Now more than ever farmers are probably looking for ways to bring more income as an uncertain financial future lies ahead. Markets are taking unpredictable cartwheels, consumers are abandoning traditional buying patterns and the supply chain is on a topsy turvy tailspin.
Yet, the same problems that so many agrifood tech startups were working to solve before Covid-19 remain. Chief among them: climate change.
“There’s a lot of excitement for farmers to be part of the solution,” Jerry Steiner, CEO of cash cover crop developer CoverCress told AFN. “Right now, every minute of airtime is about Covid-19 but that will change back and when it does we have to do something about dealing with our changing climate. This offers a tremendous opportunity for farmers to be part of that solution.
The midwest startup recently raised a $5 million follow-on equity round led by Fulcrum Global Capital and Hermann Companies. Other investors include Prelude Ventures, Leaps by Bayer, St. Louis Arch Angels, and Prolog Ventures, as well as continued investment from some founders and employees. The funding follows a $2 million round in November 2018 mainly geared towards R&D for its seeds.
Founded in 2013, the company has developed its winter cover crop, CoverCress, from the native plant pennycress through modern plant breeding and new genome editing tools. The cover crop is planted in winter and has a short enough growing season to not interfere with the farmer’s regular rotations of corn or soy. Unlike other cover crops like winter wheat, CoverCress matures two to three weeks earlier. To persuade farmers that CoverCress was a worthy addition to their rotation, downplaying any friction with their cash crops was key.
It also offers something many cover crops do not. Instead of being stripped from the field with herbicides or tilled into the soil, it’s actually harvested. The resulting crop is crushed creating oil and a residual feed-grade meal product that will be marketed to livestock producers.
“It’s very difficult making a living just growing corn and soy. There is definitely an interest in something new that can add cash margin using the same land and equipment they have today,” Steiner explains. “When it comes to farmer adoption, this is going to be a ‘show me’ kind of exercise and we have planned for that in our expectations. We want to grow from a solid foundation of leading farmers demonstrating how you can turn a two crop rotation into a three crop rotation.”
The new funding will be used to make new hires and to help CoverCress make a commercialize debut during planting in Fall 2021. When asked how the cash will be deployed, Steiner says, “Carefully.” A select handful of farmers will spearhead initial plantings and serve as demonstrations for other farmers. So far, a group of 20 farmers participating in trials has been pleased with what they say, he reports.
“The adoption question has been really important for us and we have been spending time with farmers,” Steiner explains. “We’ve taken a strategy from the beginning where we’ve been very frugal in terms of how we approach this knowing that in making a new crop you are dependent on seasons. You can’t make up time. Largely, we’ve not spent much cash each year and that’s enabled us to be a good investment for our partners.”
CoverCress is also taking a conservative approach to structuring the downstream side of the business. Because there isn’t an existing commodity market for CoverCress’s byproducts, the startup is launching through proprietary contracts. The startup is taking a cautious approach to figuring out its route to market for the oil and meal.
“We are envisioning a model where we provide seed and are paid based on delivery. We are in it with the farmer on yield. We are working to figure out the best way for us to engage farmers and contract with them. That’s a question we will work on this next year and we are in some trials that will help answer that question.”
As far as competition, Steiner hasn’t seen anything comparable in the Midwest but notes that another company, Agrisoma Biosciences, is developing a cover crop out of Carinata seed, a member of the mustard seed family. In 2018, the Canadian startup partnered with United Airlines and French oil and proteins sector company Avril Group to accomplish the second international commercial flight using the company’s seed oil.