A Year in the Life of an Agtech Incubator

Michigan’s Great Lakes AgTech Business Incubator launched in 2015 after the Ottawa County Board of Commissioners received a grant from the USDA to conduct a feasibility study into creating an agtech incubator for the region. 

The study was initiated during the global financial crisis when the board was seeking an innovative program to encourage job creation that did not duplicate any other existing economic development efforts in the region.

The board studied various different incubator models and found that those offering physical facilities for startups to work from struggled to keep the lights on.

“So we started to create an innovative incubator model without a facility where almost all resources go into recruiting staff to support clients,” says Paul Sachs, assistant director at the Great Lakes Incubator. “Our feasibility study showed that there was a market need for agtech startup services, but that they didn’t need a physical space.”

Considering the regional focus of the incubator, many of the agtech startups emerging in the area are founded by farmers who have workshops, barns and farms to work from. “What they said they really needed, instead of physical space, was help getting through the business hurdles challenging their development,” said Sachs. These challenges include developing markets for products, and working on patenting their technology.

“The more common incubator model provides a plethora of resources for young start-ups, however, many times these resources are generalized, or template-based, for a wide-range of companies,” he added. “Our incubator aims to provide its clients with customized, hands-on assistance to help those businesses overcome their specific, individualized hurdles.”

From there the Great Lakes AgTech Business Incubator was born, funded in-part by a $500k grant from the State of Michigan to help support the first-of-its-kind model. Funds have also been pledged by multi-sector private sector sponsors including cash contributions and, in some cases, discounted service rates worth tens of thousands of dollars. These corporate sponsors are:

Ottawa County Farm Bureau, West Michigan Community Bank, GreenStone Farm Credit Services, Consumers Energy, financial services firm Rehmann, law firm Warner Norcross & Judd, IP lawyer The Watson Intellectual Property Group, and software company BizStream.

Michigan’s counties are also contributing some funding.

For every company that applies and gets accepted, the incubator team has an intensive 90 – 120 days verification period, where it decides if the startup has a viable product, what the market opportunity for that product is, the costs involved and the potential returns. Even if the startup does not successfully make it on the 3-year incubation program, this process gives them lots of helpful information, according to Sachs.

“We might tell them a different resource would work best for them, that they need to do more work and come back to us later, or that they need to realize there is no product or chance of return,” he said.

The incubator is reimbursed for its support through 2 percent of gross sales once the companies start to generate revenue. It doesn’t charge any upfront fees, and it doesn’t take an equity stake.

“We heard from other agtech entrepreneurs that our fee arrangement is a win-win, as we will work our hardest to help the companies generate sales, which is what they want. And receiving 2 percent helps us sustain our model.,” said Sachs.

The incubator has signed five agtech companies and is targeting another five before the end of 2016. One of the companies did not make it through the 90 day product verification phase, three are currently in the verification phase, and one has become a fully-fledged client in the incubator. 

Sachs and his colleagues have noticed a particular wave of products dealing with new energy technologies for on-farm operations as well as drone technology and businesses relating to hops harvesting and processing, an industry that’s starting to boom in Michigan. 

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