will be renewed. This makes it difficult to make infrastructure investments, and for some, it may be a disincentive to put optimal stewardship ahead of squeezing as much profit as possible from the land.
There are some farmers who prefer leases as complements to their home farms or as a way to dabble in farming without taking the major financial plunge that comes with buying your own farm. It’s also typically less risky should the land suffer a natural disaster or zoning laws change to prohibit once-allowed agricultural practices.