I recently connected with Audrey Epp Schmidt (Director of Business Development) and Harrison Greene (Chief Investment Officer and Co-Founder) of Propagate Ventures.

 Propagate Ventures helps farmers, landowners, and investors make regenerative agriculture work for them by balancing short-term income with long-term returns.

Propagate makes it easy for investors to fund low-risk agroforestry projects, while helping farmers increase profitability, through their analytics and project development platform. Propagate is a Techstars-backed company, and a portfolio company of Elemental Excelerator.

With Propagate Ventures, farmers become more resilient, and investors earn great returns while building the next generation of regenerative farms.

Typically, these projects add tree crops to farmland. So why is this relevant to golf? That’s what we endeavored to find out.

Heading into this conversation, I knew that the typical golf facility includes about 30 acres of natural and out-of-play areas. Golf in the US alone comprises about 2.3m acres in total (or over 5m acres globally), and while I love the game, I also know that a golf course is not always an efficient use of land. Golf is often a monoculture in more ways than one. Yet, golf also wields a perfect opportunity both to increase the number of plant species on the course, and the diversity of people that get to use the land.

So how might plant diversity increase economic and social diversity?

Possibilities for combining agroforestry with golf could include:

• Reducing costs (by leasing underutilized land, with the option for a third-party to buy-out)

• Diversifying revenue streams (and mitigating risk in a cyclical industry)

• Maximizing land use efficiency

• Providing a tax benefit to golf course operations through agricultural zoning

• Creating ecosystem services (e.g., tree roots can improve water cycling and nutrient management)

• Improving biodiversity; and

• Telling a story that helps golf attract new groups to the game

Simply put, if operational costs can go down, then green fees and membership dues can also decrease, and the number of people enjoying the game might increase. At scale, that benefits everyone. More rounds played, more equipment sales, more golf lessons, etc. – and increased climate resiliency. By converting out-of-play areas into profitable enterprises, perhaps golf hazards could help mitigate one of our ultimate existential hazards: climate change. If golf doesn’t have the physical scale to do so, then it certainly has the economic and social influence (or visibility) to help lead such solutions.

Here are excerpts from my latest conversation with Harrison Greene:

How would you explain Propagate’s platform in simplest terms? What are its main advantages to farmers, growers, landholders, and investors?

Propagate Ventures is an agroforestry analytics & project development platform. They make it easy for investors to fund low risk agroforestry projects, while helping farmers increase profitability.

Their platform simplifies the financial, business, and technical services that farmers need to integrate fruit, nut and timber trees with agriculture, in row with existing operations. Propagate's streamlined deployment and underwriting process serves as a due-diligence funnel that quantifies risk and identifies investment potential.

By supporting farmers and landowners in accessing the operational know-how, workflow tools, and capital needed to succeed in regenerative agriculture, farmers and landowners become more resilient, and investors earn great returns while building the next generation of regenerative farms.

Once a project is “de-risked” with our analytics platform – i.e., the costs, revenues, yields, labor assumptions, etc. are de-risked over a 30-year time frame – then it sets up the system to be funded either by the farmer and/or landowner themselves, or third-party capital (consumer brand to an NGO or actually an investor). Securitizing the tree-assets takes a page out of the playbook of the solar industry.

Our platform also allows users to log-in and explore rapid prototypes on alternate land use. With golf courses, timber plantations might be the easiest system to implement. Chestnuts would also be a relatively low maintenance option. Chestnut harvest equipment looks just like what you might use for golf ball retrieval.

Could you securitize the agroforestry projects? In the case of golf, you have management companies that own 600+ golf courses. Is that a logical way to scale?

Bingo, you got it. It would be very similar in that regard. We bundle projects into funds that are diversified across crop type and geography – so chestnuts in New York can de-risk chestnuts in Tennessee.

And who have been the investors in these projects? Might some investors look for a larger scale project, or perhaps to invest in a bundling of projects?

It varies. The types of investors could include family offices, to funds, to funds of funds, to angels.

Could you speak to the typical costs? And what are those costs going toward?

The costs are going toward everything required for that system to break-even, whether that’s pruning, fertilizer, mowing, all the labor that’s required, and then all of your various inputs.

The size of the typical project is between $0.5 - $2 million let’s say for a 25 to 200 acre system. That would be a mid-sized to larger-end project. A fund of projects might be up to $50 million.

So in a word, maintenance is what costs go toward?

Yes, it would be similar to managing trees on a golf course but with the assumption that those projects are harvestable and going to provide a 7-20% IRR over the long-run.

So whoever finances these projects is able to own these tree-assets by financing what’s required to break even?

Yes.

What are some common concerns/barriers/hurdles? What have been your key challenges and also could this model create any potential unintended consequences or conflicts between stakeholders?

The challenge has been communicating the long-term value that’s there in agroforestry. Most of the time farmers are looking for that annual cash yield, and the lag-time to break even is what has brought us to equity financing these systems. We make it clear what it takes to get a system to break-even and then we create avenues for an exit in case someone needs to re-allocate their capital break-even. For example, with timber, even if there hasn’t been a harvest yet, you can sell standing timber. You can still buy and sell tree assets before the project reaches maturity.

It seems like the platform is really about minimizing uncertainty – projecting out capital needs over a 30-year time frame to ensure profitability and minimize risk.

Exactly.

And where does the operational know-how come from? Does your typical model train landholders in agroforestry solutions or would you more typically bring in an outside partner to manage the land separate from its original owner?

The answer to “do we train folks?” is yes. We have a strong internal knowledge database of how to operate these systems. A lot of this knowledge comes from traditional agronomy sources like universities but more so from farms that are actually managing these systems. If we understand how chestnuts or black locust timber are managed in five different contexts in three different countries, then synthesizing that information and creating a malleable model allows for a lot more certainty in management.

And I imagine that context is only growing across time as you develop new projects and partners…

Yes, exactly.

What scale and time frame is typically needed to make an agroforestry project profitable? We discussed 30 acres as a baseline for a typical golf course’s out-of-play areas, but what’s ideal?

It depends on the crop type. If you have 2 acres of blueberries, and they can be sold direct to retail then you can make that work. If you have 40 acres and you want to harvest those blueberries mechanically then that’s a step up.

With chestnuts, the minimum scale is probably about 15 acres. And with short-rotation timber, you do gain economies of scale with additional acreage, but it does also scale down to provide pretty reasonable returns with lesser acreage.

When we’re working with farms, 75+ acres is pretty good. Because of the spacing of trees, we might need a more expansive use of land in some instances.

So in short summary, it depends on crop type, type of land use, etc. With golf courses that would vary pretty widely. In the US alone there are over 14,000 golf facilities and over 16,000 18-hole equivalent golf courses, and each of those is a pretty unique ecosystem. How does Propagate fit the right agroforestry system to location?

A few different things. First is climate type or geography. Northern Vermont would be very different from Tennessee. Next would be access to markets. Say, if there’s a chestnut cooperative down the road, it’s going to be a lot easier to sell – or a sawmill down the road in the case of timber. Third, access to labor for managing these systems. But if most golf courses are in urban or suburban areas then that wouldn’t be a huge challenge. Lastly, the atmosphere of the golf course. For example, public courses and private clubs likely have different mission statements, clientele, and land-use flexibility.

Regarding access to markets, I’ve spoken before about how golf courses are almost invariably located in a residential or resort setting. Would it make sense to establish the golf course (let’s say a resort) as a guaranteed buyer? Could it mitigate risk?

Yes, that’s something we try to do in our projects. To set up a guaranteed buyer. There’s a path to market creation in each model, ranging from guaranteed buyer (and that’s what we optimize for – most projects are working toward that) to increasing marketing expenditures. We’ll have to increase marketing expenses to achieve a desired return if we can’t find a guaranteed buyer.

I would think that with a golf course you even have marketing built-in with thousands of people visiting each week. It’s all very context-specific of course but it seems like there are infinite possibilities for combining agroforestry and golf. What benefits and what challenges might you imagine for golf courses in implementing Propagate’s agroforestry solutions?

The top-of-mind benefit is always revenue diversification. Transforming underutilized spaces (out of play etc.) into productive tree systems is a huge opportunity. Ecological resilience is also a boon. I’d have to look into what compliance and regs look like for a specific course, but well-managed trees are excellent for augmenting stormwater and runoff management.

I could see golf courses implementing willows, poplars, and other species that uptake nutrients to help with absorbing runoff. Trees uptake 3-9x as much runoff as does grass alone. Organic fruit crops might present different challenges with chemical use, but a 30-foot buffer is the standard and usually does the trick.

On that note, one obvious challenge might be compatibility with chemical use. Some herbicides pretty reliably kill broadleaved plants, but minimizing contact is largely a solved problem.

Another key opportunity would be to take advantage of agricultural zoning – there’s often a huge tax benefit relative to commercial zoning.

Overall, the opportunity for golf is to take an underutilized piece of land and turn it into a profitable enterprise. Having multiple streams of revenue can also help to build resiliency and minimize risk.

Additional Agroforestry Resources:

Short Videos:

What is Agroforestry?

A Forest Garden With 500 Edible Plants Could Lead to a Sustainable Future

Articles:

Agriculture and Forestry: 5 Ways Agroforestry Can Work For You and Your Land

Project Drawdown - Multistrata Agroforestry

Soil Association - What is Agroforestry?

RESET - Agroforestry and its Benefits

Food and Agriculture Organization of the UN - Agroforestry Systems