As President Trump tweets about unfair trade, and climate change reshapes the global weather map, the image of farmland as one of the quieter corners of the investing world is being turned on its head.
Investors historically have mitigated market volatility through safe agriculture investments. Trade wars with a host of global trade partners, combined with desertification in some parts of the world and erratic monsoons in others, mean farming isn’t the refuge it once was.
Still, one can safely invest in agriculture, and at the same time help the environment, according to Chris Rawley, CEO of Harvest Returns. He advocates high-tech and sustainable farm investments through his firm, where farmers who need capital connect with investors interested in agriculture with their online portal.
For example, investing in organic farms that focus on local supply can protect investments from trade wars, he said. Growing plants indoors in nutrient solutions instead of soil, also know hydroponics, saves water and shields plants from extreme weathers.
“That part of the industry is thriving, and the reason is consumer demands are changing rapidly,” said Rawley. “People want organic, they want farm to table, they want plant-based protein.”
The Fort Worth, Texas-based company has seen investment returns ranging from 8% to greater than 20%, Rawley said in an interview. Farms on the platform typically need to raise $100,000 to a few million dollars.
Harvest Returns will investigate a wide range of potential farms, and select those most financially sound and environmentally sustainable for the platform. It also provides a one-stop and easy-to-follow, in Rawley’s words, investing service, which includes signing legal and financial documents online, transferring money, and as well as keeping investors up-to-date on news from the farm and financial performance.
Scarlett Kuang: How do you come up with the idea of building an agriculture investment platform?
Chris Rawley: One of the things that influenced me was the real estate crisis in 2008 and 2009. I began looking at ways to diversify my real estate portfolio. When I started to examine farming, it made a lot of sense to me as an investment class. Over the long term agriculture farm land is a really solid investment, because it’s not correlated with the stock market and the bond market.
I decided that I would take a shot with farming and agriculture. What I found out was it’s very hard to do. It takes a lot of capital, a lot of knowhow, and a lot of time. At the same time, I saw that there were new types of platforms coming up to help people invest in real estate.
So, what I did was combine those two ideas. We launched an online investment platform to allow people to invest in farming. We launched the company in 2016 and we’ve been growing ever since.
Scarlett Kuang: Who are the investors?
Rawley: Our investors are a pretty wide range. Most are accredited investors, ranging from individuals to small family offices who just want to diversify their portfolio and see the benefits of using agriculture.
The beauty of our platform is that even if you have never invested in agriculture we let you invest in one or more deals with fairly small amounts, anywhere between $5,000 and $25,000.
Scarlett Kuang: Harvest Returns is essentially connecting investors and farmers. What is your product and what value does it add?
Rawley: For the farmers we provide an alternative source of capital; for the investors, we are curating deals. We do the due diligence on them. We look at the (farmers’) track record: what they’re producing and their ability to produce it. We look at the impact or sustainability of the project. We have many calls or video conferences with the farmers. If we need to go visit the farm, we’ll do that.
Only a small percentage, less than 5%, of the deals that come across our desks actually make it onto the platform.
In many cases, we also take an equity interest in the offering. We’re basically becoming investors ourselves, so we have a vested interest in making sure that those farming projects perform. Essentially Harvest Returns is a curated platform for people who want to invest in agriculture.
Scarlett Kuang: Can you give an example of a farm you helped finance?
Rawley: An example of a recent deal was a greenhouse operation in Kentucky. They grow baby bell peppers and tomatoes. It was a large project, over $10 million. They’ve had some bank loans and private investors, and they just needed a little bit of capital, $520,000, to finish the construction and start the operation of the plant.
We looked at their loan payments, financial statements, tax statements and permits with the authorities, the corporate, all those sorts of things. We also took a small equity position — I think we have 3% in this one.
Then we would look at those intangible factors. This particular greenhouse is bringing 75 new jobs; both manual labor jobs and higher value jobs. These greenhouses are very high tech so they have computer controls and irrigation systems, and they require job training so that they can be efficiently run.
It’s a hydroponic greenhouse. This controlled environment agriculture takes very little water. It’s not so reliant on fertilizers and herbicides, those sorts of things that can damage the environment.
Scarlett Kuang: What social impact does Harvest Returns want to achieve?
Rawley: Impact investing means different things to different people. Some (Harvest Returns investors) want environmental impact. Some of the new types of agricultural, like controlled-environment agriculture, is all about sustaining the water table and limiting the use of water.
Others are interested in animal welfare. And we’ve done some grass fed cattle operations. They’re taking better care of animals that are raised in the industrial feedlots.
Some are interested in economic benefits, like bringing jobs to disadvantaged communities. We’re all about supporting rural areas, whether it’s in the United States or overseas. We recently closed a deal in Ghana, West Africa, that’s going to bring jobs on a scale that farming hasn’t seen there. Women’s equality is another aspect of that because the team that we’re working with in West Africa has already done some projects so they understand the cultural aspect of working in Africa. They know that in order to have women’s job opportunities they have to have child care.
Another aspect is reducing the miles that it takes to get food from the producer to the consumer. That saves energy and reduces the climate impact.
Scarlett Kuang: How does climate change affect your business?
Rawley: Our investments are favorable to that aspect. If you grow indoors, you’re reducing the impact from extreme weather events like droughts or floods. You’re reducing the amount of energy it takes to produce the food.
Scarlett Kuang: What about the trade wars?
Rawley: You hear a lot on the news these days about the impact of tariffs or low commodity prices. We intentionally avoid those commodity crops, but if you look at the more specialized types of agriculture, whether it’s indoor agriculture or people doing things like converting their land to organic or doing grass-fed livestock, they are becoming increasingly popular.
Scarlett Kuang: What’s Harvest Returns’ financial situation?
Rawley: We have taken some investor money, and we’ve also sort of bootstrapped. We have four full time employees, an advisory board, some contract and consulting employees and interns. We are raising a $750,000 seed round. The primary use of funds is to grow our investor base through marketing and scale our underwriting staff.
Scarlett Kuang: What is your path to go to profitability?
Rawley: Continue to grow the platform and get quality deals and grow our investor base. We’re getting larger deals, higher margins on the deals and higher velocity of funding — that’s taking us towards the path of profitability next year.