How Ag Companies are Impacting Carbon Capture Efforts

As more and more efforts are directed towards challenging climate change worldwide, companies at home in the U.S. are doing their part to direct the power of entrepreneurial farmers towards the problem. Companies like Indigo Ag are investing millions of dollars to develop and increase the popularity of processes that sequester more carbon dioxide in the ground, instead of releasing it into the atmosphere as farmers grow crops.

These processes aren’t all that different from the way that farmers are used to running their farms. In fact, they carry with them some extremely attractive bonuses for farmland and the businesses themselves, such as increased crop and soil health, and better long term sustainability. Of course, there is an upfront cost to new carbon processes.

A recent Wall Street Journal article described the process and its advantages:

“The idea is to harness natural processes to turn farmers’ fields into carbon sinks: Plants withdraw carbon dioxide from the air and combine it with water and sunlight to produce energy through the process of photosynthesis, which embeds carbon in the dirt through the plants’ roots. Soil can retain the carbon for years if left undisturbed.”

The only real problem with these new strategies is the issue of expedient adoption. As farmers increase their use of these strategies, they’ll be able to complement their revenue with the growing market for carbon credits: “Carbon programs also give companies a potential new revenue stream, as they project farm-generated carbon offsets will draw demand from food manufacturers, airlines and tech companies seeking to offset their own carbon emissions.”

That’s why companies like Indigo Ag are offering higher rates for each ton of carbon that farmers are able to prove that they’ve sequestered in the ground. According to a 2021 study from McKinsey, the carbon capture market could expand to as much $50 billion by 2030, helping struggling farmers to stay afloat and continue to do the carbon capture work that will help slow climate change.

But the Journal’s article also commented on farmer reluctance to carbon capture technology adoption. While it is true that “less than 5% of the more than 1,300 U.S. farmers surveyed by McKinsey in 2022 said they participated in a carbon program, and more than 50% of farmers said an unclear return on investment was one of their top reasons for not participating,” the Journal’s limited experience speaking with farmers led to the expression of a view that farmers aren’t excited about this technology.

iSelect has been studying this market niche for years. We frequently talk to farmers as well as to the companies that help them measure their carbon sequestration capacity. Although many of the farmers we speak to are still figuring out the financial details of how they will make carbon credits a part of their business, almost all are very excited by the prospect.

What’s more, carbon credits represent a growing market that should have a net positive effect on the overall cost of future farming practices. The process of soil sequestration is a perfect example of an innovation being financially deflationary. As more and more farmers adopt these practices, the overall cost of future adoption should decrease rapidly.

The farmers we talk to are always looking for ways to improve the efficiency of their businesses. While the most pressing issue currently is the cost of these programs, we are confident that we can mitigate risk for farmers everywhere. iSelect is committed to supporting and investing in technology that will drive down the cost of soil sequestration, such as biochar, agri forestry, and cover cropping.

While it’s true that adoption of carbon sequestration farming technologies will take a significant amount of time and effort going forward, it’s also true that farmers everywhere are enthusiastic about this process. As we work to make carbon credit tech more affordable for more people across the country and the world, we’re seeing a related rise in interest.

At iSelect, we envision a future where competitively priced carbon credits will be an essential part of every farm’s annual budget, going far beyond the amount of money that farmers are seeing from the credits now. If we continue to develop these technologies, we know that we’ll see the percentage of the population that uses them grow.

Consideration

With 2021 well underway and with public markets still strong, we think it is an important time to highlight some of the key private market, venture investment themes that iSelect fund has identified for the year. We believe technologies transforming the Agriculture, Food and Wellness markets will flourish, with a focus on four areas: technologies that enable better food choices to drive better health outcomes, technologies that drive better, more profitable farm operations, technologies that drive the Consumerization of Healthcare, and biome-based treatment technologies. At iSelect, we invest for impact AND performance. We offer qualified investors access to emerging growth companies through our national venture capital strategy. Our unique structure allows our investors to continue to invest in these companies as they develop.

Timing

Why is now the right time for venture? The answer is that now is not explicitly the right time. Venture is something we need in our economy at all times. Now is not better than any other particular time. The question is, why ever stop? When we look at the challenges we’re facing in food and healthcare the reality is there is someone, somewhere who has an insight about how to build a product that will solve those problems. And if they put the right resources to it, they will succeed. As long as we need new technology to make life better or make our lives more enjoyable, we need venture capital to help fuel those entrepreneurs.

What is iSelect as a product?

iSelect is a very unique product, but when you break it into its parts it’s fairly easy to understand. On the front end we’re a traditional venture capital fund. We have a diligence process. We have an investment process. We have categories of industries where we have focus and real expertise, and we invest in companies in those areas that meet requirements for the fund. On the back end we’re unique in that we don’t raise a large amount of capital at one time and deploy it over the life of our fund. Each deal that we bring onto the fund, our investors have to prove and determine to invest in that deal. We have to constantly prove our diligence standards. It’s accessible, transparent and easy for investors to come in and see our comprehensive process.

What is the ideal iSelect company?

We are looking for founders that are passionate and we want the problem they’re trying to solve to be big, real, and painful. We want the solution to be revolutionary and we want our capital to be able to help them solve that problem. We want to know that they have customers involved and that the solution they’ve come up with actually meets those customers’ and market needs. And we want the team to be capital efficient with the money they’re spending.

What does the ideal iSelect company look like?

We’re looking for a company that has an opportunity to have a 10x return to our investment or greater in a period of three to seven years. What excites us at iSelect are companies that are solving big problems. We want companies that are going to be the Monsantos of the future. Not just in the size and the scope, but the impact they have on people’s lives. We want to create positive impacts on people’s lives, so we invest in areas like agricultural production and areas like producing healthy foods for our kids. They are problems that impact real people’s lives on a daily basis. That’s what we’re trying to do at iSelect. We’re trying to solve the big problems out there. Find ways to bring capital to the entrepreneurs who are the real heroes out there getting up every morning, beating away at these things that are problems that you and me and everyone else faces in their everyday lives.

What is iSelect?

iSelect is a venture capital firm. What that means is we look at hundreds and hundreds of different companies and we apply tough diligence standards to each of them, looking at whether the team has a good plan for growing the business, whether the team is qualified and credible, and more. We do that to resolve the few who provide the best opportunities for investors. And then iSelect takes that smaller set of investments and goes to investors who are interested in venture capital and provides a way for them to invest in these companies, either individually or all at once. We co-invest alongside other venture capitalists. We source transactions through to an exit where the company would become public or get bought. And we manage that whole investment process on behalf of our investors.