Eastern Washington Farmland and a New Era of Agricultural Investment

For four decades, Jim Jackson was involved in the development of both timberland and farmland in Eastern Washington. This region, sheltered from excessive rainfall by the Cascade mountain range, proved ideal for establishing apple orchards and other agricultural properties on the state’s sunnier slopes.

Traditional Funding Methods vs. Online Platforms

Historically, Jackson secured funding for expanding his farming operations through his established network. This involved requesting previous investors to collaborate and contribute the necessary capital.

However, Jackson recently adopted an entirely online fundraising platform. He is now among numerous farmers utilizing a service known as AcreTrader to obtain funding for agricultural development initiatives.

The Rise of Agricultural Marketplaces

AcreTrader represents one of a growing number of companies that are transforming the acquisition, development, and commercialization of farm and forestland throughout the United States.

The Scale of U.S. Farmland

The United States possesses a substantial amount of farmland. Bill Gates, the co-founder of Microsoft and currently the world’s third wealthiest individual, is the nation’s largest private owner of farmland, with approximately 242,000 acres.

This figure, however, is relatively small when compared to the 897.4 million acres of land currently used for farming in the U.S.

Forestland Ownership

Furthermore, the United States is home to 823 million acres of forests, with the majority held in private ownership.

Democratizing Access to Agricultural Investment

Collectively, this represents a vast amount of real estate with significant economic potential. Traditionally, access to acquiring and financing the development of this land was limited to the ultra-wealthy. Now, startups like AcreTrader, alongside companies such as Tillable, FarmTogether, and Harvest Returns, are introducing marketplace models to the agricultural sector—potentially opening up hundreds of thousands of acres to investors seeking portfolio diversification.

Beyond Crops and Timber: Carbon Offset Markets

These marketplaces are facilitating more than just the production of crops or timber. Companies like SilviaTerra are exploring avenues to generate additional income for landowners by connecting them to carbon offset markets.

Recognizing the potential for returns, Tillable partnered with The Nature Conservancy last year to promote sustainable agricultural practices and develop methods for monitoring and managing carbon sequestration.

Farmer Concerns and Disruptions

These innovative approaches to financing and developing agricultural land have not universally been welcomed by the farmers they aim to assist.

Approximately 80% of farms are operated by renters who collaborate with landowners to manage properties and cultivate crops. These renters have expressed concerns that platforms like Tillable are disrupting long-standing relationships with landowners.

Farmers were particularly upset when Tillable sent letters to landowners suggesting they rent fields that the farmers had worked for years.

A Farmer's Perspective

Parker Smith, who manages Smith Farms with his father and uncle near Champaign, Illinois, voiced his concerns. They grow corn and soybeans on leased land.

“They’re reaching out to our landlords, with whom we have established relationships, in an attempt to circumvent the farmer,” Smith stated in a recent NPR interview.

AcreTrader's Approach

AcreTrader concentrates on providing a marketplace for renters seeking capital for projects. Jackson utilized AcreTrader to raise $2.8 million for a $7 million development project aimed at converting an existing farm unit into a productive orchard.

Investing in Agricultural LLCs

The orchard is owned by a Limited Liability Company (LLC) that encompasses the land, equipment, and buildings. Investing in a share of the LLC is akin to investing in a startup through platforms like AngelList.

Venture Capital Investment

This similarity has attracted investment from venture capital firms, including Jump Capital, Narya Capital, Revolution’s Rise of the Rest Seed Fund, RZC Investments, and Revel Partners, who have collectively invested $12 million in the Fayetteville, Arkansas-based company.

“Farmland investing is becoming increasingly desirable in the current macroeconomic climate,” noted Peter Johnson, a partner at Jump Capital.

Limited Startup Funding to Date

Despite this growing interest, investment in these agricultural startups remains relatively modest. The five businesses mentioned, including SilviaTerra’s carbon credit marketplace, have raised approximately $35 million collectively, according to Crunchbase data.

This includes $8.3 million for Tillable from investors like First Round Capital and Serra Ventures; $3.7 million for FarmTogether from SeedInvest and angel investors; and a few hundred thousand dollars for Harvest Returns through discrete investment vehicles.

AcreTrader's Growth and Future Outlook

“Over the past few months, we have consistently observed increases in offering sizes alongside shorter funding windows, demonstrating the rapidly growing demand for this resilient asset class,” stated Carter Malloy, founder and CEO of AcreTrader.

“As a company dedicated to supporting and connecting farmers and investors in a unique manner, we are grateful for this significant growth and look forward to leveraging these new funds to continue our progress.”

Investment Amounts and Potential

According to Malloy, AcreTrader’s average farm financing ranges from $1 million to $2 million, with average investor commitments between $20,000 and $30,000.

Significant opportunities remain for investors to provide additional capital. While private equity investments in farmland have gained attention, they still represent a small fraction of the overall potential within the U.S. agricultural industry, Malloy explained.

“Currently, private equity assets total $30 billion, compared to a $3 trillion asset size for farmland,” he said. “A substantial portion of farmland is owned by families, often in smaller holdings.”