Iowa Agtech: ‘Building the right connections between the right people at the right time’
Iowa agriculture is now worth more than $15 billion according to the U.S. Department of Agriculture.
For entrepreneurs and investors willing to look outside of Silicon Valley, Iowa’s agricultural technology—often called “agtech”—ecosystem offers valuable and lucrative opportunities. With a top agriculturally-focused university producing talent and multiple accelerators helping entrepreneurs commercialize their ideas, early stage agtech companies are finding success in Iowa.
Farmers are in our backyard
The United States’ two most valuable crops, by a huge margin, are corn and soybeans. The growth of these two crops is heavily concentrated in the Midwest. The U.S. Department of Agriculture estimates the country’s corn crop to be worth more than $51 billion and the soybean crop more than $40 billion. Together, they account for more than 64 percent of U.S. crop value.
Iowa ranks number one in both corn and soybean production in the United States. In 2017 alone, the state produced over $12 billion worth of corn and soybeans.
“When you’re trying to build something in production agriculture, it’s almost silly to do it anywhere else because you’re ten minutes away from a prospective customer right outside your door,” said Adam Koppes, the Investment Manager for the Iowa Farm Bureau Federation. “I think that’s largely why we’ve got so many ag technology companies getting built here right now.”
By being this close to farmers, agtech companies are able to see the problems farmers are facing firsthand and can more easily communicate with them to figure out how to best solve the problem.
“I think what often goes understated and when you’re building in agriculture, especially here in Iowa, is having your customer base sitting right next to you,” said Koppes. “You can really get to your customers, talk to them, find out exactly what they want and build it for them. And you can do that on a comparatively more cost-effective way than you could on the coast.”
Iowa State University produces top talent
Iowa State University’s graduate agricultural engineering programs are among the best in the country according to U.S. News & World Report’s 2019 rankings, placing second behind Purdue University.
Agricultural entrepreneurs from Iowa State have been responsible for innovation, invention, and business creation in important sectors of agriculture and the food industry ranging from seed, agricultural equipment, GPS, agricultural chemicals, biotechnology, pharmaceuticals, and food products.
In 2005, ISU founded the Agricultural Entrepreneurship Initiative with the goal of developing high growth agricultural entrepreneurs.
Each year, the initiative supports fifteen to twenty-five student entrepreneurs as part of AgEI’s Student Incubator program. Some of the more prominent companies to come from the Student Incubator Program include Farmland Finder (formerly Terva), Scout Pro, Agventive and AccuGrain.
Scout Pro and AccuGrain have gone on to be recognized by the American Farm Bureau Federation as the 2016 and 2017 winners, respectively, of their national rural startup competition.
New Accelerator Programs
With a large customer base and top-notch university talent in place, new agtech accelerators have recently formed in Iowa to help foster and support startups and entrepreneurs.
Iowa Agritech Accelerator
The Iowa AgriTech Accelerator in Des Moines is an accelerator program that takes on startups from around the world with an idea, intellectual property or prototype for agricultural innovation. Each company accepted receives $40,000 in seed funding from the accelerator, as well as education and mentoring from the program’s strategic partners, in exchange for an equity stake in the company.
“We saw a lot of ag startups here and thought there was a need for an accelerator,” said Mike Colwell, Executive Director of Entrepreneurial Initiatives of the Greater Des Moines Partnership, part of the team that founded the program. “At the time we did the research, there weren’t many ag accelerators around and most of them are very university-centric and not so much business-oriented.”
The accelerator’s financial backers include household names from the ag economy like John Deere and DuPont. Also investing in the program are Grinnell Mutual Reinsurance Company, Farmers Mutual Hail Insurance Company, Kent Corporation, Sukup Manufacturing, and Peoples Company. Each company funds the accelerator on an annual basis, participates in its board of directors, helps to select cohort members and provides mentors during the program’s active period.
“Mentorship is a big part of the program and the ag investors not only serve as investors but as mentors to the startups throughout the 100-day program as well,” said Megan Vollstedt, Executive Director for the accelerator.
Farrpro, one of the companies that participated in the inaugural cohort, has seen early fundraising success. The Iowa City-based company recently wrapped up their seed investment round. Among the investors were Grinnell Mutual, Farmers Mutual Hail Insurance and the Iowa AgriTech Investment Fund. A small group of angel investors hold the remaining positions in the round.
The accelerator is currently in the middle of their second cohort. In total, the Iowa Agritech Accelerator counts ten companies in its portfolio, two of which originated inside the state.
Though this year’s cohort will graduate from the program on August 30, the startups will have the opportunity to showcase their companies at a side event during the World Food Prize’s Borlaug Dialogue International Symposium in Des Moines on October 16.
ISU Startup Factory
The ISU Startup Factory is a 52-week accelerator program housed at the Iowa State University Research Park that has been in operation since 2016.
While not exclusively focused on agtech companies, the accelerator has served nine different ag companies including Smart Ag, Gross-Wen Technologies, Nebullam, Performance Livestock Analytics and Tractor Zoom.
Those accepted in the Startup Factory receive formal training, resources, and access to a network of business mentors, advisors, counselors and investors in two 26-week blocks. The first block consists of a formal curriculum centered on business validation and the second block is more customized to a company’s individual business needs.
Ag Startup Engine
Another entity with close ties to the ISU startup community is the Ag Startup Engine, an investment platform based in the Iowa State University Research Park that funds agtech startups.
“We’re not really a traditional accelerator. We don’t have classes,” said Joel Harris, Ag Startup Engine’s co-director. “We largely rely on the ISU Startup Factory and Ag Entrepreneurship [Initiative] out of Iowa State to be our deal flow.”
The Ag Startup Engine primarily focuses on companies in need of early seed investment and typically invests between $25,000-$50,000. The Ag Startup Engine has made six investments to date and plans on investing in four to eight companies over the next two years.
“In our portfolio alone, there’s been a little over $8.5 million raised across the six companies that they’ve gone on to raise after our initial investment,” said Harris.
Agtech startups are seeing early success
In the last month alone, two agtech companies based in Central Iowa have received multi-million dollar direct investments from established companies in the state.
Smart Ag, an Ames company that has developed a platform for farm equipment automation, received a $5 million investment from Adel-based Stine Seed Company, the nation’s largest independent seed company.
“The advantage for us over being somewhere like the west coast is that we’re actually able to very easily get in touch with our customers and evaluate our products,” said Colin Hurd, Smart Ag’s Founder and CEO. “Building a product to address large-scale agriculture and the needs that they have. This is the best place in the world to do it in my opinion.”
Gross-Wen Technologies received a $2 million investment from Doerfer Companies, a Waverly-based manufacturing company. Gross-Wen, also of Ames, has developed an algae system capable of cost-effectively recovering nitrogen and phosphorus from wastewater. The company was started in 2014 by Martin Gross and Zhiyou Wen and is based on a technology they developed at Iowa State.
“There’s a huge base of experts with the Iowa State University and all the industry in place, the market for these technologies is already here,” said Martin Gross, co-founder and CEO of Gross-Wen Technologies. “So we see companies wanting to come here because this is where the infrastructure is and this is where the customers are going to be.”
Another early-stage agtech company that’s seen a lot of success is Cedar Rapids-based SwineTech. The company’s technology helps in pork production by preventing sows from laying on and crushing their piglets. SwineTech was part of the 2015 cohort of the Iowa Startup Accelerator, an accelerator in Cedar Rapids that is not focused solely on agtech. They raised $1.3 million in Series A funding from 19 different investors in 2017.
What’s next?
“We’re beginning to build a network of people who have experience starting agricultural technology companies, investors and mentors, said Kevin Kimle, Rastetter Chair of Agricultural Entrepreneurship at Iowa State. “Now it’s just about continuing to grow that network and building the right connections between the right people at the right time.”
With specialized expertise, first-class research and talent, engaged investors and robust startup infrastructure falling into place, all the pieces are aligning for the future of Iowa agriculture.
Read the article at Clay & Milk.
