AcreTrader, which is trying to make it easier to invest in United States farmland, closed on a $5 million seed round of funding.
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Leading the round for the Fayetteville, Arkansas-based online farmland investing platform was RZC Investments. It also included Revel Partners, the company’s founder, and private investments from technology, finance and agricultural leaders.
Proceeds will go toward expanding investment offerings, improving investor education about farmland and continuing to scale operations to support surging demand on the platform, according to AcreTrader’s founder and CEO Carter Malloy.
“We want to expand our due diligence process, which is very important,” he said. “We look at 100 to 200 farms per week and talk to that many farmers, and we may find only one farm to put on our platform.”
The company has 20 employees, and Malloy said AcreTrader is actively hiring to help manage the platform’s user base that is increasing 20 percent to 30 percent each month.
Farmland investing typically has a high barrier to entry, largely in part because of the difficulty in identifying parcels of land, many of the deals require large capital in the millions and knowledge of farm management, Malloy said.
“It can be a difficult transaction, especially the due diligence,” he said. “What we do as a company is provide a truly passive transaction for the investor: we do the diligence on the farms, and help an investor make an investment in under five minutes.”
AcreTrader also then handles all aspects of farm management, reporting and administration. The investors are able to receive annual distributions from farmers renting the land and can also capture land value appreciation when the land is sold.
Farmland investment platforms are gaining traction. San Francisco-based FarmTogether raised a $1.8 million seed round in January 2019, and in March of this year was selected to join the EvoNexus fintech incubator.
Meanwhile, in February a report on farm investment by Motley Fool said the main reason investors are seeking out farmland is due to “a long history of producing solid returns.”
Investors make money on farmland in two ways: the first is annual rent from farmers, and the other is appreciation in asset price, Malloy said.
“Farmland has incredibly low vacancy and turnover,” he said. “Meanwhile, asset prices consistently grow over time due to supply and demand. In fact, we are losing three acres every minute. At the same time, our population is growing and there are more mouths to feed.”
Illustration: Katerina Sisperova