Chris and I are big believers in agriculture. We all have to eat, and every year there are more and more of us crowding onto this big ball of dirt.
Agriculture is a dynamic industry with many moving parts. We’ve discussed some diverse ways to play it, including bioplastics and greenwashing. At the base level however the primary ingredient is dirt, the medium that nourishes the entire process.
It’s no secret that we’ve been depleting our soils ever since the advent of modern farming. This depletion has a direct impact on our ability to produce enough food to feed us all. The potential solutions are the subject of much debate, with big ag on one end and mom and pop organic producers on the other.
One of the main culprits is a practice called tilling. Simply defined, tilling, or tillage, is the agricultural preparation of the soil by mechanical agitation. This includes digging, stirring, and overturning. It turns out it’s not a good thing.
Of course there are many other factors that play a role in soil depletion, including: fertilizer use; herbicides and pesticides; and mono-cropping.
In our efforts to try and find ways to capitalize on the inevitable innovation that will help solve this problem, we came across an interesting company that recently went public on the Canadian Venture Exchange. Clean Seed Capital Group (CSX.V) has only been public for about 2 months – it’s still under the radar.
The company is pretty tightly held, with management controlling over 50% of the shares in escrow. As you know we like deals where management has a big stake.
I had a chance to speak to Graeme Lempriere, CEO, President and Director.
Mark: Your background is quite diverse in terms of the types of industries you’ve worked in. A lot of your focus seems to have been on corporate finance, restructuring and executive management. You founded Marvelle Capital Group, a private business development and venture Management Company that invests capital and management expertise into early and mid-stage companies. Tell us a bit about Marvelle, and given your current responsibilities (which we will get to shortly) are you still involved in Marvelle today?
Graeme: Marvelle Capital Group is as you appropriately describe in the first part of your question a private business development and venture Management Company. I continue today as CEO of Marvelle Capital. Currently Marvelle predominantly focuses on the evaluation and investment side of the equation for Clean Seed Capital, and is the largest shareholder.
Mark: In 2006 you formed Vesco Agricultural Technologies and acquired the rights to a No-Till farming technology. Vesco invested heavily into that technology, over $5M, and now has several worldwide patents protecting the IP. Tell us what got you interested in sustainable agriculture, and Vesco’s technology in particular?
Graeme: My family have been advocates of sustainable agriculture for over 25 years, and I have personally witnessed the evolution of the design and development of the company’s No-Till technology. My personal business development experience, in addition to evaluating countries with agriculture production challenges, solidified the obvious compelling need for new initiatives and change that ultimately set me on a course to form Vesco Agricultural Technologies and acquire the intellectual property and related patent portfolio.
Mark: Recently you formed Clean Seed Capital Group and took it public on the Venture Exchange in Canada. The company’s initiative is to identify solution-driven, sustainable, environmentally responsible, agricultural-based companies that require a strategic partner to facilitate their progress. It seems like an “incubator” for companies in your target niche..? What expertise and services will Clean Seed provide in addition to capital?
Graeme: Clean Seed Capital’s long term ambition is to play a meaningful role in Sustainable Agricultural through diversity; however I want to be very clear, the acquisition of Vesco Agricultural Technologies was our primary objective in parallel with securing the necessary funding through our successful IPO to advance the business.
100% of our efforts are currently focused on maximizing shareholder value by launching and introducing the No-Till technology of Vesco into the agricultural community. As the company evolves we expect to be in a position to evaluate synergistic business opportunities that share our vision of a sustainable future in agriculture that will have a meaningful and positive effect on current food production systems, and ultimately expanding the assets of the company.
Mark: You’ve structured Clean Seed with a very tight share structure. The market cap is under $7M as we write this. It seems you have a lot of room to grow that market cap.
Graeme: I believe that the Vesco Agricultural Technologies portfolio is significantly undervalued today, and I trust when our No- Till technology is launched next year the asset value will be greatly enhanced and should be reflected in the share price.
Mark: Sometimes the market has trouble properly evaluating incubators. In the case of Clean Seed and the Vesco acquisition, with Vesco being the company’s only asset besides cash, valuing the business isn’t very complex at this point. In the future, as you add companies and assets, how do you tell the story to gain maximum traction and valuation from the market? In other words, how should investors approach a valuation of Clean Seed?
Graeme: Currently investors can evaluate the company based on the assets of Vesco Agricultural Technologies, our treasury in addition to our ability to access capital markets if necessary in the future to facilitate growth. As mentioned previously I feel strongly that once we launch our technology the ongoing evaluation will considerably change.
It is early days yet, we have only been listed on the exchange for 60 days, and we are in the process of developing our marketing programs, in addition to expanding our influence in the sector by aligning Clean Seed Capital with synergistic groups. Evaluating Clean Seed in the future will be based on the success we have implementing our business plan with Vesco.
Mark: You’ve added a few team members with strong agriculture backgrounds, but for the most part management’s expertise is mostly in corporate finance and executive management. We find that management is always the most important factor for the success of a business. What makes Clean Seed’s team uniquely qualified to create shareholder value in this space?
Graeme: Executive management and corporate finance are the cornerstones of a business; however we recognize the immense value of industry expertise. One of our ongoing objectives is to surround the company with respected, experienced individuals that can play a pivotal role moving forward. The recent addition of Dr. Kwesi Opoku-Debrah, PhD as VP, International Agricultural Development & Director, Vesco Agricultural Technologies reflects this objective.
Dr. Opoku-Debrah is a highly accomplished scholar, educator and entrepreneur, he holds degrees in agricultural economics, international agriculture, and adult, continuing and extension education from Cornell University, USA, and Kwame Nkrumah University of Science and Technology, Ghana.
Among his many achievements he served as the Agricultural Team Leader of Evaluations for World Vision and USAID, local consultant to the World Bank, and the Rome-based International Fund for Agricultural Development He has worked in similar capacities with a number of other major NGO and governmental institutions that specialize in providing development aid to African nations.
As we evolve the company will source expansion management as required based on our growth. Our current team have the capacity to execute the company’s mandate for the near future, however we do intend to add a few key industry people just prior to our Technology launch.
Mark: Tell us about your collaboration/partnership with the University of British Columbia. Does this relationship focus on Vesco, or is it a general partnership with Clean Seed?
Graeme: The collaboration agreement is primarily focused on Clean Seed Capital, however there will be some programs for Vesco. The primary purpose of this collaboration is to establish a long-term, mutually beneficial cooperative relationship between Clean Seed and the UBC Center for Sustainable Food Systems.
The secondary purpose of this collaboration is for each party to foster mutually beneficial relationships between other related parties. Clean Seed intends to foster relationships between UBC and Clean Seed’s contacts in the Developing Nations agriculture academic community, and UBC Farm intends to foster relationships between Clean Seed and UBC contacts in the private sector business community and the agriculture academic community.
Clean Seed’s short-term interest is to measure displacement of soil using our No-Till technology, thereby confirming that our patented Terra-Glide system exceeds the commonly accepted standards for No-Till agriculture.
We feel privileged to have this academic alliance with UBC and believe that the benefits are compelling and clear. Clean Seed also wishes to facilitate a partnership between UBC and Kwame Nkrumah University of Science and Technology, Ghana, Africa. Whereby our Vesco No-Till equipment will play a central role and will serve as a catalyst for a broader long-term association between the two educational institutions and agriculture in Africa. Our Developing Nations Technology initiative begins in Africa.
Mark: Farm equipment sales are forecast to rise to US $91 billion by 2015. In regards to Vesco, what are your immediate plans to add value and get this technology to market quickly to capture market share?
Graeme: We are planning to establish value-added commercial-scale advanced demonstration projects within established frameworks for No-Till farming. These projects have been designed to provide high-visibility near-term, mid-term and longer-term opportunities to demonstrate the commercial and agronomic properties of our No-Till technology. These exhibition projects will be used in market launch and wide-scale commercial deployment. The projects will also provide further empirical evidence and commercial milestones that will be reported to media and industry stakeholders.
We are also planning to conduct on-site visits to demonstration sites over the course of the 12-24 month early commercialization period. Site visits will be hosted in small groups with presentations geared to respective interests of group members. One-on-One in-field site visits are planned for the following stakeholder groups: prospective buy-out targets, manufacturers, distributors, licensees, end users, strategic partners and media. We anticipate one-on-one visits will generate important stakeholder interest to be used in refining our wide-scale commercialization strategy.
Concurrent with the demonstration projects, we will show our No-Till technology at major farm machinery tradeshows in Canada and the United States, and further demonstrate the technology at Company-organized field demonstrations and workshops. The intent is to build enthusiasm for our equipment (based on the launch activities), our proprietary technology and the field demonstration programs. On a controlled basis, machines will be sold to strategically important customers in tactically important regions.
Mark: This seems an obvious question, but how important is Vesco’s success to the validation of Clean Seed’s overall business model? In other words, is Clean Seed’s ultimate success hinged solely on Vesco’s success?
Graeme: The success of Vesco is paramount, once we have demonstrated that Clean Seed Capital has the ability to discover, develop and introduce technologies to market that can play a meaningful role in sustainable agriculture we will solidify our standing in the industry and enhance shareholder value.
Mark: Finally, have you identified other acquisition candidates, or technologies that you would like to go after at this time?
Graeme: We are evaluating complimentary business opportunities at this time however we are not in a position to disclose them.
Mark again… You can do further due diligence at the company’s website at: http://www.cleanseedcapital.com.
Chris and I don’t currently own shares of Clean Seed, but we may be adding some soon.
“The farmer works the soil, The agriculturist works the farmer.” – Eugene F. Ware