Innova Memphis, a Tennessee-based venture firm, has announced the winner of its first $100,000 Row Crop Challenge powered by AgLaunch as part of the Farm Journal Expo last week. After pitching in the final four, selected from a group of national applicants, Kopper Kutter was voted by a panel of farmers as the lucky inaugural winner.
Founded by three farmers in Kansas, Kopper Kutter makes ARRO (Alternate Rotary Rowcrop Option) head conversion kits for corn heads enabling harvesting of additional row crops including sorghum, milo, sunflowers, and millet, among others.
As part of the Innova Challenge, the four new agtech startups competed for a chance to receive a $100,000 venture capital equity investment from Innova Ag Innovation Fund IV, a USDA certified Rural Business Investment Company whose investors are eight Farm Credit banks. Teams pitched their company in front of an expert panel of farmers who determined which team received the investment.
“This whole thing started with a network of farmers in 2010 to 2012 that basically involved partnering with startup seed companies like Ceres to grow and process crops for bioenergy, bioproducts, and novel food health products,” Pete Nelson, president and executive director of AgLaunch tells AgFunderNews.
AgLaunch is an accelerator program based in Memphis, Tennessee focused on agriculture technology startups born out of a group of farmers’ desire to make agtech more practical and to ensure that growers and producers were part of the technology conversation from day one.
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AgLaunch’s network of farmers is involved in everything from providing guidance to startups in its accelerator program and investing funds, to helping conduct field trials, according to Nelson. Starting with farmers helps the group identify the specific problems that growers are facing and to build programs and technology-focused solutions tested by growers to address those issues.
“When farmers aren’t engaged in the pipeline really early in the process, it means that the number of errors will be high, so our whole goal is realigning that. How do we get farmers in the value chain in other ways than just producing ethanol or developing a CSA? How do we actually involve them on the venture side?” asks Nelson.
We caught up with Nelson to find out more about model and how it’s adding value to the agtech ecosystem overall.
What is the AgLaunch model?
There are four main components. First is our farmer aligned capital component that we announced in early 2015. We started working with Innova Memphis to build an ag innovation fund focused around the Rural Business Investment Program. Under this program, once a company is certified as a Rural Business Investment Company (RBIC), Farm Credit can be an LP in the fund. That fund has raised and closed $31 million. There are three other RBICs now working together as a unit with $400 million in capital. Innova looks at all our deals and they are the underpinning investor.
The second piece is that we have built relationships with Farm Journal Media and have a preferred exclusive MOU with them where we do events and feature our startups through all their publications, stories, and activities. Farm magazines are interested in agtech now and they write stories about how the technology is ready for the market instead of writing about how we get growers engaged and testing it. We want to help the media understand agtech.
The third piece is growing our direct partners network. We have grown by a couple hundred-thousand acres doing active trials with major row crops, livestock, specialty crops, and adding groups in other parts of the country who want to replicate our farmer network.
Finally, our basic premise remains that there is no ag ecosystem functioning for agtech, but that there are little pieces. We also believe that growers have to be engaged right at the beginning.
What are some of the unique aspects of your program?
During phase one of the program, which takes place October-November, we do a lean startup business model and Ag 101 where we mainly try to make sure they get time with growers who are finishing harvest and ensuring they have a good hold on a business model. Phase two of the program is January-February where we have companies work for two-months on statistical design and field trial planning until they have a three-year plan that involves going to market with growers. This is what most Silicon Valley accelerators roll their eyes at because their approach is to build fast, break it, and start again. The final phase of the program involves an agronomist and data scientist. This is the field trial phase where there may be multiple farmers participating in the field trial, data is collected, and the company is operating as a real ag company. They may also be raising money during this phase.
What do you look for in startups?
Does it solve a real-world problem? I’m an advocate for ethanol because it demonstrates that we are capturing solar energy. We are not looking for pie in the sky ideas. We want practical solutions that are scalable and that will give investors money. Some examples include addressing spray drift, herbicide resistance weeds, infant mortality in swine, and cleaner conditions for workers. Really basic things that if you fix them, the whole value chain works better.
What trends are you seeing in agtech?
A greater realization and understanding that there is no silver bullet for agriculture and that you cannot talk about agtech without thinking about an overall, full-systems approach. If you look at the farm of the future, you see monetization of ecosystem management such as soil health coupled with the monetization of data.
I think that everyone is overbuilt because they started like Google Maps, mapping every square inch of the field and microbiome. It’s interesting, but you are inundated with so much data that it isn’t actionable. I think the industry is starting to understand the more practical aspects of farming and that their inventions may not work the way they thought it would. So, investing in startups that are starting the other way and looking at what tasks are happening on the farm and thinking logically about the biggest problems is the biggest trend we are starting to see.
I think we are just at the beginning of this whole agtech revolution. We are right on the precipice of things getting really fun instead of how some people say it’s a bubble. Some of the technology gaps I see are contracting and creating markets. How do we connect buyers and sellers? I call it agfintech, which includes all the financial mechanisms of lending and growth capital. Another gap is using solutions to deal with herbicide-resistant weeds and spray drift.
What’s AgLaunch’s plan for the future?
We plan to double down in Memphis and our region to make this a central point in the development and launch of technologies and to implement those technologies here when they come out of the lab. We have core values around women and minority entrepreneurship and creating urban and rural jobs. We are trying to make ourselves the center of the universe here and to build out our farmer-centric platform. We have interest in Iowa, North Carolina, Mississippi, and Missouri, which want to borrow parts of our model or partner with us.
The trick for us is to balance how we work with other partners to really create a fully realized platform and to really focus on core values in our region. Practically that means engaging more farmers, greater rigor in field trials from a data and agronomy perspective, and more capital deployed in startups.