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Agricultural innovation series, part 2: Creating access to capital

Access to capital for agricultural innovation lies in cooperative, public-private partnerships.

Whitney Haigwood

January 12, 2024

7 Min Read
Six men on stage at a conference participating in a panel discussion.
Panelists discuss unique funding mechanisms for agricultural innovation at the Agri-Food Summit hosted by the University of Arkansas System Division of Agriculture, at the Don Tyson Center for Agricultural Sciences in Fayetteville.University of Arkansas System Division of Agriculture

Part 2 of a series about the challenges and potential solutions to bringing cutting-edge technology to the agriculture market. This series is based on panel discussions from the first ever Agri-Food Innovation Summit recently hosted by the University of Arkansas System Division of Agriculture

Solving big problems takes expertise and cooperation. It also requires considerable funding to support the research, development, and commercialization of new products. While federal grants are a great option, even the brightest ideas may never make it to the marketplace when relying solely on government dollars. 

This prompts the question: How do we create better access to capital for researchers and entrepreneurs looking to commercialize their intellectual property? Recently, panelists and participants dove headfirst into this topic at the Agri-Food Innovation Summit in Fayetteville, Ark. 

They collectively agreed the key to action-based success lies in cooperative, public-private partnerships. Through a series of roundtables and fireside chats, representatives from government agencies, universities, non-profits, and private firms joined in to discuss capitalizing on agricultural innovation. 

Current landscape of investment 

Trey Malone, assistant professor of agricultural economics and agribusiness at the University of Arkansas System Division of Agriculture opened a panel discussion by asking panelists for their view of the current landscape of investment and support in Arkansas agrifood business and commercialization. 

Related:Agricultural innovation series, part 1: Collaboration begets commercialization

Jean-Francois Meullenet answered with his perspective as the director of the Arkansas Agricultural Experiment Station at the Division of Agriculture. 

“I think we have a pretty diverse landscape for funding in the state,” Mullenet said as he listed internal and external research funding sources. This includes support from the Arkansas commodity boards, investments in the Division of Agriculture, and grants through the U.S. Department of Agriculture. 

Yet, when it comes to broad-scale projects, beyond the farm level, Mullenet added, “I don’t think there will ever be enough investments in ag and food research, in particular, for high-risk type program research.” 

Ranu Jung, executive director at the Institute for Integrative and Innovative Research at the University of Arkansas, noted that while the USDA is a major source of research funding, there are other entities to tap into depending on the scope of the project. 

Jung specifically discussed two federal agencies, the National Science Foundation (NSF) and the National Institutes of Health (NIH). 

Related:AgLaunch propelling new startups through venture investment & farm-centric innovation model

The NSF invests in a wide range of projects including research on U.S. food security and impacts throughout the supply chain, from how our food is grown to integrity and access. 

“The NSF is funding things, not just at the basic level, but translational things,” Jung said, pointing out the collaborative approach of the NSF Convergence Accelerator program that establishes research cohorts to solve national-scale problems. 

In addition, the NIH’s Precision Nutrition program looks at research in terms of nutrition, using food as medicine, and how that might impact the future of health. 

“Those are two of the federal agencies that maybe aren’t shouting out loud that they fund agri-business kind of research, or food and nutrition related research, but they are working in this space,” Jung noted. 

Federal research awards 

The USDA recognizes the need for innovative research to solve real-world problems in agriculture that make a significant societal impact. Last May, the USDA announced the launch of the Science and Research Strategy, a three-year vision to transform U.S. agriculture and forestry through science and innovation.  

The strategy serves as a call to action for public-private collaboration to deliver advanced discoveries in ag. This includes broad scale solutions for productivity, nutrition, food security, natural resource conservation, and climate change.  

During the Agri-Food Summit, Deirdra Chester, director of the USDA’s Office of the Chief Scientist presented the priorities and importance of this strategy that is intended to translate research into action.  

In addition, much focus was placed on federal funding opportunities through the USDA Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. These programs are intended to strengthen small businesses and increase commercialization of ag-tech innovations that lead to significant public benefits.

The SBIR and STTR programs are competitive grant opportunities, with three phases of program funding, administered through the USDA-NIFA. These phases include research and development, determining a project’s feasibility and commercial potential, and alternative funding to continue commercialization efforts. 

Dennis Goodes, deputy assistant administrator at the USDA-ARS, noted one way to improve the likelihood of receiving phase 1 SBIR or STTR funding is through collaboration with ARS researchers.  

This collaboration is developed through a Cooperative Research and Development Agreement (CRADA). Benefits to innovators include access to ARS researchers and facilities, proprietary information, leveraged funding, and exclusive licensing and patent options. Those interested in learning more should contact their USDA area office technology transfer staff member. 

Economic development in Arkansas 

In Arkansas, state funding is available through the Arkansas Economic Development Commission (AEDC). Bob Kucheravy, director of science and technology for the AEDC, described two royalty-based incentive programs for ag technology projects that are intended to create employment in Arkansas. 

The Technology Development Program provides up to $100,000 in funding for small businesses to commercialize new products and processes of qualified technologies. Moreover, the Seed Capital Investment Program provides up to $500,000 in funding to assist Arkansas based companies with initial capitalization for scientific or technological projects. 

Kucheravy referred to SBIR funding and made special note of the Arkansas SBIR matching grant incentive. This program helps companies apply and receive federal SBIR funding. At the state level, phase 1 awards are matched at 50% of the federal award and capped at $50,000. Furthermore, phase 2 awards are matched at 50% of the federal award and capped at $100,000. 

“This matching state incentive is a great source of funding,” Kucheravy said, noting that the state funding can be used by companies to purchase equipment where federal awards restrict such purchases.  

Arkansans interested in AEDC funding opportunities can contact Kucheravy by email at [email protected]

Private, non-profit, and philanthropic investors 

Other funding mechanisms were discussed during a panel with private investors, non-profits, and a philanthropy foundation. 

Big Idea Ventures is a rural business investment company interested in startup companies headquartered in areas with less than 50,000 residents. Bill Arnold serves as venture discovery director for the company’s Generation Food Rural Partners Fund and said the company is looking to solve big problems like sustainability and climate change challenges.

Arnold said, “We have 24 partner universities today. We look at the intellectual property from the universities and vet the problems those technologies might solve with our corporate partners. If we think there is a match, we form and fund the company.”

From there, Big Idea Ventures hires a CEO tasked with hitting milestones to unlock another $3 million for the startup. Arnold said when those milestones are hit, other venture capitalists are invited to invest in the company. 

On the non-profit front, the Yield Lab Institute is the 501c3 arm of the Yield Lab. The company works worldwide with public and private partners, totaling 86 investments from four regional funds on four different continents. 

Brandon Day, COO of the Yield Lab Institute described the non-profit arm of the company as a global think tank that supports early-stage ag technology startups at the pre-revenue, pre-customer, and even idea level. Day said the business model is to build funds up to $15 to $20 million in size. 

“There is a lot of front-end activity that these startups and ideas need that do not follow the scope of a venture fund,” Day explained. “Part of what we do as a think tank is thought leadership, ecosystem assessments, and white papers. 

Representing philanthropy was Kim Davis, of the Walton Family Foundation. Davis serves as senior advisor for the Home Region Program that is focused on education and asset building in northwest Arkansas and the Arkansas-Mississippi Delta.  

Davis referred to environmental challenges on the U.S. west coast where two-thirds of the nation's fruits and nuts are grown. “When you look at the Arkansas-Mississippi Delta, the largest most significant asset is the land. It is agriculture.  

“We think there is a tremendous opportunity for the Arkansas-Mississippi Delta to provide and take some of that market share,” Davis added. “I am proud to say we are one of the few national/international foundations that has boots on the ground in the Arkansas-Mississippi Delta which brings us really close to the work.” 

For more information on this topic, follow the third part to this series where we focus more on opportunities for agricultural innovation. 

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