Overview:
Two entrepreneurs want to use their platform to lower the barriers to invest in agriculture.
Chris Rawley wanted to invest in agriculture, but he said it was tough to find a way in. He says his options were buying a farm for millions of dollars, or investing in a real estate investment trust, for $100,000-$200,000.
So, he reached out to his friend Austin Maness with the idea of creating a digital platform to make it easier to invest in farms, ranches and agriculture technology. Since establishing Harvest Returns in 2016, the two have raised about $30 million for nearly 50 agriculture farming operations and ag startups.
Many traditional farms that grow crops such as corn, soybeans and wheat obtain financing through the U.S. Department of Agriculture’s Farm Service Agency loan program or Farm Credit System.
Financing can be more challenging for entrepreneurs starting businesses such as grass-fed sheep or cattle ranches, a specialty food product, or creating a new technology like a robotic tractor, Rawley said. The goal of their company is to become a one-stop shop for ag investing by lowering the barriers for investors interested in financing an agriculture startup.
The other larger goal is to educate people about the farm and ranch industry, he said.
“The average American is very out of touch … with agriculture and how their food is produced and farming and what it means to be a farmer,” Rawley said. “Especially people that live in urban areas. So part of our goals is to branch that gap by bringing urban people who might have money and want to invest in something different closer to farmers, and help them understand one another essentially.”
Rawley served in the U.S. Navy and Maness in the U.S. Army and through deployments to other countries, they’ve seen the importance the food system plays.
Maness also helped family members on the farm growing up.
“Food security is a big deal,” Maness said. “So there are sexier things out there to invest in, but you know, we have to eat. We cannot survive without food.”
Over the years, Rawley and Maness have created four avenues for investing: livestock production, indoor agriculture and agriculture technology.
Most recently, Harvest Returns raised $470,000 for Idaho-based cattle and sheep ranch American Beef Ranch, and $217,500 in equity capital for robotic tractor company Barnstorm Agtech.
Of the inquiries they receive, 4 to 5% of the companies make it onto the investing platform. Their minimum investment is $5,000. Maness said their job is to balance accessibility with how the investment will affect the farm.
“We want people to be able to play but we also (have) to make sure the cost of capital to the farm is not so overbearing that it starts to hurt the business and then potentially hurt the investor, Maness said.”
Ranching ‘requires a huge amount of capital’
There’s a big demand for funding in the sector because in general, agriculture is an expensive business.
Ranches, for example, take a lot of money to start and operate, Jeff Geider, director of the Institute of Ranch Management at Texas Christian University.
“Buying land, buying livestock, buying whatever necessary equipment … all the things to operate on a day-to-day basis, it requires a huge amount of capital,” Geider said.
The amount of money it takes typically depends on the size of the operation, Geider said, but it could take millions of dollars, he said. That’s why there is a hunger for alternative sources of funding, he said. There is a trend of investors investing in a piece of land and loaning it back to the farmer or rancher, he said.
Most farmers and ranchers that come Harvest Returns have maximized the amount of debt gained from the bank, Rawley said. Many also want to own their land or keep their family’s land.
Although there are loans available from the USDA’s Farm Service Agency, the agency requires a certain amount of years of experience in farming. That can be a barrier for farmers and ranchers just starting out.
Investments make a difference for farmers, ag businesses
For Grace and Todd Vranac, who make elderberry cider through their business Harvest Farmacy, Harvest Returns played a big part in their expansion. They met Rawley while selling their product at the Clearfork Farmers Market in west Fort Worth.
They were a self-funded business initially, so they needed the funds to acquire land to start their own elderberry orchard.
The Vranacs did not disclose the amount of money they raised due to a nondisclosure agreement. Todd Vranac said the deal was customized to work for their operation. Not all investment firms understand agriculture, he said.
“We know that whether you’re growing a crop, or you’re building your herd, it takes time,” Vranac said. “And a lot of times it’s the season or you can say weather patterns that drive that investment to grow and you still have to harvest and process and there’s a whole processing side of things.”
Andrew McKenzie, the CEO of Precision Livestock Technologies raised $600,000 for his company that develops technology that gives feedlot owners feeding data – including feed levels in bunk feeders.
The money the company raised helped fund the company’s technology and business development. McKenzie acknowledges that fundraising shouldn’t be easy — investors want to make sure the company they are adding money to will be viable.
Most technology venture capital funds are made up of people who have expertise in software or hardware — not agriculture, he said.
“What we hear when we do talk to those folks is ‘wow, that sounds really amazing,’” McKenzie said. “‘And it sounds like you’re doing great, but I don’t know anything about that. So I’m not sure how to evaluate it.’”
In comparison, McKinney said the vast majority of people in Harvest Returns’ network have an agriculture background, whether it’s row crops or animal production. They invest a little bit lower than a traditional tech angel investor, who typically writes six-figure checks.
“It bands together, smaller five-figure checks into a single entity, which is, frankly, at their scale, I think, is really unique and really powerful,” McKinney said.
Seth Bodine is a business and economic development reporter for the Fort Worth Report. Contact him at seth.bodine@fortworthreport.org and follow him on Twitter at @sbodine120.
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