This Week in Startups - Understanding non-dilutive fundraising options + Continuum Ag Founder Mitchell Hora | E1419

Episode Date: March 27, 2022

Sunday Double-header! First, in VC Sunday School, Jason explains non-dilutive funding's impact on startups (2:18). Then, Molly interviews Continuum Ag Founder Mitchell Hora. His company helps farmers analyze their soil and create a roadmap improve it via a holistic approach known as regenerative agriculture (21:33). (00:00) Jason and Molly tee-up the show (02:18) VCSS: Discussing non-dilutive funding (12:37) Intercom - Get advanced Intercom features and Early Stage Academy at a 95% discount https://www.intercom.com/early-stage (13:53) More on venture debt and factoring (18:33) Jason and Molly Introduce the Climate Guest (20:17) Cyvatar - Get your first 2 months free at https://cyvatar.ai/twist (21:33) TWiCS w/ Mitchell Hora of Continuum Ag (30:20) Thorne - Personalized, scientific wellness. Go to https://Thorne.com/u/TWIST (31:23) Mitchell Hora on the importance of healthy, balanced soil Check out Continuum Ag: https://continuum.ag FOLLOW Mitchell: https://twitter.com/Continuum_Ag FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

Hey, everybody, hey everybody. We've got another amazing Sunday edition of this week in climate startups for you today. But first, because it's Sunday, we're going to VC Sunday school. Today, I'm asking Jason about non-delutive funding options, all the different ways that there are actually for startups to get money that don't involve issuing shares. And which of those ways to get money might be a red flag. Yeah, and this is for people who are capital allocators, board members, and especially for founders, this is across. topic that impacts everybody. And when you say non-delude of funding, that's going to be in a lot of different categories, including venture debt, most commonly, but also grants, maybe selling your

ARR with some of the factoring type companies, as well as kickstarting and Indiegogo and pre-selling your product. So it's a very complex topic, and we're going to double click and triple click on all of the nuances. Oh my God, I love this show. And then I talked to Mitchell Hora, the founder and CEO of Continuum Ag, which helps farmers and agriculture companies quantify and improve their soil health, which is huge for feeding the planet and, you know, saving it, tiny bit too. All right. It is going to be a great show. Stick with us. Yes. Why wouldn't you? So good. This week in startups is brought to you by Intercom. If you're an early stage high growth startup, you can get access to Intercom's Early Stage Academy today at a 95% discount. Join the program today at intracom.com slash early dash stage or email them at startups at intercom.io. Scivatar. Implementing cybersecurity for your startup can feel overwhelming

and expensive, but it doesn't have to be this way. SciVatar is a startup friendly, fully managed, all-inclusive cybersecurity subscription. Twist listeners get their first two months for free at say avatar. a. a. That's C-Y-A-T-A-R. dot-A-I-S-T-T-T-S-T-T-S. And Thorn. Thorn empowers people to take control of their long-term well-being with a proactive, science-based approach to help. Through a variety of at-home test,

Thorne teaches you about what your body needs and provides the right, high-quality, certified nutritional supplements for you. To learn more, visit thorne.com slash you slash twist. Everybody, it's time for, I think what's becoming everybody's favorite segment of the week. VC Sunday school, this is when, Molly, who is crushing it in her third month as a venture capitalist, a capital allocator, asked me, I'm in my 11th year, I've done okay. Questions that may seem basic. They may seem like stupid questions.

They may seem like obvious questions, but none of these are stupid or obvious because the situation is constantly changing in startup land. The market conditions change, the competitors change. There are no dumb questions, Molly. what is the question for this week? Thank goodness, although it is funny because I was looking back. So when I was preparing for this job back in December, I was keeping this list as I was reading various books about venture capital of like things I wanted to ask.

And I'm looking back those questions now and I'm like, oh, no, those are pretty dumb. You know what? There's nothing like doing to inform your next question. And so you're doing meetings. You've done over 50 meetings with founders. And you've brought stuff to the investment committee. And we've asked.

follow-on questions and undiligence. So now you're just asking super sophisticated questions. There you go. They're getting more sophisticated. But it is kind of fun. I almost want to. Maybe we should do a thing where I'll send a screenshot of the questions that I had written down like, why do you care about the size of the employee option pool?

And I'm like, oh, dilution, duh, you know, things like that that were just not obvious to me. However, today's question is also about dilution, sort of, because what I'm hearing more and more about in the industry and then also from some of the founders. that I have met with is this question of non-delutive funding options. So I talked with a founder recently who's doing a hard tech climate solution, whose revenue thus far is effectively government grants and other non-dilutive funding. And I am hearing that there are even options in the marketplace for startup founders

to get non-dilutive funding. And so I wonder like it's a multi-part question. So I'll start with sort of on the specific founder question, if someone comes to you and is like, we have revenue that we're realizing as a result of some of this non-delutive funding, does that count? Okay. So non-dilutive funding is not revenue in almost all cases. The category of non-dilutive funding contains a number of items. When you say non-dilutive funding, what you're saying is we had money come into the company in some format. We'll get into that in a second. That did not result in us issuing chairs.

So the cap table has stayed the same, but the treasury has added a million dollars. Okay, how does that happen? How does one put a million dollars into the treasury and not change the cap table? One way could be you got a grant. So in Europe, in Canada and in Australia, New Zealand, the governments want to spark innovation, and they might give a grant to somebody of $100,000, $250,000 to start their company. So the companies has a million shares. They're owned by the two founders and the employee option pool, and they have a million

dollars in the bank account because the government decided to give it to them. Another way to have non-dilutive funding is you could sell a thousand cars in advance, a thousand phones in advance. You could run a GoFundMe. You could run a Kickstarter or an Indiegogo campaign. That is money coming in for pre-orders. So you have grants, you have pre-orders. Both of these are non-dilutive funding.

They're funding the future of the company. You could have people pre-order or pay in advance for software that does not yet exist. So some big company says, we really want this slack thing to exist. We're going to pay $100,000 a year for it. We'll give you $200,000. Instead of for two years, you give us five and we'll fund you to build it, right? So there's three examples, but those are not the common examples. The most common are is venture.

debt. What is venture debt? It's debt. It's a loan. But venture debt is a type of loan that is different in a couple of small ways. It's typically done by a bank that is focused on startups like Silicon Valley Bank, America, etc. And what they do is they look at your venture funding and they say, okay, you're raising $5 million for Sequoia and some known entity. We know they have a good filter process. will allow you to have $1 million in debt. You'll pay interest only for two years, then the principal would kick in, and it just tops your round off with an extra million bucks.

And as part of that, we would like to get 10 basis points of equity in the company. So we'll get a little kicker of some equity, and that'll be our upside in addition to the risk we're taking. And so the interest rates can be high, over 10%. So they're almost like credit cards, and they can come with covenants. Covenants are, hey, if you're running out of money, if you don't have sales, we get our money back,

et cetera, and it is senior to even the venture capital. So venture capital is generally don't want you doing venture debt until you've hit revenue and they only want you to have a percentage of debt to the cash at the bank that is very low so that the bank doesn't wind up for closing on your startup, which they do not want to do. So that's the basic overview. What are the questions do you have, Molly. So is what out of that list, what type of non-dilutive funding might show up as a bit of a red flag? It sounds like venture debt could be. Is it concerning if a company is saying like, oh yeah, we have all this money. But that money is in the form of grants. Like it's not necessarily recurring. So grants, nobody cares about. It's like it's always a minor amount. It's icing on the cake.

It's not even icing. It's like some sprinkles on the icing. So put that out of your mind. pre-sales can be a very good sign, not because of the money, but because it shows commitment for people in the future. Venture debt, I've met a group of venture capitalists who are always suggesting it. You know, maybe 20% of venture capitalists are like, hey, we did your series A, we did your series B, you got 10 million. Maybe you should set up $2 million just so you have it in case you need it, even if you don't draw it down. These things typically cost $50K or $100K to originate. There's an origination fee. That helps these folks who are giving venture debt, maybe smooth out some of the bad debt that happens, right, because those are high risk.

So, and then there's another group of people who are like, listen, if you're a world-class startup in this hot funding environment, you don't need it. You could always raise more money at a high valuation. So when the markets are cool, venture debt is cool. When the markets are hot, venture debt is not very cool because, well, if your company's doing so well, and you can raise that a $50 or $100 million valuation from a great venture capitalist, and it's not super dilutive, like the $2 million in venture debt, which people might consider a ticking time bomb at its worst, well, just sell 2% more of the company and have

the cash and not have a ticking time bomb because it's not like the people who invest in the company can just say, oh, you have to buy my shares back for me. With the venture debt, you have to give it back. Right. Right. Now, there are a couple of, so anyway, that's how people look at. In a really slow market, people are like, yeah, let's have the extra six months of runway. In a hot market, they're like, oh, we don't need this. We have 40 months of runway, 30 months of runway. We don't need to even bother with this. There is something new that, you're came out, pipe.com.

Yes, I was going to ask about that next. And pipe.com and a couple of other people are doing a new spin on an old device, which was called factoring. Factoring is you have accounts receivable coming in in 90 days. You can prove it. We can look at your bank account. You know,

let's say you were in the Schmata business and you're selling clothes, right? Yeah, and you got everybody on 90. I'm sorry, you were in the web business? I think it's Schmata, right? Shmata.

Love it. It's a Yiddish for like clothes for rags. My office was on 37th and 8th and 9th in the Schmata district where people were running around with, you know, racks of clothes through the streets selling dresses. I kid you not. And so, you know, like those dresses, you get the money back in 90 days. So you got 100,000 dresses on the streets. They would buy those from you for $90,000. You get the $90,000 now.

When the money comes in, it goes directly to the factoring company where they have a bank account and some way of, you know, making that $10K. Now, that doesn't seem like a lot. You got 90 days in events, but that winds up being 10% in three months. So if you were to extend that 10% for a year, it's a very high interest rate. Some people might even say predatory. But, you know, it's sort of like in the way that a check cashing place is predatory, right? It's predatory. It's hot.

If you use it, it is predatory, and if you use it poorly, it could get you in trouble. Correct. So people are a little bit, you know, rightfully concerned about that. What Pipe did was super brilliant. I'm not an investor, but a couple of my besties are. That company's done very well. They created a marketplace where you as an investor could buy Slack's future-looking revenue, if they have great subscription revenue, for 90 cents on the dollar, for 92 cents

on the dollar, and you bid on it. So let's say Slack was in year three and they had $5 million in ARR. They could go on to Pipe, say, anybody want to buy this $5 million in AR? Let's say it's 10 million, so it's easier number to work. 10 million in ARR, anybody want to buy it. Somebody says, I'll give you $9.2 million for that $10 million. So here's $9.2 million today, and in a year, I get $10 million. So I got that extra 800K.

Somebody says, well, you know what, this is easy money. I'll give you $9.3. And the little competition happens, and people make the spread. And so Pipe doesn't actually originate it. They just created a marketplace to do it. Factoring, usually a bank does that. And so it's just different financial devices. If your company is growing well,

you generally don't need this. If you have world-class investors, you don't generally need to do this. But with some of these devices, a founder will say, I feel pretty confident. And if I get that money, I don't have to dilute the cap table

because I have pipe.com money coming in. Right. And I can hire 10 more sales executives, and I could spend money on Facebook because those are predictable ads. And instead of doubling my ARR, I'll triple it. And I don't need to sell $10 million

in equity and dilute the cap table 5%. I can just take my next year's revenue now. So it's great. It's great that there's a lot of financial innovation here. You may not realize it, but you've almost definitely used Intercom before. You know when you visit a website and you get that little chat bubble pops up and they say, hey, you got any questions? That's Intercom.

It's the best way to connect with your customers, period, full stop. Intercom's platform helps you engage and support your users through personalized chat-like experiences and over 25,000 companies, startups like yours, use it every single day. Why do they use it? Well, because they want to foster a relationship with their customers. Customers have so many nice things to say about them. Here's a testimonial from Twitter that they just got. It's almost like all websites I visit with that intercom chat button. I instantly associate them with great customer service, just like Intercom intended. If you're an early stage high growth startup, and you're probably are, because you're listening to This Week in startups, you can get access to

Intercom's Early Stage Academy today at a 95% discount. Join the program today at Intercom.com slash early dash stage. Okay. There's a dash in there, so let me make sure you got it right. Intercom.com slash early dash stage, okay? Or you can just email them. Email them at startups at intercom. com.

See that? They know support. So they just gave you their email address. Yeah. There was another bank, Mercury, which are, they're advertisers on the show right now. they haven't had by right now, full disclosure. So Mercury just started their own venture debt program. So the more competition there is, the better.

I don't, when I see as a board member, I just say, what are the covenants? The covenants, if they're broken, in a down market, I've seen the venture folks extract more value. And that's really where you have a problem. I had a friend who had this with a high profile bank, and they basically wanted their $5 million back. They were going to sell or go public. the market tanked, and they extracted another like 3% of the company from the founder.

They said, yeah, we'll give you two more years, interest only, but we want, you know, $5 million in shares in the company. And he tried to fight them, but the venture capitalists had no more money. So he just got, had no choice but to settle with them. And he was really upset at them for a long time. Yeah. Because he felt they were being predatory. So in a down market, these things can be dangerous.

In an up market, they seem like no-brainers. And the truth is in between. Just be really careful and play out the scenarios. You need to have a CFO or, you know, a controller if you're going to do this kind of stuff. So if your company has outsourced accounting, which is fine in the early days, and you don't have the discipline internally and you're not making projections, that's a sign you're not ready for this kind of thing. If you have a great internal team for accounting or, you know, a really great executives who understand this stuff and you're doing projections and you have predictable revenue, this stuff is kind of essential in the mix. you'll see this. You know, Amazon or Google will do a bond.

And you're like, wait a second. They have $100 million in cash. And why are they doing a bond for, you know, some solar farm or a building? It's like, well, because they can. There was some point where Amazon started doing corporate bonds. Remember that like five years ago? It was crazy. I do, sir, remember that.

Everybody wants to be in financial tools. I was like, why are they doing a billion dollar bond? It was like, well, because they're getting it for 2%, 1% or something insane. It's just the CFO and their team looked at it and were like, free money, low, makes sense, let's take advantage of this debt facility. We're making more money over here. We get to spread, whatever it is. So you have to be sophisticated. It is very true that in the business world writ large, there is this kind of maximum, like as an individual in the world, you know, we are conditioned to have some fear of debt unless you're an American in which you're

like, I live in credit card debt. I don't know. Eventually I'll die and I won't have to pay. But like some debt is good. Some kinds of debt are good because they mean that you don't have to spend your own money when you can get access to money cheaply. And this is sort of like a version of that. But it sounds like it is something just to sort of tie it all together. If a company comes to you and they have lots of different kinds of finance mechanisms, it is something to just pay attention to. Yeah.

Everything is contextual when we're talking about startups and assessing the viability of a startup. The financial viability of a startup that is profitable is different than one. that's burning $250K a month. If you're burning $250k a month and you're adding $3 million in venture debt and you've got $2 million in cash left and you're going to be out of money in eight months

and you're going to have to hit that and you don't have product market fit like, oh my lord, I've seen people without product market fit come to me and be like, hey, we want to add a million dollars in venture debt. I'm like, okay, before we do any of that, can everybody just stay focused on product market fit? Right, right.

So, you know, it's at what stage do you add this stuff? And at some stages, it's brilliant and efficient and a sophisticated thing to do, and other times it's too early. So you need to have the right counsel around you to do this, whether it's attorneys, accountants, CFOs, outsource CFOs. And if you're a first-time founder, get help. Talk to your board members.

Talk to multiple board members. Talk to multiple banks. Talk to multiple accountants and tax specialists and make sure you have good projections. And I always like to be conservative. Some people like to be aggressive. They like to maximize how much of a home they buy. They like to maximize their mortgage.

Remember those super jumbo mortgages? Oh, yeah. You can look at, like, are mortgage is a bad thing? If I asked you that, you'd be like, well, it's contextual. Like, how big is your mortgage compared to your savings and your revenue and your salary and your income? And then how secure is your income? Have you been at the same company and, you know, for 12 years and your income is kind of

guaranteed or are you like, you know, have spiky income because you're working as a consultant? So you've got to figure out all that. Love it. Love it. See? And even founders got a little VC Sunday school there today. Right. It's for everybody.

That's for everybody on the cap table. All right. Let's go to your amazing interview this week in climate startups. Who did you interview this week? And what are they doing to put a dent in the universe, Molly? I know. Oh, that's such a great way to put it. This job is so hopeful.

Yes. Be hopeful. It's good. You're allowed to be. Like, we just get to be so positive. This week in climate startups, we have a startup. Yes, great.

With a lot of capital allocators there for a while. Exactly. And this is a really interesting interview and it gets to exactly how broad the universe of climate tech startups can be. This is I talked with Mitchell Hora of Continuum Ag. Mitchell is like a multi-generation farmer himself. Our first call was like him and his big pickup in Iowa

driving through a snowstorm, just checking in on what's up with Continuum Ag. And basically what the company does is help farmers and agriculture companies quantify and improve their soil health. They have a tool called topsoil, which helps farmers profit from their environmental outcomes, like carbon sequestration, but also helps them understand the health of their soil so that they can maximize the amount of money that they're making from their crops, like grow better crops, make more money.

And then also, you know, their big long-term play is to get into this big carbon sequestration market where you can get paid as a farmer for having healthy, happy, rich black soil that actually sucks up and sequesters carbon. So this would be a win-win-win. Top soil wins. Carbon sequestrian companies, people who need to do carbon sequestration and buy those credits win and the farmer wins. Win-win-win.

I love it. Let's go on to the interview. Here is a problem a lot of startups face. They need cybersecurity, but they don't have the same. staff to implement it or manage it. Well, if your startup is overwhelmed with thousands of different services and you're looking for a simple and cost-effective starting point, Scivatar makes cybersecurity accessible and effortless for startups and SMBs.

They have an all-inclusive subscription that you can cancel at any time. Scivatar provides the following. Security staff, a proven process, and solutions for your business so you can close more deals and get compliant faster and gain customer trust. SciVatar helps startups get secure in 60 days or less. Again, it's an all-inclusive, fully managed cybersecurity as a service, a free platform to analyze and report on your security investment. They are a preventative service, not a reactionary one.

This means they find the problems before they happen, not after. You can use SciVatar's freemium version right now at no cost. But if you want to upgrade, you can get your first two months free at Scivatar. a. a. Let me spell that for you. C-Y-V-A-T-R-A-I-S-T-T-A-I-S-T-T-E-A-S-T-T-E for two months free. Welcome to the family Siv-A-V-A-V-T-A. Mitchell Hora is founder and CEO of Continuum at Continuum Ag on Twitter, Continuum underscore Ag.

Mitchell, welcome to the show. Thanks for having me. I'm excited to be here. I don't know what we're going to talk about yet, but let's dig in. Well, I think it should be like pretty much in your wheelhouse. because my first question to you is going to be, what does Continuum do? I think I can handle that one. Not a trick question, not a gotcha.

Yeah, I can handle that one. So yeah, Continuumag is a soil health data intelligence company, and we built the first soil health data software, which basically just means we've got a new tool that we built the software around, and that tool is called the Haney Soul Health Test, developed by a USDA soil scientist. It's been out for a long time, but we built the software to be able to help farmers to actually utilize the test. to deploy precision ag and make better decisions.

Now we've been able to expand the business to be more holistic around regenerative management and fitting into these new carbon markets and sustainability initiatives and all the buzz, all the hype around farmers, you know, now being able to utilize better, more sustainable farming practices to not only provide the feed and fuel and fiber for the world, but offset the global carbon footprint and improve water quality and improved nutrient density and lots of other things that farmers are now in the spotlight

for being able to bring to the table. So we just help farmers enable farmers to do it. Current footprint is 38 states and 15 countries as we review this today. And current team is at 24 people. So it's been a heck of a journey. But running it all from small town southeast Iowa, I'm also seventh generation on my family's farm here too.

Yeah. I mean, there is so much to unpack there for, considering the fact that this is this weekend climate startups, we're talking to an investor audience and a startup audience who maybe did not consider soil health. First of all, the foundation of a hypergrowth startup, which is almost how you have described it, but as something that is so key and can be measured in such a high-tech way. Let's like go all the way to basics.

Why does soil health matter? That's a great question. So soil health, I got exposed to that in 2015, this whole concept. But on the farm, we never called it soil health. It's kind of a newer term. But we've been using no-till since 1978 and cover crops since 2013, which are these conservation practices and the basics of these soil health systems. The key is that soil health is a overall concept,

an overall approach to farming that as a just by happenstance, it creates all these great environmental outcomes. So what do we mean by soil health? Soil health, in my definition, is that we're creating soil balance. Farmers for a long time have focused on their soil chemistry and their soil physics, meaning how much fertilizer do I need? How do I improve water management with field tile and things like that? But now soil health brings about, hey, the soil is alive,

and that in one teaspoon of healthy soil, there's more microbes than there are people on the earth. and we can use those 8 billion microbes per tablespoon to help us to be more profitable and to help us to influence those chemical and physical properties. But it's the biology that's driving it. And soil health is an understanding that we have to create balance in the chemical, physical, and most importantly, the biological components of the soil. And we do that by implementing the soil health principles, which is to keep armor on the soil, keep residue and keep material on the soil surface. We need to minimize disturbance, both physically with tillage and minimize tillage and both and chemistry, minimize the chemical disturbance with pesticides and too much fertilizers and things like that. We need to keep living roots at all times, meaning have more perennial crops that are alive all the time,

or have cover crops out there, which is the big thing that we've pushed on and I mentioned it before, that cover crops are a typically grass or other species of crops that are growing over the wintertime between our cash crops and kind of in the off season. The fourth soil health principle is that we have to implement more diversity and more diversity of species, meaning grasses with legumes, with thorns, with brassicas, there's lots of different stuff, and it's emulating the natural biological processes of Mother Nature and the diverse tall grass prairies that made my soil in Iowa here, you know, some of the best soils in the world.

And then the fifth principle is wherever we can, we want to integrate livestock that, again, mimics mother nature, that there used to be the buffalo and all these critters running around, you know, depositing their manure and urine and stuff like that, that we want to emulate that as much as we can. But the sixth principle then being you've got to do all these things within your context. and that's really important here that as the government gets involved and as consumers and supply chain organizations and more and more investor money, you've got to enable the farmers to make the right decisions for their local family farm. And at Continium Ag, we've got the software tools and the digital enablement to be able to make it happen and focus on the farm has got to be profitable. As family farms, we're running businesses out here.

My family's been farming this area for 150 years and they've been able to do that through. the Great Depression and through the farm crisis of the 80s and all the stuff, I'm able to do it because we're running a business. Now it's a family farm, it's a lifestyle, but we've got to be running a business here too. And now as we implement a more regenerative way of farming, a more sustainable way of farming, that's great. It's got all these environmental outcomes. It's great for the consumer.

It's great for the environment. It's great for all these things. But it also has to be great for that farmer's bottom line and their profits. That's what we focus on. So again, back to basics, what happens when soil isn't healthy? Obviously, I would assume it means your crops don't grow. No, your crops can still grow, but it just takes a lot of forcing it to happen. Okay.

That soil is sick, okay, just like humans. Okay, so I relate all this stuff back to human health. If you have a human that, you know, doesn't eat right, doesn't work out, you know, maybe drinks too much, smokes too much, whatever it may be, they can get sick. a lot of times and they're unhealthy and their body's not working the right way. And if we're not eating the right things and stuff or not being healthy, we have to offset that with medicine or with, you know, and that's why in America, you know, we spend all this money on the healthcare industry and on, you know, with big pharma and stuff that it's because we're not getting

the natural nutrition and balancing our diets and taking care of ourselves the way that we're supposed to. Right. And same thing for the soil. And it's not. healthy, we don't work through all these fertilizers and chemicals and fertilizers that end up in runoff and are really bad for us. That's exactly it. More chemical, more fertilizer to solve the symptoms and continue to drive the only driver of success on the farm right now is yield. So it's tossed more at it to get more yield.

Same thing on the human health. You know, I want to be more awake in the morning. We'll drink more caffeine. You know, when really it should be no, you need to sleep with the right way, eat the right foods and take care of yourself. and then you'll come for my coffee, Mitchell. Don't do it. I still love coffee too.

I mean, I'm not going to look from it, but I should also, you know, sleep better and work out better. And yeah, you know, it's the same kind of concepts here. But in ag, in order to get away from those things, we have to wean it off, just like on us. If we went cold turkey and didn't drink coffee in the morning, it wouldn't be great. At least for the first couple of weeks, it would really suck. But if you weaned yourself off of it and were to replace that with better systems, it'd be better. It'd be a more holistic process. But it might take a little while, be able to do it. Going cold turkey can be really hard. Same thing for sustainable agriculture that we're dealing with

a biological process just like us. And it's our, we can blame it on our microbes. Okay. So the human body is 10 trillion cells microbe or sorry, 10 trillion cells human, 90 trillion cells microbe. What? So you're not addicted to coffee. I'm not addicted to coffee. Our microbes are addicted to coffee. Those little bastards. I know. That's what I'm saying. Yeah. So that's just mind-blowing to me, though, that the human body is, and I'm not a PhD scientist on human microbiome. But my understanding and what I've learned is that the human body is 10 trillion cells human, 90 trillion cells micro. Listen, if you're a high-performing founder or operator, you need to make sure you can take care of your health and wellness. I do. I try to get great sleep. I try to eat healthy,

you know, all those important things, and that's where Thorne can help you. Thorne is a health and tech company that offers at-home tests which identify where you need the most care. They offer things like a gut test that analyzes your gut microbiome and a stress test that measures your stress hormone fluctuations. These tests will help you eliminate the guesswork for good health by providing personalized steps for how to eat, how to exercise, and what supplements you should take. Then they have a range of multivitamins and supplements that you can subscribe to. again, this is personal health and wellness and Thorne is totally vertically integrated. So you're not dealing with anyone in the middle.

Plus, thorn is the only supplement brand to collaborate with the Mayo Clinic, according to Thorne. Head to thorn.com slash you slash twist today. Once again, t-h-o-n-e dot com slash the letter you slash T-W-I-S-T-T-T-D-E. Okay, well, before I go all the way down that rabbit hole, let's do a contrast and compare.

So what happens when the soil is, bad, we've discussed, what happens when it's good? And can you draw that bright line to why that's more sustainable and better for the climate? Yeah, so when it's bad, it's fragile. We've got to put in a lot of inputs and then we're really susceptible to weather issues and that's becoming obviously more and more prevalent. But when the soil is healthy and when it's good, we have a lot more nutrient cycling and we don't need to apply as much fertilizer because it's naturally more readily available. We're able to infiltrate water and not have flooding. We're able to hold on to the water that we do get because we have better organic matter, which a big portion of organic

matter is carbon. 58% of organic matter is carbon. So the more carbon we get in, the more water we can hold. The more balanced soil creates a healthier crop, a more nutritious crop, and more nutritious product going into the environment. It's the whole what we learned in what, like, first or second grade that you are what you eat. It's the same thing there, but it's reverse engineering that, okay, the plant or the animals

are eating plants or humans are eating plants. plants are getting their nutrition out of the soil. And if it's a diverse, healthy, balanced diet that they're getting out of the soil, they're going to be healthier and more balance as well. Less disease, less insect pressure, less issues. So we just really need to enable that. On our farm, how that's translated is that we've decreased our synthetic fertilizer by 45% over the last three years, four years. We're still weaning off. We're a very conventional farm still for the generally still conventional. So we've cut our synthetics by 45%.

We've cut our pesticides by 75%. We've been able to improve our organic matter, our organic matter by 1.4%. And therefore, I'm sequestering carbon currently at a rate of about 4.7 tons per acre per year in the upper profile of my soil. And then my water infiltration, the average water infiltration across the country

is about a half of an inch of rainfall per hour. And we get plenty of rains that are heavier than a half an inch per hour. And that's why we have a lot of flooding issues and erosion and things like that. On our farm, we can infiltrate four inches of rainfall in less than five minutes. Wow. Now we don't have flooding. I don't need the federal crop insurance at the level that I did before. That's all taxpayer funded.

I don't need, I'm more resilient against these weather concerns because I've got a healthy functioning soil ecosystem. Yep. All right. Now, for our third question, how do you translate all of that, right? The difference between bad soil and good soil and the importance of having that good soil and high quality soil into a tech business. Because it's how do I enable the natural system to make money? Yep.

That's what it has to boil down to that. How I started it all out was the, how we were, how we were, how we were, how we were managing our soils before with precision ag and some of the tools that were available, they just weren't really making sense for our farm. The recommendations that Dad was getting back, he was frustrated with,

he was confused of why are we doing some of these things that we're doing? And at that point, we were using some no-till, we weren't really into cover crops yet, but our soils were just a little bit different than maybe the norm. Then, especially when we got into cover crops,

the soil testing that farmers typically do, today and that big egg does today, the soil test does not work. It's designed for chemistry, designed for those soils that function solely based off of the fertilizer that we input. Same thing on like a lot of the medical industry and stuff too, like looking at utilizing food as medicine and more holistic medicine stuff, which I don't know anything about. I never go to the doctor, so I can't talk to that at all. But it sounds like my farmer family. Yeah, yeah. It's the same thing, you know, for the on the soil side. But anyway, so, I got connected with this hainy soil health test, which allowed us to quantify biology,

quantify the organic nutrients, the naturally available and the biologically derived nutrients. We can quantify those things now. And that's why we're able to utilize the data to cut back on our need for synthetics and put more dollars to our bottom line. So now this past year was our most profitable year ever. And we're doing it without government subsidies, without handouts, doing it all on our own and being more resilient, which is so enabling for a farmer that often just feels stuck in the current rut of the system.

But when you're better enabled with a light at the end of the tunnel and a light shining ahead that, hey, we can, there's a better way here. When you're enabled to make better decisions, it's really empowering. And we just built the software to scale that. That's all we did at continuum, you know, and it's called Topsoil to online database.

that houses that farmer data to enable them to make better decisions and put dollars in their family farm pocket. So at what point did you turn this into a business and build this software? Yeah, so I started the company in 2015 doing direct-to-farmer agronomy consulting, mostly in Southeast Iowa. So it was a service business at the beginning. Direct-to-farmer, not very scalable except for hiring more people to create more hours in a day. consulting. In late 2019 or so is when we are like, okay, we need to better connect with our own

customers and we need to create better, more scalable systems. And that's when we started building the software to manage the data. But really at that point, it was still just me connected with my farmers. It wasn't supposed to be this big global, you know, behemoth that we now want it to be. But I got connected. We raised venture capital for the first time in early 2020. And I went through the Ag Launch Accelerator down in Memphis, which was really that springboard that we needed to get us into moving away from just being a direct to farmer consulting company and moving into the actual, hey, we're a tech company. So that was early 2020 right before COVID. And then we brought in a little bit of venture capital then.

And we've worked with two Iowa venture capital groups. And I've got an angel investor in Indiana. and then we've got the folks at Ag Launch. And then in early 2021 or mid-2020, we raised another small round. We brought in one new venture capital group out of Chicago and been able to just continue to really build everything, though, based on revenue. And so it's been a conglomeration of building software

and scaling more quickly, utilizing the little bit of venture capital that we've raised, but doing this really focused on what's going to actually bring value to the customer and how do we define that value and build it based on driving revenue. And right now, our average farmer customer is spending $10 to $15 an acre, and our average value return last fall was $106.24 an acre. Wow. So spend 10 to 15 to make 10.6. Like that, that's huge. And our overall value, our overall value created for our customer base last year, 2021 was $1.8 million.

bottom line. That's after paying us. So 1.8 million returned to those farms and we're super early, very small. So obviously very proud of that. And we want to keep scaling it because more people need, when farmers have money in their pocket, they invested back in their family farms and better technology in being more resilient. But they also put money in their rural schools and their community, their church, things like that. Like that's what I care about is revitalizing that in strengthening those family farms so that they're in a position to be successful, both now and in the long term. How does the product work on the customer side?

Yes, we have two key products. We have a regent roadmap, which enables farmers to quantify their current baseline, quantify point A, identify point B, what's the goal? And we help them to get there. It's $5 per acre per year, essentially subscription model to the software. And that just be like you're hiring that. health coach. And first thing to do is say, okay, well, let's check the vitals. Let's check our weight. Let's check our body mass index. That's what we do on day one. And then we say, okay, what's our goal

and what's our time frame? And then we put together the plan to get there. And we provide ongoing check-ins and our processes to enable that farmer to get there and make sure that we're focused on the risk and focused on the profitability. Yep. And then does that plug into existing measurement tools like existing iot systems i know there are some very advanced tools for measuring health a lot of it for right now you know it's our tool because the the systems that we're going out there and measuring which is our second business model which is okay do we do they have the existing data already for us to more holistically define that baseline or do we need to go to their farms and gather new data especially the soil health data that and how very many farms have we charge an average

a $10 an acre for that. And is that hardware? We built the system to bring it all in. Nope. So we collect the soil. There's some hardware that are new sensors and things like that. But today, the current system, as you go to the field, collect soil, mail it to a lab that has the hardware.

And we have all the data infrastructure to communicate with the lab and to communicate that lab data back to the farmer and back into their current decision-making process. Gotcha. Okay. So you're not in the hardware business. You are in the data collection business, and that literally is like, examine the dirt. We're the hub of the data. I know it's not cool to call it dirt, the soil.

Yeah, yeah, the dirt and the soil. But yeah, I mean, dirt is dead. Soil is alive. A lot of people, yeah, they're in dirt right now. We got to make it alive. I just got a bunch of tweets just for saying that. Yeah, yeah. No, that's perfect.

That's perfect. But it's being able to enable that. And I think what's really interesting is the amount of farms that are coming to the table now, wanting to go and get into this. I don't have, I don't know what the most recent data is, but last that I've heard across the U.S., there's only 4% of farms that are using cover crops, which is kind of the key that you've got to get to

to really get on this regenerative path. There's 30 some percent that are no-till, only 4% using cover crops. Wow. And so we have 96% of the farms that really need our help to get going. And even a lot of the farms that are the early adopters that have been doing these things like my farm. We've screwed up a lot of stuff.

We need to tell that story as well. So we need our data to be better enabled to communicate that story to the consumer, to the taxpayer, into the supply chain, wherever it needs to go. And we need to be more thoughtful and really hone in on what is our goal and

how do we push further and how do we get there? But especially these later adopters and big farms and stuff like that, they can't be as risky as a small. all farm like mine that we can be nimble and we can experiment, we can try new things. So now we're really at that point where those 96% of farms that need to figure this out, they've got to have success in day one. And that's what we enable.

So what does that sort of stair step look like? Because like you said, if you've got something that's working, even if it's not working optimally, you don't want to mess with it. Like how hard is it to get farmers to adopt new tech? It's been really, really interesting, especially over the last. 18 months even. And the key thing for us is we're not necessarily asking them to make a major tech play. Because a lot of the data that we're helping them collect, it's already, for the most part,

out there. We're just pulling it all together into our system where we can actually holistically help them to utilize the data. Right now, ag data is super fragmented. We've got to be able to pull it together to, number one, make better agronomic decisions, but also for this data-driven supply chain and for the blockchain enablement of the future and all this, we've got to have our data more cleaned up. We've got to have our ducks in a row. But the biggest thing on these farms has been a change of mindset on how they are approaching

farming and that understanding that the soil is alive and that if we enable Mother Nature to do her thing, then we're going to be more profitable. And that's been a major long, long journey here that, I mean, on our farm, we started doing no-till in 78. And, you know, it's been a 40-some year journey of being able to really get to this point where we are now. Now, we really didn't crank it up until 2016, even 2017, 2018. So the major gains have been just in the last couple of years now that we've got the data to be able to understand what do we actually got to do to make better decisions. And we're connected and learning from others and social media and stuff enables that. But that farmer mindset is what has to change. But what's been really

interesting to me is getting to those later adopters, getting to that next wave of folks on the adoption curve that are saying, okay, hey, I see it. I know the writing's on the wall. The government's putting a bunch of money to this. The financial sector is saying we've got to be carbon neutral, all this stuff. The money that wants to go into this is crazy. And right now, though, it's not necessarily flow into the farm. And it really is not enabled. Like the farm is not enabled to really make money on this right now. The money is sitting on the sideline waiting to get in, but how they want to participate, how they want their money to go in, namely via carbon credits, it's not, it's not ready yet.

It's not there. It can help. It's a cherry on top for the farmers, but that floodgate is not open and farmers are really very, very few have been paid. Very few have been paid anything significantly. Hold on. I want to untangle this a little bit because now you're, you're. talking about carbon markets, right? You're saying that if farmers large scale implement

these changes and their farms do become carbon sinks, carbon sequestration mechanisms, that they could get paid for that. So there's like a double benefit to the farmer who really goes all the way. They have 108% improved crop yield and they can potentially sell carbon credits as offsets. So long term sell. I know. I just want to like draw that line about what we're talking here. Well, but the long, okay, so it's a really good point. And we do need to break it down a little bit. Okay. So they're a part of what's driving the farmers to start calling me more rapidly is they're saying, hey, there's these carbon programs and all this money and I want to make sure that I get a little bit of it. And right now the carbon program, so they have really, in my take, which is I'm too aggressive at saying it, but I'm going to say it anyway, that these carbon programs are privatized costs. share. They don't really have anything to do with your carbon because the data and the tools

behind these markets were not designed for these multi, potentially multi trillion dollar markets. They're not designed for that. They were academic tools designed for some of these research plots and stuff and the data behind them is not robust enough. It's not updated. And it needs a lot of work. What we have to do is create more transparency for the farmer to be able to deploy the right data and collect the right information to quantify their actual carbon footprint. Today, I'm super deep into this, probably deeper than just about any other farmer in the country, and I have no idea what my carbon footprint is today. Because those systems are not there and not enabled for me to actually define my carbon

footprint. So what the markets are doing today is they're saying, well, those farms that are using tillage and that aren't using cover crops and that are using all this synthetic fertilizer, we'll just pay you to decrease tillage, add cover crops, reduce fertilizer, because those things help to decrease your carbon footprint. And we'll pay you in the form of a carbon credit,

which on some of the registries, nobody's actually gotten a registered, a registry verified carbon credit. Nobody's been able to do that. Norie has been able to get credits verified through their system, but as far as with Vera, gold standard,

climate action reserve, Nobody's actually created a verified carbon credit yet. And so that's what I mean by the floodgates really are not there. And for the most part, though, the issue is that it's not about your actual carbon footprint. It's about here's some practices that you can change, which hopefully help with carbon. But it basically incentivizes people to check the box, do the bare minimum because the payments are not enough. And the payments are just based on make as minimal of a change and spend as little money as you can. because you're getting paid just a couple bucks that don't pay for the change of practices,

but it's a little bit of a carrot that hopefully can get people to change a little bit. And then we're involved and we're helping those farmers to actually make the change, which is where we want to actually be, which the real money is in actually understanding these principles of soil health. And like I showed, our average customer last year saw a return of $106 an acre. That's real money. that's way better than 10 or 15 or maybe 20 bucks an acre, you're going to get on a carbon market

and it can be much more long-term sustainable. And also, I would imagine that for you, that builds a business that isn't necessarily, you know, one of the big fear points around investing in clean tech and ag tech after the kind of collapse of renewable energy investments in the mid-2000s was this fear that it was policy dependent. Yeah. And it sounds like what you're saying is,

we're building a business that is not policy dependent because obviously every farmer wants to have higher yield and make more money off of their farm. That seems like a really easy sell. And PS bonus, when this all gets figured out, there's an added value for you. Yeah, I mean, I hope it all gets figured out because I'm going to make a lot of money and my farmers are going to make a lot of money if it does get figured out. And I'm, and we're really pushing on that. You know, the USDA has deployed a new grant offering for a billion dollars worth of grants

to help to figure out climate smart commodities. We're applying for one of those grants. We're involved. We want a lot of our partners and stuff to be able to get some of those dollars to so we can deploy those two family farms and to the right folks that can really help to make this happen and not take it from being academic and put it into practice with the right farmers that are really doing it. So that's what we're pushing on.

But yeah, I mean, overall, I think that's where I'm just seeing the just normal farmer coming to us saying, hey, I need to position myself to make more money no matter what, no matter what's happening in D.C., no matter what these companies are wanting, but that the writing's on the wall that, hey, there's a better path of farming, and it's reducing tillage and using cover crops and using biology to help us to be more profitable and to feed the world better quality. And yeah, it also, just by happenstance is done with a lower carbon footprint and better for water quality and better for the consumer. And that's great.

And they're going to want us to do it more and more. So let's get in position to capture as much of that opportunity as we can and get ahead of the curve to be in the right position. So what do you say to in our last minutes here, what do you say to investors and potential founders who might be scared off by this segment, you know? I think this is one of the hottest places that you can get into. but especially on the investment side, hey, this is early.

There's opportunity to get in early. Know that, hey, this is not fully developed. Like, I've got some of these groups that I work with that would love to put in hundreds of millions, you know, into the billions of dollars towards this kind of stuff. That's not really there yet. So help us to get this going on an earlier standpoint

so we can get to that point where we can deploy real money and really be able to get this to scale. So at this point, you know, there's a lot of need for better enabled data and for these, the calculation stuff that we're building. We need sensors and better technology for verification and for easier, more cost-effective quantification. There's some need for that. There's some pretty cool tech companies and some of our buddies and stuff that are building startups and stuff in that space.

And yeah, I mean, agriculture being part of the solution here is a good spot to be in. And everyone's got to eat. It's a long-term kind of play here. And we've got to be able to feed people in a more regenerative manner. Agriculture today is 10 to 12% of the U.S.'s carbon footprint. But it's one of the few sectors that has the ability to actually be carbon negative, to offset its own carbon footprint plus out of others. That's very exciting.

but we got a long way to go. And in order to make it actually happen, we've got to enable the farmers to understand their actual impact and their actual goals and stuff. So US farmers are the best in the world because we know what the scoreboard is and we know how to make yield.

And that's been, the driver of success has been yield. And there's TV shows about it, there's contests about it, there's tons and tons of money going into chasing yield. Until we can enable farmers to quantify their carbon impact and be paid based on optimizing their carbon impact, until we can enable that to happen, this isn't going to work. We've got to enable farmers to be creative, get them paid based on innovation.

When that happens, we're so competitive as farmers and we want to win and we want to have bragging rights at the coffee shop and stuff so much that we'll do it. And if we can be enabled with being rewarded based on those outcomes, is going to blow up and it's really going to be able to go and farmers are in the right position to make it work, but we've got to enable the farmers be paid based on innovation. They have to be able to choose how far they want to go and how fast. We can't do it with regulation or else all it's going to do is hurt small family farms and and we've got to be able to make sure that the farmers are getting the right advice so that they don't chase the carrot and go broke doing it. Mitchell, where can people find you because you are not just a farmer and a startup

founder, which are both really hard and extremely time-consuming jobs? You're also a podcast and evangelist. Yeah, we've got the podcast stuff. So the fieldwork podcast is produced by American Public Media. It's a really good one, all in sustainable ag. The Topsoil podcast is my personal podcast. And then all over social media, At Continium Ag, Continium underscore Ag on Twitter. continuum.ag is our website. Hopsoil.ag is our software, and it's free to check it out. And yeah, I mean,

I'm pretty easy to find through looking at me or a continuum. But I mean, I think it's key that my perspective in this is really unique, that I do it on my own farm and I own farmland and I'm actively doing it on the farm. I'm an agronomist helping other farmers do it. I'm a tech entrepreneur helping other consultants,

globally do it, then I'm involved in the registries and that wrote the rules. I'm involved in the policy side. I'm involved in the very large companies and the Fortune 100 side that's, you know, helping to drive all this. And so I understand why things are the way that they are. But I also understand a brighter future is what's needed. And yeah, definitely encourage everyone to hop on board and let's go do this. Mitchell, as we like to say in my family, getting after it.

Mitchell Hora, thanks so much for the time. Appreciate it. I love that. Thanks. Hey, everyone. Producer Nick here. I want to tell you about the SaaS Syndicate. If you're a founder of a SaaS company with a product and market, our investment team wants to talk to you. Head over to the syndicate.com slash SaaS, S-A-A-S to apply to raise from the SaaS Syndicate. And you can join Jason's Syndicate of over 9,000 accredited investors at the Syndicate.com. Producer Justin here.

No cool startup? check out openscouting.com where anyone can refer a startup to our investment team here at launch. Even if you don't know the founder, if you're the first to flag a company for us and we decide to invest, you'll get 5K in cash or 10% of our carry. Hey everybody, producer Rachel here. Are you an early stage startup that has product and market, some traction, and are looking to raise at least $500,000? Apply today to Remote Demo Day for your chance to pitch to over 9,000 investors in Jason's

syndicate. submit your application at remote demoday.com. Our next event is on April 27th. And if you want to learn how to invest in startups from the world's greatest angel investor, and no, we're not talking about Chris Saka, then head to angel.combe to apply. The four-hour workshop costs $300 and all proceeds are donated to charity. To date, we've donated over $175,000 to various charities,

and you can see the full list at angel. dot university slash charity.