I am very excited to share the news that Western Growers and Reservoir Farms have signed a three-year agreement that extends the strategic partnership and raises the capital commitment from $250,000 to $1.5 million. This is the largest investment the WG Innovation team has made in automation, and the Reservoir Farms partnership is the most strategic relationship for the WG Innovation team and for Western Growers.
What Danny Bernstein and the team at Reservoir have put together in about two and a half years has been amazing and impressive to watch, from the first location in Salinas that is now open to the second location in Sonoma (also already open) and the upcoming Merced launch later this year. These facilities are not trivial to build or operate. Capital and expertise is required on several fronts to pull all of this together.
The deliverables are aligned with Western Growers key objectives: demo days, tech validation, and sponsored residencies at Reservoir Farms all line up with the WG Innovation team’s objective of reducing the capital and time needed for startups to get to MVP (minimum viable product) or Product 1.0. Current estimates are that for many automation startups it takes $50-100M to get to early stage commercialization. With the 70% drop in AgriFoodTech VC from 2021 ($54B to $16B) and the shift to 78% on B round and later, the need for significant improvement in capital efficiency (and doing things faster helps you need less money) is becoming ever more clear.
Reservoir Farms helps by providing 15-20 startups at each location with shared R&D space for developing automation solutions, shared ag equipment including John Deere tractors to test the equipment as it is getting build, and shared acreage to run trials on when the equipment is ready. Each Reservoir Farms member should get to the next product stage faster and cheaper than if they had not joined Reservoir Farms. When Reservoir Farms gets to three locations later this year in Salinas, Sonoma, and Modesto, that will be roughly 50 startups across three different sets of crops and regions that are saving time and money on R&D and trials.
This deal is a win for startups that get things built cheaper and faster. It’s a win for Reservoir Farms because they establish themselves as the preferred location for commercializing specialty crop automation solutions. It’s a win for Western Growers because we have partners at Reservoir Farms and John Deere that share our vision of having regular field day events on site to show off the tech around ag operations narratives. Look for us to up-level the field day events space with a lot more math and a consistent set of narratives that goes through the entire process of a growing season, the economics involved, and the improved economics that AgTech solutions can deliver.
In addition to field days, we are adding a new technology validation tool to the specialty crop toolkit. The WG Case Studies that Ben Palone has developed working with some of our largest Western Growers members and their operations team in coordination with startup teams at Carbon Robotics, Stout Industrial, and Cal.NET are the gold standard for AgTech evaluation, and we have three more in the hopper to release this summer. For those startups that are not yet ready for that level of detail and economic analysis, Reservoir Farms is going to conduct Tech Validation studies for feedback to Reservoir Farms members based on Reservoir and WG member feedback. These reports will be tremendously useful in getting the startups focused on the right stuff to push hard for commercialization and scale.
There is much more to be done in the tech validation space. Every Accelerator and Incubator can be doing more in this space to help their investment portfolio deliver returns. Every investor in the space can be working on items like this to help the 700+ automation startups prove they can commercialize or understand why they are not ready and what they need to change.
Finally, Western Growers has a number of sponsored Reservoir Farms membership slots that we will use strategically when we identify automation startups that could benefit from the sponsored slots. We will be opportunistic on this and are always on the lookout for startups that are approaching a break-out moment. Ideally, our sponsored spots can help be a catalyst that pushes some startups further faster. That’s why we built them into the agreement.
The Reservoir Farms marks a big double down on the existing Western Growers, Reservoir Farms, John Deere three-way partnership and goals are completely aligned among all three parties. Now that the agreement is done, it’s time to get back to work and start doing the grind to help the startups … so they can help the growers!