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VOL. 131 | NO. 42 | Monday, February 29, 2016

Farm and Gin Show Features Startup-Ag Combo

By Bill Dries

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The annual Mid-South Farm and Gin Show looks like any other gathering of farmers over the years, but there is a distinct entrepreneurial underpinning this year merging technology with venture capital.

The two-day event this past weekend at the Memphis Cook Convention Center drew farm families browsing farm art for sale, T-shirts, ball caps and other souvenirs, including yard sticks.

But the large farm machinery that defined the geography of the convention center floor space was a reminder that agriculture is about technology, not just in the cabs of tractors but in tools used for precision ag – as it is called – and other advanced techniques.

Where there is that kind of technology, there is risk. And where there is risk with the potential of great profit, there is venture capital.

The night before the Farm and Gin Show opened, Archer Malmo marketing and advertising agency hosted a reception in the basement room of Flight Restaurant, not far from the convention center.

Patrick Woods, director of Archer-Malmo Ventures, works with startup branding, a relatively new area for Archer-Malmo. Putting the startups together with ag isn’t a foreign concept in this part of the country.

“They understand the culture and the nuance of the distribution channels,” Woods said, contrasting that with West Coast ventures that associate startups with Silicon Valley.

“They’ve been in the Silicon Valley bubble for so long,” Woods said. “What they’re looking for is perspective and guidance to navigate what can be some complicated channels for outsiders.”

That’s where Pete Nelson, who runs AgLaunch, the Memphis Bioworks Foundation startup organization, is spending a lot of time. Nelson has the Bay area on his schedule three times in the next eight to nine weeks.

AgLaunch has a goal of raising $10 million to build a program that will start or draw 100 new ag companies in the region in five years.

“We incubate other technologies in a lab or a building. For this, we incubate it on a farm,” Nelson said. “We have consumers interested in food in a way that they’ve never been before.”

But agriculture is a different model for interesting venture capitalists who are used to the model of Silicon Valley where software comes out and the creators and investors see a quicker return on development costs.

“It’s understanding that for agriculture, bringing in a crop or new technology market, it takes multiple seasons.”

Helping with that understanding is Archer Malmo senior vice president Mike Butler, who points out the firm has a 20-year history of working with agriculture companies.

“What you are seeing today is so much more investment in the ag sector from the (venture capital) world,” Butler said.

That includes Microsoft CEO Bill Gates and other Silicon Valley giants motivated by the money to be made and by the global demand for food as the world’s population grows.

“They see both opportunity and a need,” he said. “That’s where you see opportunities come from.”

Nelson confirmed the interest from venture capitalists.

“Venture capital ag was stagnant globally – around $500 million a year – for about a decade,” he said. “Over the last three or four years it’s ratcheted up. In 2015, we were at $4.6 billion. It’s a high-growth area. And we’re trying to attract as much of that here as we can.”

In the past though, the startups would round up farmers to give their innovations a trial period and a field day independently.

“We’re organizing them to have a true gateway where they’ll actually have equity in the deals,” Nelson said. “We go to the Bay area and say, ‘You bring your technology here. … We’ll scale you up in the region.’”

The farmers who can increase acreage as the methods and innovations prove successful “own part of the value chain,” Nelson added.

Bioworks, which works specifically in economic development that includes venture capitalism, has included agriculture as one of its investment focus areas since its inception in 2001.

Executive director Steve Bares says farming is “undergoing a radical transformation.”

“It’s got to have higher productivity, lower environment impact, higher yield, better products. And the question is how does this community take advantage of it from an economic development space,” Bares said. “Memphis is the gateway to the Delta and the Delta is millions of acres of productive farmland and professional farmers with water, with logistics, all waiting to enter the global market.”

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