Fractal Agriculture with Ben Gordon

Shay: Welcome back to another episode of the Ag View Pitch. Today you have Shay Foulk with Ben Gordon, CEO of Fractal Agriculture. Ben, how are you today?

Ben

Gordon: Not too bad, Shea. How are you?

Shay: I am, I'm doing really well. I'm excited for this conversation and we are recording here on August 17th in advance of when this will kick out on August 29th. Have some exciting things coming up here. Uh, before we dive too far into Fractal Ag though, I'd like maybe for you to give the listeners just a little bit of background about who you are and, you know, how you grew up.

Ben

Gordon: Yeah. Ben Gordon, CEO and co-founder of Fractal. Grew up in eastern North Dakota. My family's from north central North Dakota. So, you know, some of the best farmland in the world in the Red River Valley and not always the best, maybe where the family homestead is at. And then, yeah, went off to university, joined the Army in the Guard and did some active duty. And then ended up coming out of that and went to business school, worked in private equity, kind of finance, but mostly in agriculture, mining, industrials, and, you know, knew I wanted to come back into the agriculture space that I grew up in and around. And so I was able to do that by joining Granular after they were acquired by Corteva. So built some software, did some other things there, and then helped build out their carbon program.

And, you know, can spend all day talking about where carbon programs sometimes work, often where they don't, including for, you know, my family that were early adopters. So some fun Thanksgiving conversations and then Fractal about a year and a half ago.

Shay: Very cool. Now it's pretty phenomenal, that background, and we could dive into that a lot. But today's focus is on Fractal Ag and kind of how that came about. So, you know, you mentioned you've been around here for a little while now. Why don't you tell the listeners about, you know, how you got the idea for Fractal and then we'll dive into the specifics of implementation, what it is, how farmers can employ it, and what the importance is of it in the future. But where did this idea come from? And tell the viewers kind of what the idea is in general.

Ben

Gordon: Yeah, so you can't spend more than a couple of years even, or maybe even a couple of minutes with farmers before you start hearing about the challenges that exist in terms of farmland, and especially investor pressure in farmland. And really, it's that simple. To me, it just didn't make sense that there was all this competition with investors when my personal belief, both from my financial hat as well as just my social views and how I grew up, that farmers are best positioned to manage the land. So you look at just the challenges that farmers face today. You continue to see consolidation. Never required as much capital as it does today to go farm, whether that's equipment, whether that's inputs, and especially the cost of land. At the same time, we have a lot of landlords that are passing their wealth on to the next generation.

And so you have a lot of farmers who maybe have known that landlord for 50 years, but maybe their kids don't want to be landlords. And so just to keep the ground that you farm today, you might need to go out and buy it. That is a really tough spot for any business person to be in. Especially in something as tough as agriculture. And to us, it just seemed a little nonsensical. And frankly, it was frustrating that the idea that investors weren't going to come in alongside farmers, that that didn't exist, and it kind of pissed me off a little bit. And, you know, starting a company is not the easiest thing. You know that just as well as I do. And but, you know, we could either sit on the sidelines or start Fractal. And so what we do is, you know, we're trying to solve that investor kind of competition problem by bringing investor alongside a farmer versus against them.

So we are a passive minority investment. So we're not all up in your business on that. We have symmetry in our investment. When your farm, when farmland goes up, we're both going to win. When it goes down, we're both going to lose. We, at its simplest, are sharing in some of the other risks that happen. So if you're investing in soil health building practices, so no-till where it makes sense, cover crops where it makes sense, in season nitrogen, where that makes sense for you, we will share in those costs by lowering our cost of capital because we're going to receive those same benefits over the lifetime of our investment together. So if I just kind of really dumb it down, hey, it's really, really tough to compete with investors, especially when you need more capital as a farmer. And so we're just trying to flip that on its head in a way that we think is really common sense.

Bring investors right alongside the farmer, keep that farmer in control. And we think that is a heck of a financial bet. For an investor and for us building a business.

Shay: People listening to what you just said there are probably thinking, yeah, that's a great idea. You know, we're tired of fighting against the investors. Um, people that are not interested in agriculture are just looking for a haven for improved, you know, land equity long-term. And the, you know, I guess I would say lower risk investment that typically comes with land over a long look. So I'm gonna get into some specific questions there, but what I would ask is, you know, why is this so different? You mentioned you didn't want to have to start a company, but you did, and, and I like the way that you put that. But the point being is there was an opportunity there and probably a better way of doing things. Why was this approach not taken earlier? Why do you think that people, uh, didn't want to take this approach? Was it education to the investors?

Was it that they felt that the relationship management would be too complicated? You know, why, why did— why has this not existed?

Ben

Gordon: Uh, I asked that question to myself a lot. Um, and, uh, you know, a year ago I was probably pretty naive because, like, it's, it's been tough to, to get us here. I think, you know, there are good people that do farmland investing. Like, you talk to most of those farmland investors, they have family backgrounds, often in agriculture. And they do care about farmers. I just think it's a lot of inertia. And I know we have that same problem on the farm side, right? If it's been done that same way, we just kind of keep doing it. So I mean, the original model is very similar to other parts of finance, so it's not surprising. That's what they do. If you build a building, you build it and then you rent it out. That's how you make money, right? So they just kind of templated that over to agriculture.

And I don't think You know, I think the analogy that I've heard used is, you know, the reason that Tesla is able to build a really cool car is that that does a lot of really amazing things is they started from the ground up from a problem. Well, we're kind of doing the same thing in the farmland space where we've built our entire process to align to the farmer in a way that will also drive returns and impact. And that means that we just do things a lot differently. So our deals, they're going to be a lot smaller than what a big asset manager is going to do because we're going to go deal by deal alongside a farmer, which means We need to use technology and not a lot of investors know agtech. Well, you also have to be able to know local markets and you have to know farmers. Well, I don't know a lot of tech people and finance people that know the farmland market.

And then you have to be able to go raise and do the whole finance and capital market side. I don't know a lot of tech people and farmer salespeople and service people that know the finance side. So we got really darn lucky, if I'm just being honest, where one of my co-founders is Emma Fuller. She helped build the first version of Anchor Value. She was at Granular. They have a horsepower organic farm at home, and she works in the biggest commodity row crop operations for the last 10+ years. That's not somebody you get to start a company with every day. I got a great head of capital markets who's been doing investing, including in farmland and other spots. We got really lucky that we have a bunch of people who care about farmers with those capabilities. And so I think part of it's chance, and part of it's just the opportunity that we're at today.

Farmland's in a really unique spot, and this is not the same market that we were in 10 years ago or 20 years ago. And so I think it's just a little bit of timing, a lot of luck, and, you know, a lot of hard work that we're going to have to do to make sure we do this right.

Shay: Chris and I have a saying that luck is where preparation meets opportunity. We didn't come up with that, but we like to adopt that. And so what you said there, the hard work is the intensive amount of preparation and the problem solving and the questions and the fact-finding and the talking with people and the farmers and the finance industry. I, I think from your team's perspective, I would, you know, just initially probably give you a little praise on that end of, sure, it might be a little bit of luck, but, you know, preparation and opportunity coming together has a lot to do with that as well.

So I— what I'd like to do, Ben, I guess, is give the listeners, um, whatever you would consider your most basic scenario to help them wrap their mind around it, and then I'm going to poke and prod with some common questions, and then I might get into some more intensive or specific questions, the hard questions, if you will, about people that might be skeptical about something like this, which I think is fair.

Ben

Gordon: Yeah, absolutely. We love the hard questions because that's where the rubber meets the road. So yeah, let's use the most basic, basic example of, you know, a farmer using us to essentially go buy another piece of ground. And before I dive into our transaction, I think it's really important to, like, look at where where the farm landscape is today and where they're going. There's a lot of farmers that have a pretty strong balance sheet today 'cause we're coming out of a really good set of commodity markets and good farm cash flows. And so when we really talk to our customers, they're usually thinking about us as one, a complement to debt, two, another source of capital that can help them through the downturn, not to survive, but to be able to grow. How do you turn the downturn into an opportunity?

And there's the old Warren Buffett of, you know, be fearful when everyone's greedy, maybe the last couple years, but be greedy when everyone else is fearful. So most of our, most of our farmers, they don't need us today. They're thinking about us in that longer-term view, because they know that having this source of capital, when they play out over their landlords and how much they need to grow in the next 5, 10 years, they know that something needs to change. So that's why they're engaging with us. Alright, so we're back to this deal. Let's just use really dumb, simple North Dakota math. Let's say we have a 100-acre field valued at, we'll say, a buck an acre. So we got a $100 field. And let's say for that next deal they need $10 on top of what they already have to go get that down payment.

Because remember, farm credit, Farmer Mac, you know, you're talking maybe you can finance 50% of that thing if you're lucky. So our customers, they need a lot of money for that down payment. So they're going to use us to help with that down payment and their banker to go do that next deal. So what we're going to do is we're actually going to invest in a piece of ground that that farmer already owns today. Because that gives us the time to go underwrite, underwrite things, would not be pressured by a deal. And I don't want to get in between you and your banker's relationship. That's really, really important to us that we're being a good partner to your banker and keeping your relationship strong. So you're going to sell, you know, the portion of your field. So $10 out of, out of $100 to us, you're going to use that, you're going to go make that investment in the next field.

And then after we've done that initial transaction, you're going to pay us an annual income payment every year, and that's kind of some hybrid between rent and an interest rate. It's neither. It's just an annual payment, essentially, to compensate us for that, or our investors on it.

Shay: And then is it fair to call that a cost of money, Ben?

Ben

Gordon: Yeah, I think that's just the simplest way.

Shay: Okay.

Ben

Gordon: Yep. And then we give a 10-year term, and over that 10-year term, like, that percentage that we came in at, you're going to pay your rent on, or that cost of money on that. And then at 10 years you can buy us out or we can do another one of these instruments to go for the next 10 years. And it might be with the same investor, it might be a different— that's all kind of behind the scenes to you. Just like your mortgage might be owned by any one of thousands of different entities. We try to keep that simplicity for the farmer. And so the model is very similar to maybe how you might work with an existing investor today in some ways, or existing bank in terms of the cash flows. The spreadsheet is pretty darn simple. It's just, you know, we come in, we won't exceed 45% of original ownership on that because we want the farmer to have control and be in the minority.

We're not on the title. This is an option contract structure and there's a ton of details behind it. But at its simplest is we're just placing a lien on that asset to make sure that you're not going to go sell it and we don't actually have a claim on it. So we're keeping security and the right to go earn capital and then we make our money off of appreciation. That annual kind of cost of money, like you said, Shay. And then we charge our investors for Fractal to make money. And we just think it's a better, more efficient way for us, for our investors to get farmland exposure.

Shay: So a couple quick questions or comments. The first one is someone that's listening to this is going to ask, all right, Ben, is my name going to change on the plat book if I'm working with Fractal?

Ben

Gordon: Nope, it is your name. We want it to be your name, not just in the letter of the law and what's on there, but in the spirit of you having that operational and legal control. That is actually a— we think that is a heck of a bet for investor, as opposed to, uh, someone out on a coast telling a farmer how to farm.

Shay: Yeah, and, and the analogy that I would make here, how you pose that, is having that lien, having that position against whatever percentage that Fractal takes, a minority ownership. And I want to stress that. I think maybe your words got jumbled there for a second. Fractal maintains minority position, farmer maintains majority position. So I want to make that clear. The other comment that I wanted to make is You were talking about lenders only allowing you to borrow a certain percentage, and in some cases it's 50%, some cases it's 70%, some cases it's 80%. But people and lenders and investors are getting more and more restrictive or cognizant of what that dollar amount is, and they want to make sure that you either A, have the cash or the capital to go do that, or that you have the collateral in other owned land..

And where we need to get careful here, and Chris and I have started to see it, and I think most of you have started to see it as well. The farm credits of the world, Farm Credits of America of the world, and other lending institutions are being very careful that you are not overpledging the collateral that you have. So you can't pledge collateral for one piece of land, two pieces of land, and the equipment and the ice cream shop that you bought. You know, it has to be used appropriately. And I think smart. It's a much better way of doing business. I think we've been lackadaisical from the finance industry in the past about that and are starting to get a better understanding and better grasp. Do you have any comments on that, or is that fair?

Ben

Gordon: Yeah, I'd say that's definitely fair. Um, you know, I think one thing you see in other capital-intensive industries that are somewhat similar to the cash flows of agriculture— so mining's an area that I played— is you have different types of capital that take different types of risk. So this is why as Fractal, we're coming in and we are taking equity risk. If it goes down, if land values go down, our position comes down. That's not the same case for a bank. And this is why banks is great partners is they're a different source of capital. We want our farmers to continue to work with their ag bankers. We're coming in, we're often taking a second position behind that bank. So we're not— again, they have first position on that collateral. We're not violating their debt covenants.

We are being In both practice and in the letter of the law, we're trying to work with that farmer and their banker partners while still bringing in a new form of capital. Now, in return, we're getting more upside because if land, that $100 field goes up 10%, well, the bank's still just getting their— whatever that loan value, that par value, ours goes up. Right. And we just think it'll go up by more because farmers are better asset managers than the asset managers themselves.

Shay: I really like that about the second position and what that brought up. And in my mind that I want to make sure we clarify is this does not have to be 100% paid for free and clear land, correct? No, it doesn't. Explain that, explain that a little better for listeners.

Ben

Gordon: Yeah, so we'll require that a farmer maintains 20% of equity in the land. And so really, if you just take the whatever percentage, again, below, below 50% or below 45% to start on a fractal position, plus however much debt is in there, As long as that doesn't exceed 80%, we're good. So, you know, let's say you have an FSA new farmer loan. That's it. That's an instrument you want to keep for a very long time. Come in and use Fractal so you don't have to refinance that. You have another note on there that's at a really nice 4%, 4.5% interest rate. Come in and use Fractal, you know, on that. But really, you should be thinking of us as kind of just a way to infuse equity across your operation. It's not just on that field. In that same kind of conversation you're having with your banker, just to make sure your ratios are in line. That you have good debt service coverage on it.

Like, we don't want you risking your farm to just push to that very edge. Like, we want great disciplined operators. What we're doing is we're helping to take really strong cash flows that maybe you'd have to sit on for a couple of years to go make the next deal. And instead of having to sit on that to go then go get a big down payment just to go get your debt, we'll take some of those cash flows and essentially accelerate them. And you can go do more deals because, you know, that deal that you might be missing out on, that might not be available and probably won't be in a year, 2 years, 3 years, 5 years.

Shay: What you just said there, I think this is the right time to interject. When I first, uh, started talking with you guys, what, what came to my mind, or maybe you said it, I don't remember, is this is kind of a land snowball tool. Meaning what you just said is instead of having to save up and pay down so that you can go get, you know, more money for your down capital or take your, your own, your made money and reinvest that back in, this gets you there faster. Is that fair?

Ben

Gordon: That, that is fair. And as long as you are still building a great disciplined business, right? So we are not a silver bullet and I don't want anyone listening to this to come in and for us to think that like we are the solution for you. No, you are the one who has a great solid business. You probably are already growing at a certain pace. We help you grow slightly faster to get that snowball moving a little bit faster. But we're not the heroes of this story. We're just connecting some dots between capital and great operations and that great disciplined playbook financially, agronomically, logistically from your marketing. That is what is making this playbook happen.

Shay: When I think of the 10-year thing that you said, I want to go back a little bit. You mentioned, you know, we can reevaluate this at 10 years. Does it have to be 10 years? Is it a 10-year commitment? Can people, you know, decide, hey, we're 3 years into this, we used the tool effectively, we used it as the good business managers and practical business people that we are. And now, you know, I'm sitting here, I'm the farmer, I'm looking at land prices that are skyrocketing in my area. And I know that, yeah, we're benefiting, but you're benefiting too. And I know that there's a cost to that. So talk to me about what that looks like.

Ben

Gordon: Yeah, so we, we actually allow the farmer to buy us out at any point within the 10-year period, just because things happen, right. And that might be a repurchase, or it could be, you know, there's something that just changes in that family or in a partnership or what happens. And so we had to give that flexibility. To our farmers, and they're the majority owners, so it makes sense. A 10-year lockup is on the investor side, and the investor is compensated for that because we believe our returns will be higher in this model than in the traditional model. So it's just, again, kind of puts and takes. Find a good, important farmer need that exists and then match that to what an investor needs on it. I think you bring up a really interesting point about appreciation, and if farmland values go go skyward, where our capital becomes more expensive if you just look at our deal.

So this is where the use of Fractal Capital is really important. So in that example that we were talking about, if you're using the proceeds from a Fractal sale to go buy another field, really the total value of your balance sheet is going to go up using Fractal because you have more total land that you have exposure to. So as long as you're buying something that's going to be at the same or higher return than what you're using Fractal on, Actually, our cost is going to be a heck of a lot less because you're going to use that Fractal Capital to go buy another asset, probably use a little bit of debt on that asset itself. And so you're going to get even more upside than you would without it.

So on a deal-by-deal basis, we're going to look expensive, but as soon as you widen that lens to look at what you're going to actually use us for and the entire deal and the wider view of your operation, and you pro forma out what your balance sheet and your cash flows and all that looks like, great operators tend to, you know, be able to outperform just the, the average land market. And that's where, uh, where our, our customers use us.

Shay: The top business managers that just listen to that are probably smiling because they understand it. And if you didn't catch it and you didn't fully understand what Ben just said, rewind this 45 seconds and go back and listen to the big picture of why I think that this is so important and why it can have an impact in your operation And probably more importantly, you might be sitting here thinking, okay, well, maybe I don't have a huge land ownership, or I don't know if I'm going to have the opportunity to buy much land. But what I want you to think about is whether it's Ben's example of, you know, buying from the next generation of landowners that maybe don't have that connection to the land or want the cash and just want to be out of it. Or maybe you have something come up out of the blue. We're not seeing as many tracts come up for sale that are 40 acres or 80 acres or 100 acres.

We're looking at 200, 400, 800, 1,200-acre purchases at a time from single-owner landowners that appreciate or know you as a tenant or know you in the community, and they want their cash and they want to be done with it. And they would prefer to do maybe a private sale, you know, instead of having to go and put it on auction. They want to give someone an opportunity, but By golly, you better have the capacity and you better be ready for those opportunities because they're not going to be here in 2 years. You said, Ben, you used the word maybe they might not be here in 2 or 5. They're not going to be here. They're going to sell in the next 18 months or less. And if you don't have the ability to get that deal done, someone else is going to take that opportunity.

Ben

Gordon: Yeah, Shay, I mean, you hit the nail on the head and I think the, you know, there's a lot of fun parts of starting this type of company when, you know, farmers are helping us to figure out and have figured out like how to build this solution. The crappy part of all those conversations is you hear about all the missed deals. Homestead ground that they lost in the early '90s that they weren't able to get, that they were renting for a long time just because they didn't have all the capital and the landlord wasn't willing to wait. And the amount of times you hear those stories, it is frustrating and it isn't the most fun conversation you'll ever have.

Shay: The other thing that Chris and I were talking about in a 19 Minutes podcast the other day, the other, the other business-focused podcast that we do here, is people have different risk tolerances though, too. So be cognizant, like you said, this is not a silver bullet. These are for good business managers that understand and are willing to make calculated risks, but also good, competent decisions. So again, I don't want anybody listening to this to think, oh, this is my silver bullet, this is my way out of it. No, this is for people that understand the risk that they're undertaking. And are willing to take on that risk. Because I would— I'd turn that a little bit. For every story that I hear of people saying, we didn't have the opportunity to buy it, there's the farmer saying, I should have bought it, but I just wasn't willing to take the risk.

And you know what, unfortunately, it's kind of tough luck. And that's how things are going to continue to play out, because land's not getting any cheaper. It just isn't over a period of time, which is, you know, one of the entire hedges behind this business model.

Ben

Gordon: Yeah, I mean, the— your use of hedge is a really interesting one, and it's one that frankly I didn't even think of when we were coming up with this. It was our farmers who told us this. It was, you know, the symmetry of our model. If you're buying in today and you think that, you know, your local market might be a little overpriced in the short term and it might come down, well, guess what? Fractal's a bit of a risk management tool for you because that line goes down, we're going down with it, and your cost of capital is a heck of a lot less than debt on that. So again, I'm not saying we're competing with debt on that, I'm just saying it's a different form of risk management. And I think it's really important to understand where the risk in your operation lies.

And this is just one more tool, but it is a very specific tool around equity capital to make sure that you have that dry powder so that you can both get through downturns and you can grow through downturns in whatever way makes sense for your operation. It might not be more acres. It might be another business that you run on that operation. It might be on-farm infrastructure. It might be just securing, you know, kind of the land that you farm today. From your landlord. It really just comes down to, like you said, great operators that are, that are using good risk management and have a vision for where their operation needs to be in 3 years, 5 years, 10 years, maybe even more.

Shay: I want to talk about land valuation and how that plays into this, because I know the people listening, they're skeptics and they're going to say, well, you know, Fractal or whoever's doing the land valuation, they don't understand the land market in my area. And I think you guys have a good solution to this. So talk to me about how you're determining those land valuations and how you make it maybe as fair as possible when it comes to the land value?

Ben

Gordon: Yeah, so the first piece is, our goal is trying to get on the same side of the table as fast as possible with our farmer customers. And we do that by being transparent in how we value. So we do a full offer, and we explain our valuation to them. So, you know, call us really, really old-fashioned. We think cash flows and yields matter in what, you know, what a farm should be valued at. And so we get the yields from a farmer, which not every investor does. Yet another advantage of why aligning with the farmer makes sense. And we're going to look at those revenues and then we're going to look at what the implied rental rate is going to be on that relative to the market. And that's our kind of— that's our— that's our basement of our valuation, right? Just good fundamentals, agronomically cash flow.

Now, the great thing about this, and one of the folks that I think we both know, Shay, is a good example, is if you have somebody who really outperforms on yield, like they just crush it year after year for whatever reason, they're going to get a higher valuation than you probably get on the market. So if you're a great agronomic operator, we will overpay for that happily because that's good fundamentals. Now we got to look at the top of the market, what's happening, that's comparable sales, and we're just going to go look. We need to make sure those comparable sales are recent, they're relevant. So we'll, we'll take out a lot of the tops, a lot of the bottoms on that, and, um, and bring them up to date in terms of where the land market's at, really just based off of interest rates.

So if you look at, you know, the last 24 months of comparable That's going to be a little overrated compared to where things are at or overpriced where they're at. So they're going to come down and we're going to triangulate based off of that. And then we're going to look at the operator's agronomic and business performance across their operation. And we're willing to take a little bit more risk on a really well-run operation that's kind of just quantifiable. You know, how are they doing on their yields across the operation relative to averages and comparable fields? We use a lot of, you know, a lot of ag tech and a lot of satellite imagery. Maybe hasn't delivered its agronomic promise. But man, is that helpful in comparing field by field over multiple years. Thank you, venture capitalists, for subsidizing a lot of great tech that we can use.

And all of that comes down to we're going to make an offer and we're going to explain that offer to a farmer. And, you know, if they have additional information that we didn't have, like we might be able to move on our offer, but really we're more like a bank. We're just going to make an offer and hopefully it's a good fit because we're not trying to make our money on that initial entry price. We're trying to get to a risk-adjusted market valuation. And where we're going to make our money is on higher-than-market appreciation because we're aligned with that farmer. And we're able to charge more because we're a financing solution than what a normal rental rate is. But it's still going to be cheaper than an interest rate. So it's good math across the board for everyone, the investor and the farmer. And by being transparent, we frankly learn a lot.

I had a deal yesterday where a farmer knew something about the local renewables market that I didn't. I was like, oh yeah, we do need to be thinking about this specific type of renewable development in this area. And so that was new information. We're going to come back with a new offer.

Shay: No, I like that. What does the 10-year outlook look like though, when I as the farmer have the opportunity to, you know, repurchase that? How is that valuation done?

Ben

Gordon: Great question. So you're saying, Shay, you don't want the person that you're partnering with to be able to just, you know, control everything?

Shay: Strange. Arbitrarily decide numbers and what I have to repay? No, probably not.

Ben

Gordon: Yeah, probably not. I certainly wouldn't sign up for that. So I definitely won't ask anyone to. We just use a third-party appraisal and neither of us can have a personal relationship in that has to be a certified appraiser, both at that state level and at a national level in there. They'll go through, they will do that appraisal. If either of us disagrees with it, the disagreeing party will pay for another appraisal. You can take the average, you can do that up to 3 times. At the end of the day, like appraisals aren't perfect, but neither of us can game the system on that. And that was really, really important to us is that whether, you know, we believe that we're going to act in the farmer's best interest because we're trying to build a business that'll be around., you know, not just to be acquired in 5 years, but it'll be around in, you know, 15, hopefully 50+ years in there.

Um, but, you know, if we're all on a plane and it all goes down and we have the most soulless capitalists out there in the, in the world coming in, we better make sure that, uh, our legacies aren't that we, uh, you've got a bunch of farmers screwed over on that. So gotta have a lock tight contract, make sure a lawyer reviews it, needs to be transparent in all those oh crap scenarios. That's just fundamental to working in agriculture and something as important as land.

Shay: I was going to wait a little bit to bring this up, but since you touched on the topic, let's dive into that real quick. If Fractal, what you just said in not so many words is what happens if Fractal gets sold or goes under, or, you know, we hear about a lot of these tech companies, I guess would be the prior way, some financing companies. Obviously there's a lot going on in the finance industry right now. So what happens from the farmer perspective when they're looking at this new solution, this new tool, this new accessibility point, and they see that in the news something happens to Fractal Agriculture, how are they protected or what does that look like from the investor side as well?

Ben

Gordon: Yeah, so I mean, I'd be more worried from an investor than a farmer because if we just went away, then all of a sudden the farmer just, they got money and didn't have to pay it back. And, you know, from my experience in finance, that doesn't really happen. And so at the end of the day, you know, somebody would acquire those assets and they would service them up through maturity on them. You know, really, when we look at the instrument itself, like the contract has to be a lot right regardless of who's executing that contract on the other side. And that's why we think really, really, and we've spent a lot of time on that with a lot of farmers and their lawyers to make sure that is lock tight. You know, I think the difference between this business and a lot of other agtech businesses— and I've been part of a few of them— is that we're really based in the underlying fundamentals.

Like, we're not relying on disruption for us to survive. Like, we're trying to add into the existing landscape, not trying to just go and disrupt existing ag finance. I'm not trying to go disrupt a farmer. I'm not trying to go disrupt and ask you guys to change a bunch of what you're doing. We're just trying to give you a different source of capital as a farmer. And that allows us to really have a much more disciplined set of growth. Metrics that we're able to kind of target where we don't need to go spend crazy amounts of money like some of our agtech colleagues to just go be viable. You know, we like profitability. You know, we shouldn't— no one should be ashamed of having a financially sustainable business as well. We just think there's a really good path for Fractal on that relative to anything I tried to build in software before.

Shay: Yeah, right. You know, I appreciate that perspective. And that's probably one of those hard questions that I was planning to ask. But it's no different than when I sit across from a a farming operation, farming business, and ask the senior generation, you know, if you get hit by a beer truck tomorrow, what happens to your farm operation? And so I appreciate your, um, you know, being candid about that and the insight for those that are listening of, hey, those assets are going to be acquired, it's going to be managed appropriately, it's going to be written into the contracts. You know, make sure that you do your legal work and that you have the right people on your team, but you're going to be fine at the end of the day.

Ben

Gordon: Yeah, I mean, essentially, if anyone doesn't deliver to our promises, then we don't get our capital back. And, you know, that's, that's not a bad set of incentives for a farmer to have.

Shay: Okay, so let's talk about, you know, bouncing around here a little bit, just kind of as things pop into my head. Who's your, who's your best customer? Who's your target customer? Who are the people that you want to work with? And the people that you've maybe been surprised that might be most beneficial out of this, I guess?

Ben

Gordon: Yeah. The farm that is thinking about what their farm is going to look like and is planning for 10 years from now, 15 years from now, 20, 25 years from now, they are the best Fractal customer. Now that might mean that they're already a large operation looking to continue to expand or to consolidate, or that might mean that they're an early farmer, somebody taking over from the last generation. But really at the end of the day, you know, they just need to be running good, strong farm businesses. I fully respect people who are farming as a lifestyle. And there are a lot of folks out there doing that and I have zero problem with that. That's really not a Fractal customer. There are better financing options for them and we would frankly not take them as customers, not because we're better than them, but because it just wouldn't be a good deal.

And like, that's just not the sort of deal we want to be in. So priority one is like they need to be looking to grow and not just in terms of acres or dollars, like growth mindset, right? I know that's something you guys talk about a lot in terms of looking to improve margin improvement, everything across their operation. That is the first thing that we're looking at and folks that are curious and trying to improve themselves, that operation that, that we both know that I was mentioning before, like one of the, one of the best growth mindsets I've ever seen in an operation in terms of their team, everything like we value the heck out of that. Second thing, they do need to have some equity in their operation today, just the way that our instrument works. So that's the one kind of turnoff. If it's a, if there's a brand new farmer listening, we need a little bit equity in that operation.

So we'd probably be a solution for you a couple of years down the road. Yep. Third, third thing is just like Good solid financials. We are not capital for like, you know, some distressed operation. That's not how we work. You will not be underwritten well. If you have a nice strong balance sheet that you want to maintain some extra dry powder on, you want to keep options because you know that there's such a tremendous opportunity in the next 5 years, you are a great Fractal customer. And maybe the last piece is just, you know, you are looking to both hedge that risk and look for new ways to grow. So in that kind of growth mindset, it's just, it's an openness.

So, you know, if, you know, I'd say our instrument by the cash flows in the contract is arguably lower risk than debt because like what default looks like with us is much lower risk and much lower probability than with the bank because we're taking that up and down risk. But it's new. And so if you just don't like new things, hey, we'll probably be a good customer for us in 5 years. But today, you know, we want the folks that are really looking to be on kind of that leading edge, you know, that top, you know, 50, 25, 10 percentile of farmers, um, however you define that. If that's what you're striving for, probably gonna be a decent practice customer.

Shay: You've said several times having dry powder, and I want you to speak a little bit to the timing of how this capital gets deployed and how if someone listening says, hey, I'm interested in this, I want to I want to go through a case study or go through a scenario, or I want to be underwritten for the opportunities that we have. Could you talk to how capital is being deployed, how you plan to deploy capital, how that fits into any sort of waiting list or what investment opportunities that you have? Kind of big picture there.

Ben

Gordon: Yep. So I'll start just defining what I mean by dry powder. An operation that has a great strong balance sheet today. If you have two of those big chunky land deals that you were talking about before, Shay, That's going to be a very different conversation. And even a great operation probably can't do two in a short period of time. Yeah. So that's why we— a lot of folks we work with are looking for those alternative sources of capital to be ready for that opportunity. Okay. So how do you then actually get ready? Very tactically, to your, to your question, the first thing you do is you go get a field or fields underwritten, i.e., we are going to agree on a valuation on that field and we are going to do that ahead of time.

We do not want to wait for the deal to go get that underwriting done so that way we can get to a very clear, strong valuation that we both agree on so that when you have that need, we can just flip that switch and we're not getting in between you and your banker. We don't miss the deal timeline. You're ready with that landlord and you just know where you stand. Now, we're an early-stage company, and so there's been a lot of overpromising and underdelivering in the agtech side. And when it comes to capital, you cannot do that. And so for us, what we do is when we do that valuation, we make an offer, farmer has a set amount of time to essentially look over the contract. And then they have a set amount of time to either accept the capital or not.

And when, and when they have that capital, or they, if in that window, we allocate that, nobody else can go get that because you need to know if you can truly rely on us or not in that time. If it's not the right timing for you, then it's just a queue. It's kind of first line, first come, first serve. The only exception to that first come, first serve is if there's a farmer we've done a deal with in the past, they're going to always go back to the top of that queue. Then obviously within them, there'd be kind of a line within the farmers that have done it with us, just because we already know your operation, you've made a bet on us, we're going to make a bet on you, you're just lower risk for us. So that's kind of a little bit of the incentive to get moving forward. Now it's like, get the valuation so that way we can move quickly. And if we have capital, you'll get it.

If there's a limited supply of capital, the folks that we've worked with in the past, they're going to be the first ones who'll be able to get it. And, you know, farmland's an interesting, uh, interesting space. Sometimes we have way more capital than, than, uh, than demand. I'd say right now we have way more demand, uh, than we have capital. And that's going to ebb and flow just because that's how financial markets kind of move.

Shay: I love the honesty there that you had on, you know, the people that we've worked with are the people that we would love to continue to work with and have the opportunity because we know your operation, we know that you're good managers, and If anybody's listening to that and they think that's a tough pill to swallow, well, tough luck. What you just heard was a good, sound business decision from a company that's looking to be sustainable and viable long term. So that's another one of those that I want you to go back and listen to that and really understand the message there, that if you think this is an opportunity, if you think this is a fit for you, reach out and have this conversation, have the discussion, get evaluation done, get get this access to the growth opportunities that you have envisioned in your business.

Because if you don't, who knows when that opportunity is going to come back around. That's not a— I don't believe in fearmongering or scare tactics. That's not what I'm doing. What I'm saying is take advantage of the good opportunity that's there if you think this could potentially be a fit for you. Okay.

Ben

Gordon: Yeah, it's that last piece. Like, it has to be a fit and like, that's on us too. And like, we have told folks that like, we are not a fit for them back. And that's again, not us being exclusive on anything. It is us just trying to be as honest as we can about where we work and where we don't.

Shay: Okay, so from the farmer being the best manager, and the person that's in the best position to care for that farmland and realize that valuation long term, you know, you mentioned agronomic practices and how that plays into it. A question that I know someone listening is going to have, okay, so where's the teeth in the contract? From Fractal that says, are you doing fertility tests? Are you taking soil, you know, soil outlook? Are you making sure that I'm doing yield reports, tissue tests, whatever? Is there anything like that that's written into this and how is that evaluated?

Ben

Gordon: Yes. I mean, we have the same clause that's in probably every mortgage. We literally kind of lifted it from some mortgage contracts around just like not degrading the asset massively. And that is a— there's a lot of legal precedent. That's a pretty big bar. That's not what you're talking about, Shay. You're talking about like the agronomic tweaking. So there's two things that we do. The first thing is, you know, we think where there are practices that lead to long-term asset health, so think no-till, strip-till, where that makes sense, cover cropping, where that makes sense, especially if it's continuous to really build that soil health, in-season nitrogen, grassed waterways to help prevent erosion, those sorts of practices, we will actually reduce that cost of capital if you are doing those practices.

And I don't care if you're an early adopter,, or if you're just starting that, we will reduce that cost if you're doing that. And frankly, like, that allows us to go to an investor and say, we think this is a darn good business and risk management opportunity to incentivize these practices, and it drives environmental impact. But we start with the business opportunity first, because frankly, the only sustainable operation environmentally has to also be sustainable financially. So that's kind of the, the big lever, and we're happy to talk about that. We come from the carbon background. And man, it was frustrating to go look at these great operations that were incredibly resilient, great assets that couldn't be in a carbon program and weren't getting paid anything different from a bank or a landlord or anything else. It just drove me nuts. And it's just such a good investment.

These practices don't work everywhere. So we let the farmer decide that and we incentivize that. So that's kind of the first piece. Second piece, to more directly answer, like, hey, what are the teeth? What's in that? We do require you to soil test every 3 years. Most folks we know are doing it more than every 3 years. So again, we're trying to be pretty light touch. We do ask for your Precision Ag data, like if you have it on there just for high-level monitoring, and we want to see where yields are at just to make sure there's not a crazy cratering in that. But there's no default criteria essentially around, hey, you don't do tissue sampling, you don't do this, you don't do that. We consider that to be part of our upfront underwriting. What's your playbook to go get great agronomic performance? That's going to go into how we value that asset.

And let me tell you, like, I'm not going to write a bunch of rules for a bunch of farmers because there's about, you know, how X, X plus 1 amount of growth playbooks out there. And like, our thesis is localized agronomy, localized operations. So if I was going to go tell folks what to do, I'd be going against my own investment thesis and common sense.

Shay: Yeah, that's, that's a great way to put it. And I appreciate you tacking that on at the end there of we're not here to manage your operation. We believe that you're the best managers. You do have what you said, what you listed there, the soil testing, the things like that. That's very common. And anybody listening to this that's had any conversations with investors or landowners or has some sort of cash rent scenario, it's common to see that sort of stuff in there. So I appreciate that. Okay.

Ben

Gordon: Invest— like one of my favorite stories is when I talk to investors, one of the first things they look at on this is they're like, minority? Why would you ever want to be a minority investor? And every other financial transaction like that doesn't make sense. Then they'll say, well, you don't have any control. And the simple response to that is like very common sense called us. It's like, do you think you know the best thing to grow in DeKalb County? Like, that's a very easy question to answer, right? Okay, well, what should the right fertility rate be? What should the right management practice— should they, should they do no-till there? Like, especially in a, like, in a really, really wet year, like, where should that go?

And it's very, very easy to see their eyes light up about like why this starts to make sense, even though it takes somebody just saying the very obvious thing to get them there.

Shay: Yeah, no, I love that. Okay, so you mentioned investors, which is exactly where I was heading, and I'm not looking for specific answers, but who are your investors? You know, and people are going to ask that. Who are the people that want to invest in this? Why do they think— why do they think this is important? And are these the same investors that have ulterior motives in, uh, land ownership or in the renewable space where they're looking long-term to have, you know, low lit, low-risk land acquisition, and then they're going to turn around and reinvest it back into solar panels and it's going to take up the farmland anyways? Is talk to me a little bit about who the investors are and why these are people that you partner with, how you vet them in that process and decide whether they're a good fit for this model or not.

Ben

Gordon: All right, so I'm gonna break into the answer into 3 parts, like who do we want as our investors? What are they looking for? And then how do we kind of like connect that back to the farmer? So like, who, who are our investors? To be completely honest with you, if they agree with our contract that protects the farmer and finds that win-win, I don't care. Everyone hates on Bill Gates. Everyone hates on foreign money coming in. If they're willing to fund farmers and just take cash flows because they don't have the rights to purchase that land wholesale, they don't have the rights to go do the things that you were talking in terms of control and all where those ulterior motives. And I know you and I probably follow a lot of the same kind of like national security things from our previous backgrounds. This instrument is cash flows. It's not ownership. From an investor standpoint.

And so I want to go find the lowest cost of capital for farmers, because this is about having a farmer-led future of agriculture in terms of the overall ownership. And this is a financial tool to get them there. That said, I mean, I do care a little bit, right? Like, that's me posturing a bit. Like, I want to work with good people who care about farmers. Our story resonates with people who care about farmers, who frankly care about impact, both on like rural communities as well as environmentally, and they see agriculture as a really strong tool for that. So we have a lot of impact investors because we think that there's just a really good science-based case for intensive agriculture managed by farmers that also is environmentally sustainable. And those words come up a lot of BS a lot of times. But if you actually go and tear apart a lot of the science, you need yields to be sustainable.

Otherwise you're cutting down the Amazon. Intensive agriculture is really, really important ecologically in a lot of places. It's not perfect. There's a lot of things we can do to improve, but there's a lot of people that believe in our theory of change there. So that's one. Two, you get a lot of folks that you let off this as saying, hey, Farmland, a good store of wealth. It pays you the equivalent of a dividend every year, and they're not making any more of it. Demand continues to increase. Just global food demand, 56% is what WRI thinks it'll be by 2050. If you look at bio, like biodiesel or renewable diesel, you look at things like sustainable aviation fuel, you could see soybean demand go up by 25% in the next 5 years. That's an insane business case in a commodity market. That's a great thing that people want exposure to. So there's just financial returns that they're looking for.

In there. So it could be an endowment, could be a pension fund, could be high net worth individuals who just can't really invest in farmland today because there's a line out the door with Nuveen and Manulife and a lot of other great farmland investors that are out there. So that's just kind of the makeup. Good mix. People are looking for impact and returns or just returns. Again, I want them to buy into our thesis of farmer-led ag, but at the end of the day, I'm not going to get too far into it because we're not renegotiating every contract. We have a product.. And that's what they're buying into. And they don't have control. They're not going— they don't own any one farm. They own a bucket of farms and the cash flows from those, but they don't— they aren't going to be showing up at your doorstep. We are passive investors. You work with Fractal.

You don't work with that investor directly. Were you going to say something, Trey?

Shay: I want to interject my personal bias here real quick, and I hope this is an appropriate time. Some of the farm operations that you know of that have grown rapidly, are working with these types of investors on a one-on-one basis. And the reality is most farm operations, 98%, 99%, do not have a relationship with this type of investor. And quite frankly, many of us would not be good at it. Like, this is not the space that we live in. We don't have the relationship management skills. So where I think that Fractal has a great, uh, case use for many of you listening is you don't have to worry about who the investors are. You don't have to worry about the ideas and the principles and the vetting that goes into it on whether they're the right people and the intensive management from, you know, the reporting side of things.

If you're not at that level, if you're not the businesses out there that are owning and operating 10,000, 15,000, 20,000 acres that have investors behind them that just want to continue to snowball and grow at a tremendous rate, This is how you compete in that environment. This is the tool. These are the resources. These are the people from Ben and his team that get you in a position to utilize that so that you can be competitive and so that you have a chance, especially if you're farming next to or competing against some of these operations. Is that— I just want your reaction to that. Is that fair?

Ben

Gordon: 100%. I mean, a farmer already has how many jobs? Like, they have to be great financially. They have to be great logistically. They have to be great in terms of maintenance. They have to be great at grain marketing. Like, to also go be a CFO and a fundraiser, like, That's really hard. And so we try to take some of that off their table. And if somebody's already, you know, maybe they, maybe they have that rich uncle who, you know, they've been able to grow with a little bit. Well, that rich uncle isn't there for every deal. So we're not trying to go disrupt everybody and their dog. At the end of the day, like, we're here to fill a need for farmers. And our farmers tend to use us in a bunch of ways that we didn't expect right away, because that's what farmers do. They're smart folks that tweak and tinker.

And, you know, we just have to go find a good way to find win-wins between capital and farmers just to keep farmers on the ground. Around and give them the upside of the asset itself.

Shay: So to keep this conversation moving here, you just touched on my next bullet point, which is what are, you know, other uses. So we've talked about land, we've talked about how that kind of makes sense from, you know, if you, if you go out and acquire more land and it's appreciating at the same value of the land that you're, you know, working with Fractal on, then really big picture, it's a good deal. But, you know, there's some evaluation in the underwriting process that goes into it. There might be other opportunities that you have in your farm operation or your ag business ways that you could use and deploy this capital that, like you said, we would've never even thought of it if we hadn't talked with farmers about it.

So do you have any examples or, you know, how would you, uh, poise this or present this to the listeners in a way that makes sense of, okay, how do we think outside the box and how do we deploy this elsewhere?

Ben

Gordon: The, the first question that I would generally ask a farm is, do you have more good investment opportunities on your farm than you have capital? To deploy against those? And most people say yes right away. And then when they think about it, that list grows and grows. That could be on-farm storage, grain, you know, whether it's grain storage or trying to get more direct ships on things like bulk fertilizer to really bring down your cost basis. It could be trying to reduce your total operating expense exposure with interest rates going up over the long run. It could be an adjacent farm business. Let's say you do some custom work, you have a cover crop seed dealership, you have another, another ag dealership, and you think that your business prospects look really, really good there. But it's hard to go get all the capital for that and what you're doing on the farm side.

You know, again, like, these are, these are folks, everything is unique. And this is why we don't tell farmers what to do with their money. We highly suggest you don't go buy a boat with it. And if that's what you come in and say you're going to do, we're probably not going to do business together. But it's not like we have like an individual string attached in the contract, but I mean, we're talking to operations that are good business people and they almost never will call themselves a good business person. But if you look at what they do, they're disciplined. They are always trying to look at that next little edge that they can make to improve their operation and their team. Those are people that find great creative uses for their capital, and we think those people and their land is a great investment.

Shay: I like that. I want to talk on To your point, okay, you loan Shay, me, some money, um, or, or, you know, deploy that capital based off of a use scenario, and I go out and do something with it. Okay, from my standpoint, one thing that we do in the operations that we work with, uh, we encourage to do, you know, an annual, annual state of the farm address, essentially, where you put together a presentation on here's the financial health of our business, here's, um, you know, what our yield goals were, here's where we actually wound up, here's what our 3 to 5 year capital expenditure, uh, was projected to be, here's what it actually is. And painting that picture to the lenders and the financial institutions and partners that you work with, what does that customer success, um, story look like moving forward with Fractal? What are the expectations there?

You know, is there any expectations, or is it, hey, as long as you're making that payment and we have you know, good contact and communication, we're good. What would you like to see out of that?

Ben

Gordon: Yes. I mean, there's, there's what we contractually require, which is effectively, hey, we need to know what the yields were, what you planted. We want to know what your management practices were if we gave you that discount for those regenerative, for soil health building practices. And then we get the basic financials that you submit to your bank anyway, as well as like any mortgage payments or whatnot to make sure the asset's fine. The simplest way to put it is we're going to ask you for stuff that you're already creating after you've already created it. And we'll— we literally were just doing this this morning. We aligned on the dates. We said, when does this normally come out? All right, let's put a 2-month buffer on it. We're not creating new work for you. That's how we think about it. It's not like some of the carbon credit stuff where it was, you know, 40 hours of work.

That is the opposite of what we're going for. That's the contractual requirement in terms of like what a great Growth Story relationship looks like. We're going to be talking more than once a year because, you know, when I go back to my investors and talk about my business plan, My business plan is not to do one deal with one farmer. It is to do however many deals a year makes sense for that farmer every year within their growth playbook. And we want to make sure that we are working with them and we're not stretching them too far. Maybe they should actually be using more debt than us, or maybe some of their own cash. That is a conversation where we want to work with that farmer and that farmer set of advisors. And again, we are just part of the solution. We are not the silver bullet. And so that's just an ongoing conversation, pressure testing each other, being incredibly transparent.

And again, as you can probably guess, like we're working with folks that like that transparency back. They want to know a lot about our business. And, you know, we will— we have a certain amount we need to know about their business. And often we know a little bit more just because we're trying to co-solve problems for them, get those big chunks, whatever that right deal looks like for them.

Shay: I like it. I have an idea for you that we'll talk about offline, but I want to go back to timing of access to capital real quick before I forget. Do the underwriting process, uh, agree on evaluation, this comes together, you know, and, and I get someone that calls me tomorrow and I give you, I give you a shout and say, hey Ben, you know, I had a guy call me, he wants to sell 300 acres to us, this is what my needs are, we're already pre-qualified, how quickly can we make that happen?

Ben

Gordon: Yeah, I mean, if you're already pre-qualified, um, probably talking week and a half, 2 weeks, um, today. And, uh, my, as you can imagine, I'm a very impatient person, I would love that to be days. Not weeks. But again, overdeliver, underpromise on that. In terms of if we were starting from scratch, it was somebody else who called you, I'd say probably take us 3 or 4 weeks to go get that, that valuation done, get everything agreed, and then go execute on the deal. So a little bit longer there, which again is why we really urge people to come out, get evaluation. If it's the right fit, we'll talk through about like what the right field structure is. Like we will pay more for kind of higher quality ground, on it, as you would expect, it's just a better investment case. We want to make sure there's not too much debt on the field. There's minimum amount of farmer equity.

And typically, like, if you're doing some of these soil health building practices, send those farms our way because we're cheaper, like, be self-interested.

Shay: No, I like that. One thing I wanted to ask, and I want to be cognizant of our time here, is when it comes to the hard questions that you've been asked, or the most difficult things Is there anything that's really stumped you in this process or anything that a farmer's brought up that you're like, man, that's a really good question. I'm not sure we have this fully figured out yet. So I'm asking you to be a little bit vulnerable here, I guess, but that's, uh, that's also a condition of, uh, you know, being a newer company and trying to get the message out here to people. Are there any challenges that still exist or do you feel pretty rock solid about, you know, where you guys are at?

Ben

Gordon: I feel really good about our, like, core buy box. What we're doing, if it's a commodity crop field that doesn't have a lot of craziness to it, I feel really darn good with a good operation. That's great. But farm operations are unique, whether you're talking about tax structures, whether you're talking about capital improvements. Is this the right fit for a farmer? Like, the math isn't always super simple and you have to be thinking over multiple, you know, family dynamics, all the things that you guys talk about. Right. And it's not just a spreadsheet. And I think the thing that's most important for us and our team is we have to be very humble about where we are a fit and where we aren't. And we won't always be a fit, but also not be paternalistic and tell farmers what to do. Because that's not our thesis, not— and those aren't our values.

And so it's really finding the balance of being open and vulnerable to use your language on things about what we think, but not from that overpromising. And like that, if that means we have slightly slower growth in these first couple of years, because we want to be a better company in 10 years, like That's the trade-off we have to make. And so there's all these tiny little, these little details that just are these little pinpricks. And you have to see those as opportunities to improve. Because every one of those little details, that's our moat against some Goldman Sachs dollars, like coming in and trying to replicate what we're doing. It's because we have had those conversations. And we took the time and absorbed the pain, frankly, the legal fees to go solve all those little things, to be able to solve as many pharma problems as we can., and you're gonna do it better.

Shay: So that's, I, in my opinion, I think that's the, that's the absolute win-win there. I also want to take just a quick second to talk and, and feel free to be as transparent as you want. I don't know where you're at on that. You know, we had a discussion offline about, you know, dollars and about, you know, kind of the support from the investor base and how that grows over time. But I, I guess the comment that I would say leading into that is, as you can imagine, it doesn't take very many deals or very many opportunities to get to big dollars here. You know, I just saw a land sale last night. It was 330-some acres that went for $7 million in 7 different tracts. Okay, 330 acres, $7 million. So we're talking big dollars here pretty quick, especially, you know, the thousands of operations that this podcast goes out to, plus the other engagements and interactions.

In my mind, I could see you guys getting a lot of business, a lot of requests, a lot of opportunity, a lot of deals. Do you have the investment and the long-term growth outlook to match that, or what are your thoughts there? That— this is one of the hard questions, so answer it how you will.

Ben

Gordon: No, I, I love it. Um, I would say right now, if you look at existing farmland investors, and just like what I know, like, there are hundreds of millions and maybe even over a billion dollars sitting on the sidelines waiting to be deployed in agriculture. That's your competition. But those are also limited partner investor, like the investors in the Farmland Investors that wanted to play next. So I think if, as we prove this out, there is going to be a ton of demand for what we're doing. What they're looking for is the proof. They want to see our early deal. So right now I have about another $3 million today that we could go deploy. And that's where we're at. At this moment, we have a great medium-term pipeline to deploy a heck of a lot more than that. This year in the near term. And then I'd say, you know, I'm not going to say infinite, but just massive amounts downstream.

What's the problem and the challenge, not just for us but for our customers, is those are chunky events. So you get a big, big chunk of capital that comes in. Also, you might have more capital on demand for a short period of time and then that reverses. This is why we come down to being very, very deliberate about what we promise to our farmers. We give a valuation, give an offer. If we say, hey, we have these dollars for you, You need to rely, like you can rely on these and that will be time limited because we want to make sure we're serving as many customers as we can. Like you will be able to rely on that and then we are not going to overpromise beyond it. So that's how we handle kind of the early days and just trying to be really transparent and like those are sometimes really uncomfortable conversations to say, hey, you need X million and we, we have Y that's slightly below X.

Does this still work? And I might be turning down a really attractive deal because You know what, if we can't get to that full amount, it's not in the best interest of the farmer. We got to suck that up and go in on the investor side. But I get to bring that to an investor and that's a heck of a sales pitch to them of like, hey, we missed out on this amazing deal because you hadn't signed on the dotted line yet. Like, let's fricking go.

Shay: Or we're going to miss out on this deal and you're going to miss out on future deals and opportunities. Like, you know, get, get on the, get on the bus, right? Let's go get on the bus.

Ben

Gordon: I mean, the proof is in the pudding. Like the deals we're doing right now, they look really darn good because we're talking about really high-performing operations. They make us look good. That's a heck of a sales tool to an investor. And like, that makes my job a lot easier.

Shay: No, I appreciate that outlook. Um, as, as we wrap up here, what, what have we not talked about? You know, this is going to be debuting kind of with the initial launch here on the 29th, or, you know, one of the bigger pushes, I guess I would say. What, what do you want to make sure that the listeners know and understand, or what, you know, what soundbites, what pieces have we not talked about that you want to make sure is included on this for you guys to demonstrate moving forward?

Ben

Gordon: I mean, for us, it all comes back to like what that underlying farmer problem is. And change does not always happen in a linear process. So everyone, everyone loves to talk about Bill Gates and farmland. One of my favorite quotes that might or may not be attributed to him correctly is, you know, we all overstate what we can do in a year, but we understate what we can do in 5. And the same thing applies to market change, especially in a market like ag. There's been a lot of things that haven't really changed because of the combination of, you know, government payments and just like, frankly, farmers and technology solving a lot of problems. And so a lot of things have felt relatively consistent, or we haven't been able to feel that year by year. But we're facing a lot of nonlinearity.

So that's the fancy word of like, stuff is going to be a lot different in 1 year, 3 years, 5 years, and 10 years than it is today. And a lot of that stuff requires a lot of capital. So your playbook that you, maybe your dad, uncle, grandpa used is not going to be the playbook that's going to get you to the farm that you want to have in 20 years. And we can talk about a myriad of the reasons why. We can also talk about why ag is, especially in North America, especially in the US, is incredibly well positioned on a global stage for this to be an incredible investment over the next 20 to 30 years. That means your competition is only going to increase from investors. So more competition, more volatility, you got to do things new, like you got to get started now. And I'm not saying Fractal is the answer for everybody.

But I think we're definitely going to be a big part of an answer for a lot of folks that because of not just because of us, because everything they're doing, are going to run great operations to keep family farmers driving the center, you kind of the center of gravity of agriculture in the next 20, 30 years. And You know, that gets us really excited, but it's not going to be easy. It's not going to be without change. And like, if you just want to be comfortable, you know, we're probably not going to be in the same conversation together with us, or you're not going to have the same conversation with you or their neighbors in that 5-year period.

Shay: Yeah, that's awesome. I want to give you an opportunity here. You're not going to be able to get to everybody, but you have a pretty outstanding team working with you there. And, you know, this isn't— this isn't Ben Gordon out there doing it solo, doing it by himself. Tell, just tell listeners a little bit about your team. You already talked about them a little bit, but any shoutouts that you want to give there or how that growth has looked and is continuing to look?

Ben

Gordon: Yeah, I mean, we've almost all worked together in some capacity and every one of us is either tied to ag or has worked in ag. So Brian Gruttner leads our farmer engagement. So fellow veteran, been working in ag for several years now and family had a farm, actually lost their farm in the '90s because there wasn't a tool like Fractal. So I'd say there's some real skin in the game there. We got Drew Miller and Harrison Rogers who work with us at Corteva. They've been, again, have worked in ag now for at the minimum of 5 years across them. Emma, who is an incredible data scientist, and when you're a tech person, you know, is the person who farms, albeit in a very different way at home. Like, that's really helpful. And her vision is behind what works in this space.

And then if you look at our finance folks, we got Aaron and Michael, and like both of them have worked in farmland before. Before. And you look at just the care that they have for the customer experience and aligning that when they're your finance people, like, it doesn't get more exciting than that. And we're excited to have a bunch of advisors and a bunch of people who have kind of been around the block on both the finance side and the ag side. So, you know, our team's not perfect, we got a lot of, a lot of room for growth, we all got to work really, really darn hard. And you'll never see us resting on our laurels. But we got a good group right now. And it's continuing to grow. And, you know, we'll probably ask for a shout out as we, as we grow in the future, because we want folks that come from kind of the type of community that you're, that you're, that your listeners are in. Yeah.

Shay: Now that's awesome. Okay. Last, last minute here. Your parting thoughts. What do you want to leave the listeners with? And I'll close out.

Ben

Gordon: If you're feeling the need, if what we've spoken about resonated again on that need, on that problem for you, let's have a conversation. You will find us to be very transparent and honest about where we think we're a fit, about where we're at. And initiating that movement to, to be ready for that unexpected land sale, to be ready for your own growth trajectory, to have this other option is something that I hope you at least explore. And if it's not with us, like, do it in some other fashion, because we need to keep farmers at the center of the system for us to— for our agricultural system to make sense, both from having good, strong rural communities, and from an environmental and social standpoint. And, you know, I think It's just part of having a good business that's going to be around in 10, 20 years.

Shay: My final comments here is you need to figure out how to be competitive in an investor-driven market moving forward. And if you're not, you're going to be left in the dust. And so what are your solutions? What are your opportunities? And I would encourage you to reach out, like Ben said, whether it's to Fractal or to someone else in this space to learn more about it because right now you wear so many different hats as a farmer, you may not be thinking about the long-term growth strategy. You may not be thinking about these opportunities to pick up 300, 500, 1,000 acres from an ownership standpoint. And if you're not, you're going to look back someday, you're going to regret it. Right now we're presenting you with the opportunity, presenting you with a solution to have these conversations, to be thinking about it.

So if you're getting value out of this conversation, if you, if you like this content on the podcast, please share this with somebody, share it with your team, talk about it internally with your family, with your friends, with your business partners, and say, how do we make sure that we are accounting for this as a threat, but also as an opportunity to our business in the future? Ben Gordon, Fractal Agriculture, thank you so much for being on. I appreciate your time.

Ben

Gordon: Likewise. Thanks, Shay.

Shay: And thank you everyone for listening to another episode of the Ag View Pitch. We will catch you next time.