Propagate founders started out driving across the country and listening to farmers and landowners. Five years later, their company has 21 people, 140,000 trees planted, and is in a partnership awarded $60 million by the USDA’s Partnerships for Climate Smart Commodities program.
We spoke with Ethan Steinberg, founder and CEO of Propagate.
Tell us why you started Propagate.
We started Propagate in 2017. Jeremy, Harry, and I found our way to regenerative agriculture for personal reasons. I'm diabetic. So, I pay attention to what I eat closely. Jeremy and I were interested in healthy, organic, and nutrient-dense food as medicine.
Harry looked at healthy food from an athletic perspective because he was an Olympic hopeful. My joke is that it literally made him run faster. Our experience opened our eyes to the idea that “Hey, if we can go to the grocery store and demand nutrient-dense, organic food on the shelf … why didn’t that same demand exist for the landscapes where our food is produced?”
How did that “why” lead to the idea behind Propagate?
Building Propagate tied into each of our backgrounds differently. Prior to Propagate, I worked with startups and helping large consumer-facing brands on sustainability initiatives. The most impactful initiatives with food companies involved a genuine, direct connection to the farm and the health of landscapes.
Jeremy spent his time with Fortune 500 companies running User Experience projects and working on veg and dairy farms. Harry worked with Ben and Jerry's, ran a nursery, and worked with grass-fed beef operations.
We founded the company in 2017 when I got a phone call from Jeremy. I was working with Super Bowl 50, helping with their net positive campaign. Jeremy called the day of the game, and I hadn't slept in ten days while dealing with all the engagement stuff happening on the ground in San Francisco. He said, “Hey, I've been working with this gentleman, Harry, on agroforestry. How familiar are you with regenerative agriculture and permaculture? I want to find a way to finance trees on farms.”
I said, “Okay that's gonna be difficult. How do we plan to pull this one off?”
Jeremy, Harry, and I met and put sticky notes up on the whiteboard. “What are the key elements? Where can we do customer discovery?” Then, Jeremy and Harry got in a car and drove around the country. They sat down with farmers, some with name recognition in the regenerative space and others who were just excited to sit down with us.
There is an economic opportunity here but, what drives a lot of our passions, is the impact agroforestry could have on carbon sequestration, biodiversity, and water quality. We realized we could deliver on both economics and environment in an effective way.
But farmers were hesitant to adopt practices like agroforestry. So, Jeremy, Harry, and I asked, “Why not trees? What's keeping you from planting them?”
We learned two key hurdles facing farmers and landowners were the design challenges such as what types of trees and where they go, and the need to understand the economics for managing an agroforestry system including projections for costs, revenues, yield, and labor. We also knew climate models over time were important.
Our idea was to build a software solution to deliver this information and build a business around that.
How did you take your idea from the whiteboard and customer discovery to reality?
We launched the business around building the agroforestry system. That included on-the-ground technical expertise, supply chain management, and procurement of the tree stock. This approach helped us continue customer discovery and led to developing our farm services unit. As the team thrived, we started building internal tools, which matured into Overyield, the software we offer.
Based on our customer discovery, financing was the biggest barrier, and possibly the most impactful issue to solve. The average farm doesn't have enough free cash flow to invest in these activities over a 10-year period. We needed to build a bridge. “How do we help make this capital more available? How do we reduce risk for a capital provider?”
Some of that risk can be reduced with the farm services piece for operations and maintenance and driving more implementation guarantees. Managing risk also requires capturing enough information upfront. Our software, Overyield, helps us make more informed decisions. We can be transparent about the realities of what’s happening as the transition to an agroforestry system occurs and what that means from an economic and farm management perspective.
We brought Overyield to the market in the last two years as part of our holistic solution, packaging the design and planning tools, technical assistance, and financing. Propagate helps trees stand as a pillar within regenerative agriculture by providing the resources and capacity for agroforestry farms to grow.
Access to capital is a challenge, especially for agroforestry operations with diverse crops that take time to generate profits. How does Propagate solve the finance gap?
With Agroforestry Partners, a project finance model we launched at the beginning of 2023, landowners can be paid through a lease structure. So, there's payments coming in year one to adopt these practices. This makes it possible to get these systems planted and managed. The costs are covered over ten years through equity investors. The investors then see a return after that ten-year window. Landowners can be paid right off the bat and not have to sit for ten years, especially if they are already operating on thin margins.
So, tell us about the Climate Smart Commodities Partnership project.
We started working with our network and The Nature Conservancy to bring together strategic players for an end-to-end solution to be backed by the federal government. The partnership includes the whole value chain: operational partners in key regions, offtake partners, consumer brands who have an interest in decarbonizing their supply chain, technical service providers, and financial entities like agricultural lenders or our capital solution, Agroforestry Partners.
Our partnership was awarded a $60 million grant. The project looks at key regions across the United States where agroforestry is applicable. So, the Northeast, Southeast, Upper and Lower Midwest, Mid-Atlantic/Appalachia, and Hawaii. Operational partners can leverage the infrastructure that Propagate built and turn on an agroforestry system in those regions.
Part of the money will be incentive payments to landowners. The project will put resources in place across the value chain to implement and to finance and for offtakes. The goal is to plant 30,000acres of agroforestry with USDA support in the next 5 years.
How will the Partnership help Propagate?
I go back to that first time Jeremy, Harry, and I were sitting at the whiteboard and running this exercise of, “Okay, here's where we are today to structurally exist. If things were 10x’d,what needs to structurally exist? If things were 100x …” One of those sticky notes on our board was policy support at a broad level. The Climate Smart Commodities piece is going to be impactful. My hope is that it continues to inform the way we evolve, that we can showcase traction, and it snowballs and gets better and better over time.
What have you accomplished in the first five years and where do you hope to go in the next five?
We have a bit more than 30,000 acres in the Overyield app. Just less than 10 percent of that is acreage the Propagate team manages. We started as a team of three, and we're 21 now and growing. We've planted roughly 140,000 trees to date with the pipeline to put another 750,000 in the ground over the next few years.
When we get to that million mark of trees planted, hopefully, we're doing more than buying a cake for the team. It's a huge milestone with impacts that'll be felt in a positive way. Seeing that traction has been great over the last five years. There's naturally more ahead as the Climate Smart Commodities Partnership piece comes to life.
Learn more about the Propagate agroforestry solution and their Climate Smart Commodities Partnership grant at Propagate’s website. This interview was edited for length.