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Ethan Steinberg, cofounder and CEO, Propagate
Ethan Steinberg, cofounder and CEO, Propagate. Image credit: Propagate

Meet the founder: Money really does grow on trees, says Propagate’s Ethan Steinberg. But agroforestry requires patient capital

January 19, 2024

[Disclosure: AgFunderNews’ parent company AgFunder is an investor in Propagate.]

Can money really grow on trees?

Absolutely, says Ethan Steinberg, cofounder and CEO at agroforestry startup Propagate. But it doesn’t happen overnight, and farmers interested in generating extra revenues and at the same time sequestering carbon, improving water management and improving soil health by planting trees often lack the upfront cash and wherewithal to take action.

Which is where Propagate comes in. Founded by Steinberg, Jeremy Kaufman, and Harry Greene in 2017, Propagate addresses three key barriers Steinberg says are holding back agroforestry, defined by USDA as “the intentional integration of trees and shrubs into crop and animal farming systems.”

#1 – Lack of awareness of the benefits

#2 – Lack of technical know-how for on-farm planning and implementation

#3 – Lack of capital to cover initial startup costs

Propagate’s Overyield IT platform is designed to help address the first barrier by helping farmers understand what trees or shrubs to plant where on their land, how much it will all cost, how much labor is required, and whether the land is suitable.

Addressing barrier #2, its team can provide the tree stock, expertise and practical support to implement the tree-planting plan. And for #3, financing can be provided via Propagate’s partner Agroforestry Partners or through accessing public money available through an agroforestry project funded by USDA’s Climate Smart Commodities initiative.

AgFunderNews (AFN) caught up with Steinberg (ES) to find out more…


AFN: If agroforestry is such an economic and environmental no-brainer, why is less than 1.5% of US farmland deploying it?

ES:  There are three key barriers: lack of awareness, lack of technical know-how, and lack of capital. So around design, which boils down to what are the right species to plant and where do they go, our Overyield software can answer those questions. Then there’s boots-on-the-ground implementation, where our technical service can actually establish those trees. And lastly, there’s finance.

Probably the biggest challenge with chestnuts in particular but really any tree crop, is that there’s a J-curve. So you’ve got costs that stack up over 10 years before you basically hit a breakeven point, and only a small number of farmers can take on 10 years of costs before seeing a return.

AFN: Given the lengthy timeframes involved, isn’t it challenging to get farmers to plan this far ahead?

ES: The answer is yes, as in the US, you’ve got an aging farming population, so there’s certainly conversations about resiliency and what happens next if your kids aren’t going to take over your business for example. Is there a partner that could come in and help manage and operate the business?

What we are seeing, however, is that a lot of younger farmers are interested in regenerative agriculture.

In terms of the crops themselves, chestnuts are a rather resilient species. There are challenges such as deer and blight, which is troubling for the American Chestnut, but a lot of the species we’re planting are Chinese chestnuts that have been grown in the United States for the last 50-60 years.

AFN: We’ve all heard of tree planting in the Great Plains as windbreaks after the Dust Bowl, but how would you describe the kind of agroforestry projects you’re working on?

ES: There are several approaches, some of which involve animals [such as Silvopasture], but there are two main camps: bringing the forest to the field, or farming the forest, and Propagate is in the former camp.

People have understood the benefits for a long time, and in small farms in the developing world, intercropping is a really common practice, if you think about cocoa or coffee for example. It allows you to take advantage of the vertical space on a farm. But what’s the application in New York or the Midwest, where the crops are different and the average farm is much larger?

How can we leverage that vertical space to produce a crop—whether it’s chestnuts or fast-growing rot-resistant hardwoods for timber—and deliver an economic return as well as all the environmental benefits of regenerative agriculture? So that was our starting point at Propagate.

AFN: How did you meet your cofounders?

ES: Jeremy [Kaufman, COO] and I met the second day of undergrad studies at Miami University on the frisbee golf course! So he and I spent much of our college tenure staying up late arguing about different business concepts. And then Jeremy and Harry [Greene, CRO] were introduced by a mutual friend.


According to Propagate:

  • Trees contribute organic matter to the soil through fallen leaves, branches, and root exudates. This builds up organic carbon, which enhances soil structure, water retention, and nutrient-holding capacity.
  • Tree roots stabilize the soil, reducing erosion caused by water runoff and wind. The improved soil structure then promotes better root penetration and water infiltration — ultimately promoting growth for crops grown in between the trees.
  • Trees promote the growth of soil microorganisms that enhance nutrient cycling, disease suppression, and overall soil health.
  • Certain tree species also have nitrogen-fixing abilities. They form symbiotic relationships with nitrogen-fixing bacteria in their root nodules, converting atmospheric nitrogen into a form that plants can use, enriching the soil and supplementing the need for additive fertilizers.

L-R: Propagate founders Ethan Steinberg (CEO), Harry Greene (CRO), and Jeremy Kaufman (COO).
Propagate provides access to agronomic insights, technical assistance, and financing so farms can reduce risk while integrating fruit, nut and timber trees with animal or crop farming systems. Pictured L-R: Propagate founders Ethan Steinberg (CEO), Harry Greene (CRO), and Jeremy Kaufman (COO). Image credit: Propagate

AFN: What are the best trees to plant and why?

ES: When we started looking at the opportunity, we quickly recognized there was a supply/demand imbalance for chestnuts. Despite the fact that the Eastern US has a strong farming community and the perfect climate for growing chestnuts, we’re importing the majority of what we consume.

In 2022, we launched a 130-acre pilot project [at Hill Farms in Ohio], and over the course of the following 12 months, we scaled that up to about 1,800 acres, which all operate under a lease structure.

So this is now one of the largest chestnut operations in the US. It’s chestnuts and hay in about 70% of every acre with the other 30% being divided up with things like riparian buffers and biodiversity strips to build in some of that ecological value right from the start.

They take at least a decade to be very productive, but the internal rate of return (IRR) for establishing chestnut production is around 15%-25%.

AFN: Beyond securing revenues from the tree crops (nuts, timber etc), can your clients monetize the environmental benefits through carbon credits or improved yields down the line, for example?

ES:  The short answer is yes, there’s opportunity in the carbon markets, although this won’t cover the cost of implementation. Some work we did with The Nature Conservancy on Silvopasture [integrating trees and grazing livestock operations on the same land] suggests about two tons of carbon per acre per year can be sequestered, although that obviously depends on the species and the density of planting, and at current market prices we’re talking about $30-40/ton for these kinds of credits.

You can also potentially save money through better retention of nutrients such as nitrogen and phosphorus in the soil [due to improved water retention and mitigation of runoff].

Now that’s a great start, but to develop a commercially viable [agroforestry system] we might be talking about [initial startup costs of] $3,500 per acre.

[Editor’s note: A recent study by Propagate and The Nature Conservancy on several different Silvopasture systems in the journal Frontiers in Sustainable Food Systems found that chestnuts might take longer to break even than fodder crops, but delivered a far higher NPV (Net Present Value) at 30 years.]

AFN: How does the finance part work at Propagate, and how rapid is the payback if you’re planting, say chestnut trees?

ES:  There are public and private capital pools, and the more we can increase the availability of both for agroforestry, the better, as it typically takes around 10-11 years before chestnut trees become very productive.

So one public pool of capital farmers can tap into is the $36 million available for expanding agroforestry in a project stewarded by the Nature Conservancy and funded by the USDA’s Partnerships for Climate-Smart Commodities initiative.

As for private capital, we connected with a group called Walnut Level Capital and in 2022 launched a joint venture called Agroforestry Partners, which is a fund that can supply the capex and opex required to establish commercial chestnut agroforestry systems—primarily chestnut and hay—in the US on leased farmland.

So for example, for our partner Keavin Hill, who owns Hill Farms in Ohio, Agroforestry Partners set up a 20-year lease that includes the ownership of the chestnut trees as assets on the land using a combination of timber rights and farm product rights. For his operation [which is transitioning from corn, soy and wheat to chestnut and hay] Hill earns money from stable lease payments, services for the management of the chestnut system through his agricultural management company and on alley-cropped hay for a wholly owned hay enterprise.

Agroforestry Partners in the midst of raising a $30 million fund that will establish three hubs of operation in the US and we’ve already begun establishing the first hub, which is in Kentucky.

So Agroforestry Partners is raising capital from institutional investors, private equity funds, corporations, high net worth individuals, and folks who are putting capital to work for the development of regenerative agriculture.

It basically leases land from farmers at competitive rates, and farmers get paid from year one. There’s also an option for farmers to waive the lease rate in exchange for a percentage of the revenue down the line from the chestnuts, so there are a few different models.

AFN: What crops are you looking at in addition to chestnuts?

ES: We look at three crop categories. One is tree nuts such as chestnuts and hazelnuts. Then what we call ‘fast timber,’ so fast-growing rot-resistant hardwoods such as black locust. And then lastly, crops that have fodder value in Silvopasture systems.

When we start working with a farm or farmland asset manager, we evaluate which crops make the most sense for that land in terms of the location, soil pH, soil types and so on, which also align with the management philosophy of the farm, and also bring some ecological value to the table.

We’ve been steadily adding to our software platform over the years, so you can map out your farm, calculate the number of trees per acre, and build out costs, revenues, yield projections, labor assumptions, on a per crop per year basis.

So for example, we can say you’re going to need this much mulch and it’s going to cost this many labor hours or full time equivalents to go spread it. But the suitability analysis is also key. If you plant a tree here, based on the soil, the water table depth and so on, is it going to be productive?

Propagate's Overyield IT platform
Propagate is a software, development and financing ecosystem that makes it easy for farms to transition acreage to agroforestry. Pictured: Propagate’s Overyield IT platform. Image credit Propagate

 AFN: How does Propagate make money?

ES: We’re a bit like an SaaS [software as a  service] company, so you can purchase a subscription to utilize our Overyield software. And then on the product development side of the business, we basically get hired to develop projects, so we’re contracted in to establish the system and manage the nursery supply chain. We have crews that go out on the farm and we plant the trees. And that’s our bread and butter from a revenue perspective.

AFN: Propagate raised a $10m series A round last year. How much runway does that give you?

ES: We’re doing everything we can to use the capital we have to get us through to profitability within the next two years.

We basically need to increase the total amount of acreage that we’re planting, so one area we’re focused on is working more with farmland asset managers and institutional investors that are non-operating farm landowners, but have a mandate around sustainability.

But I don’t believe agriculture lives on an exponential growth curve; we’re certainly different than the technology world. The graph we’re on is more like a staircase [than a hockey stick] and so for example in 2023, we planted about 80,000 trees and this upcoming spring we’ll be planting around 120,000 trees.

 AFN: What has given you the most sleepless nights over the past six years?

ES: It’s been a humbling experience, but some things have actually happened faster than we anticipated. So periodically we’ll sit down as founders and say, what exists today in the business and what needs to exist if we’re going to 10x all these metrics? What needs to exist if we’re going to 100x those metrics?

And one of the things we put on the whiteboard when we did this in 2019 was that we’d love to see Uncle Sam [the US government] get involved. And we put that in the ‘decades down the line’ category. But here we are now with the [government-backed] Climate Smart Commodities initiative [under which $36 million will be paid out to producers in direct incentive payments to transform 30,000 acres spanning 30 states into agroforestry systems].

Like all businesses we’ve had to learn how to deal with things we never planned for, such as the pandemic, and there’s certainly been a couple of nights where the three of us have called each other saying, Man, what’s tomorrow going to bring? But there have also been other nights where we’ve called each other to say, Holy Cow, we had no idea that would happen!

Alley cropping agroforestry in France.
Alley cropping in France. Image credit: Christian Dupraz

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