Carter Malloy On Raising $80 Million To Help You Invest In Farmland

Carter Malloy decided to leave Silicon Valley when he launched his startup. A proptech venture that has already raised $80M in venture capital. The company, AcreTrader has attracted funding from top-tier investors like Drive Capital, RZC Investments, Narya Capital, and Anthemis Group.

In this episode, you will learn:

• Successfully pitching VC investors
• Carter Malloy’s top advice when launching a company
• Creating and measuring company culture
• Starting up in highly regulated industries

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For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).

Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.

About Carter Malloy:

Carter grew up in an Arkansas farming family and has had a lifelong passion for agriculture and investing. Before founding AcreTrader, he spent five years as part of the founding team of a successful global equity investment firm. Before joining in 2013, Carter was a Managing Director with Stephens Inc., a large private investment bank, where he was an equity research analyst focused on the Data & Analytics and Property Technology sectors. Prior to Stephens, he owned businesses focused on internet marketing and sustainable fuel technologies. He graduated from the University of Arkansas in 2004 with a bachelor’s degree in Physics and has previously held Series 7, 63, 86, and 87 licenses with the Financial Industry Regulatory Authority (FINRA).

Connect with Carter Malloy:

• Crunchbase
• LinkedIn
• Twitter

Read the Full Transcription of the Interview:

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Alejandro: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have a pretty exciting a founder. You know it saying one of those interviews that that I’m I’m I’m fascinated with what he he has built and with this story I think that we’re gonna be fine. It quite inspiring. You know, building scaling financing also now the way that he’s pooling. You know the farmland with investors I mean it’ is remarkable. So I guess without farther ado let’s welcome our guest today Carter Malloy: welcome to the show.

Carter Malloy: Thanks for having me and thrilled to thrilled for the conversation.

Alejandro: Um, so originally born and raised there in Arkansas so give us ah a little of a walk through memory lane. How was life growing up.

Carter Malloy: A lot of fun I spent ah a lot of time outdoors I was born in a farming community here in Arkansas in what we call the delta and and then grew up in the quote unquote big city of little rock going going back and forth to the farm on on the weekends. So my my dad was a farmer and mom entrepreneur. But have have a lot of fond memories of being outdoors and being around people growing things.

Alejandro: So what kind of what kind of farm did your did your dad have.

Carter Malloy: We grew and still do rice Cotton Soybeans and a little bit of corn.

Alejandro: That’s Amazing. So I guess from seeing your father running the farm and and having his own business. Ah what did you? What did you learn I mean did you was that kind of like what they at what point you you said? maybe you know I’m gonna have my own thing. You know when I when I grow up.

Carter Malloy: Both my mom and and dad ran their own businesses and taught me that there can be both really good times and bad. You know it was It was quite tumultuous financially at at points with without a doubt but but also yeah, they late I can just remember them. Being up all night working on their computers just having real grit and determination and and persistence to to succeed and and I think for me really was attractive to somewhat control your own destiny at least right and be be able to. Ah, influence the output with with how much you put in.

Alejandro: So then how do you land in physics in studying physics I mean it’s a quite an interesting shift here. So.

Carter Malloy: Yeah, the the University I was initially wanted to be a doctor and so popped around then I went over to the business school and I got to see an accounting and thought Wow I Really don’t like this crap and and I’d always just enjoyed problem solving quite a bit and and math growing up and so. Ended up doing my my undergrad in physics I did not intend to pursue a career in it. But I Just really enjoyed the subject matter. My my intention was still at some point to then run my own business.

Alejandro: And they from you know doing your own little businesses to tururing you know as a musician so I mean that’s a quite a lot of creativity and having fun after school. So.

Carter Malloy: I’ve always had a lot of fun I think that’s important in life to to have a really good time and and so yeah I spent spent time touring as a musician and then I stood up 3 different small businesses partially to help support that lifestyle the part six I wanted to grow a business and I think suffice to say 2 of those were absolute dumpster fires. And and maybe great learning lessons along the way and and one was successful enough to at least pay the bills.

Alejandro: So then tell me about the the process of going from. You know the touring as some musician to having your little businesses to all of a sudden being in an investment bank as an investment banker.

Carter Malloy: Yeah I had this opportunity to and interview with this bank called Stevens which is great middle market sort of privately owned old school in the good kind of ways and investment bank and. I was really interested in learning and and they had an opportunity and to work in research which meant I get to study businesses all day and get paid for it so that was pretty fascinating even though it completely violated my core mantra of working for someone else despite that i. Put on a necktie and went to work thinking that’ll be all right and ended up absolutely falling in love with investing and and with the research process and spent 7 years there studying internet companies and data analytics and property technology.

Alejandro: So in terms of Pattern recognition because I think that when you are in investment banking I mean I I interview a lot of founders that have done either consulting or investment banking or or perhaps on the investment side right? As um, as a private equity investor Venture Capital Investor. You know it sounds like those 3 buckets. Definitely prepare you will for being an entrepreneur later on So I Guess in your case, How do you think that having that access or that visibility into the good bad on the ugly in businesses you know and what works and what doesn’t you know how do you think that has served you as ah as an operator later on.

Carter Malloy: I think it it really helped me in that it it honed me to or taught me to to focus on hallmarks of good businesses and the the numbers and the data and then especially so later after being at at the bank. Ah um. A partner ah a long short equity hedge fund and I spent a lot of time short selling for for 5 years and so I think helps teach ah a healthy dose of criticism and and looking at the world through ah ah a broader lens I think what I underappreciated throughout that is I heard words like culture and and people and. I thought about incremental margins and not a whole lot about the actual people making things happen and and so did not fully appreciate it fully appreciate to the extent that maybe I do today with the employees that we have here at the company just how important having the right people in the right seats is and how defining that. That is and can be for our business.

Alejandro: So so during your your years on the you know, really on on on financial services and and more specifically in this last gig that you did with the with the hedge fund you were in San Francisco so at what point do you realize that perhaps it’s time to pack the bags and and go closer to home. So.

Carter Malloy: Yeah, a couple of things there. My my dad’s health wasn’t great I wanted to spend more time with him had a few children and and always wanted to start a business so it’s been a dozen years in investing but was always pretty pretty obsessed with the idea of of building a company someday. And obviously had a lot of really bad ideas and bad pitch decks along the way that I put together before coming to to acre trader and what we’re building here today. Ultimately, this business is our our customers are farmers are are often people out out here people here in the in the midwest in the delta in the western regions of the us and so. I felt then in 18 when when I moved back when my wife and I moved back here that this was actually a really great place to start a business despite the seemingly crazy I notion at the time of moving from San Francisco to Arkansas of all places to start a technology company I felt as though being close to our customers was important and. But we could actually have some great employees and great employee retention here.

Alejandro: So what were the the early days like at acre Trader I mean obviously you had the idea of starting a company. But how do you land on the on the idea of acre Trader and and how did you go about putting that together. So.

Carter Malloy: The idea was ultimately really born from a conversation. My my dad and I were having at the time reminder. He’s an an older farmer. It actually turns 88 next month but he is despite his age incredibly spry and studies every day and as a technology nerd. And he called me in 17 we had spoken about d 5 or whatever you know whatever they were calling at the time for for years before that and he called me in 2017 and said hey I’m going to buy some bitcoin to which I responded you you more on why on earth would you ever think about paying $1000 for some asset that’s not really an asset and is backed by like air and I laughed at it and ambassador and made fun of him and he did not buy it much too. You know note to anybody listening do not take investment advice fun on ah bitcoin from me but but that conversation really kicked off ah a broader conversation between us where he said well it would sure be cool if we could back it. Back it by a hard asset like farmland something that he and I had been buying and selling together for years and both have ah an extreme passion for and that’s where kicked off a conversation of you know, maybe we could go do a token to which I then again said no, that’s kitschy and that’s a trend and that’ll definitely be gone like next year mind you again this is five years ago just highlighting how ah dumb I was but in in avoiding some major trends but the larger theme for us stuck true which is we have this asset that we know well there’s trillions of dollars of this stuff. It’s pretty fascinating as a. As an individual investment. Historically it’s put up like low doubled digit. Ah rrs with low volatility and it has has served as an inflation hege is not really correlated to other things. So lots of really fascinating things about it but most people were unaware and and and also did not have access to it and so we started chipping away at this problem. Of how we could bring what we were doing to the to the masses and that’s really where we land on the initial plan for acre trader which is this simple notion of fractionalizing farmland and allowing people to invest and participate in in rural america and and farming and and land ownership.

Alejandro: So what’s the business model there. How do you guys make money.

Carter Malloy: We are usually paid by the seller of of land so thing about we look at the business on two sides supply and demand right? So demand side is investors and and that’s a it’ taller piece but but the thing about how we make money we work with farmers all across the country. Ah, many of those farmers want to grow their businesses. There’s economies of scale in their in their business and so they come to us and say hey I’d like to buy this $5000000 property but I’ve saved up 100 grand. Maybe it’s a half a million dollars I can’t buy a $5000000 property. Most people can’t and so we will work with that farmer and put together a package to then go out and raise the capital. For the investors they come through and that piece of land goes in a unique lllc. The investors come on buy ah a portion of that lllc and then rents and repeat with the next farm.

Alejandro: And in that case I mean obviously building um a marketplace is not easy because you have it’s like launching to companies right? I mean in this case, you have the farmers on 1 end the investors on the other end. How do you go about? you know, really building it and and what out of the. Sites of the equation I mean typically marketplaces like this which are two sided I mean you need to have the liquidity is going to be either brought by the supply or by the demand and then you know once that what that is brought everything works in the right direction with the right type of network effects and all of that and good stuff. So in this case. Which one of those 2 sides would you say was the weakest one and you needed to make sure that you would get a right to have everything work after so.

Carter Malloy: Initially the weaker side was the demand side the far harder side of our business as we scale is the supply side but but early on it. It took us a really long time to get that flywheel spinning to to get those network effects in place for the simple reason of trust. And that we built a really cool product. We had access to to really great farms. We put it on the internet people loved it. I quit my job. We we hired a team and thought you know this is this is this is awesome. The feedback is so incredibly positive and it was until it came time to actually put money in. And then people would go. Yeah, this is really cool I love this other thing about it but remind me how long you’ve been around. They’re like um, six months you know remind me how long you’ve been in business and like you know for them you can imagine like hey there’s this new technology startup and it’s cool and I like farmland but I have to trust these yokels in Arkansas with like.

Alejandro: Alright.

Carter Malloy: My hard-earned money for the next decade that is a pretty difficult proposition. So trust was really hard and took a really long time to build. We did that through education and transparency. But certainly that was the the hardest part of the business in the early days

Alejandro: And I remember there is um, there’s a good friend of mine that that I actually told him that that we were having this chat and his name is Tom he’s his wonderful guy and he actually he he was the first one that I ever you know encounter the the possibility of investing in Farmland no and he had done. It. Private equity but he he actually mentioned to me that that typically on on on on this type of segment. There’s 3 things to really keep in mind so that everything really works well and one is the field network. The second one is who negotiates the leases and the third is how you go about. Network of tenant farmers. So I think if you could cover how you guys go about those 3 different things that’ll be fantastic for the people that are listening to.

Carter Malloy: There are tons of extrinsic and and intrinsic factors. You’ve got to consider when when investing in Farmland and I think that that wraps up 3 really important areas. 1 being is the the and arguably the most important long term is the land itself. What are the soils like what is the water like in the west coast can you get water in the midwest can you get the water off but but water is really important. So so quality of soil quality of water quality of climate then the the next on that list is exactly that the the lease you’re able to put in place or the agreement. Ah, whether that’s revenue share or or flat rent with the farmer tenant there and that’s pretty closely related to the third which is the tenant pool are there other tenants in this area. Is there a good network around here and and quite frankly each of those eliminate a ton like the extreme extreme majority. Of the farms we look at and and you know that that’s sort of the first the first blush we’ve got a pretty intense diligence process that’s run by ah a big team of folks here. Both data scientists and then actual farmers and and you know folks out working with with landowners and farmers. Both. It takes a ton of work is the is the real answer and every every offering has its own idiosyncrasies that have to be worked through.

Alejandro: Now in this case for you guys as um, as a company you’ve raised quite a bit of money to so how do you guys go about capitalizing the business. So.

Carter Malloy: Yeah, we we’ve raised 80,000,000 and in venture capital to date in our business. A couple of places we really invested heavily one is technology. We are very very intentional about data science and geospatial analytics. Those sound like buzzwords. But what that really means is we believe pretty pretty hardcore that we’ve got the best maps in the world and the the best ability to understand and originate and and look at land at scale. So so really heavy investments in that and then in operational folks certainly in in marketing. All of those things matter to to building ah a durable business. We are. We are not after growth at all costs I think it’s a unique consideration within our business model that we are a trust-based business and we we are not a standard ah Blitz blitzscaling type of company. Great! Great book and and mentality. But we we have to be very cautious because we deal with people’s money and their land their livelihoods and and so we we as a result I think we’re we’re capitalized for for the long term foreseeable future to to go out and continue building.

Alejandro: And typically for a company like this one when you are like going out to to the investor’s carter and and and you’re doing the fundraising and your in your guys’s case, you’ve done 3 3 rounds where you’ve raised this money. What has been like the the different types I mean that that transition of. Expectations that you’ve had from going from c to series a from series a to series b I mean how has the the mindset of that investor that you’re encountering how has that been shifting in terms of expectations towards you guys. Okay.

Carter Malloy: The primary considerations like like the overarching is like you know for see you’re just selling a dream you know and and in a you’re selling a dream that has some real product market fit and the b round like as you’ selling. that’s that’s the story right. Be around The story is really the metrics and and is this actually working and what does the future look like so each have their own considerations in terms of how you approach the market and and with what details I think what? what we were. What we did right in those is that we were very honest in the in the seed and arons in particular if like this is a dream like here’s our financial model but it’s crazy wrong. We just don’t know in what direction right? here’s here’s our general plant and in the the business itself has in fact, shifted pretty dramatically over the over the last several years so just being honest of like here’s the thesis or here’s the plan here’s how we’re making money today. We don’t actually know how this shakes out in 5 years but we’ve got an incredible team. We got a huge tam and we’ve got strong product market fit. So we want to go out and give it a go. So I think that’s from a messaging standpoint was was important for us. And then from a actual fundraising standpoint just organization was was what matters and we’ve we’ve bucketed each time doing fundraising in really tight periods so that so like I just I as a founder we as a team don’t think it’s. Appropriate use of time to only be fundraising at all times and see a lot of friends run businesses that are just constantly on the road constantly on Zoom pitching and so what we’ve tried to do instead is create these little windows where hey were heads down. We’re executing and operating and we’ll come up with. Well advanced notice of this is our window like like this year we’re going have speak to people probably in December right? and in a touch base hey here’s here’s the window over touch base the next year we go out. We’re picking dates arbitrary right? But if we decide that June next year is a time period then put every meeting inside of a two week moment there so you can be most effective with your time most effective with the investor’s time and and come to decisions very quickly.

Alejandro: So I guess for the people that are listening Carter what is the um, you know to really understand the scope and size of acre trader today I mean what? what can you share with us in terms of like number of employees or anything else that will give us an understanding on how big you guys are.

Carter Malloy: Yeah I think we’re as a company you know trying to adhere to that rule of at least 3 x yourself each each year from a revenue standpoint from an employee standpoint probably a little ahead of that as we’re fortunate enough to be in a good fundraising environment. So. At 20 employees a year ago we’re to a little over a hundred today I think we’ll cross the end of the year close close to or through 200.

Alejandro: And as you’re thinking about the operations for a business like this I mean it a it’s not easy because I mean you have the marketplace that we were discussing earlier but then also the other side is that you’re dealing with securities because you are obviously bringing as you were saying those investors to invest in Lllcs. So. How how does it work. You know like when you’re building a business like this the compliance side and how how easy it is to adapt to that and to execute with that.

Carter Malloy: You know for for me personally, it was fine. It’s acceptable I grew up my whole life in a regulated environment and and you know being appropriately concerned about poking the bear and and you know even just misstating something even even with good intention. Can still get you in a really bad position. So I think we’ve had a constructive paranoia since since day one as a company. It was one of our very first hires was ah a lead attorney with with deep securities experience and and continues to be ah, an area of focus perhaps at best is. Our core values on the wall number one is be in business tomorrow and so don’t do anything that would risk the company that that is dangerous from a compliance or a regulatory standpoint.

Alejandro: And in this case like for example for acre trader I mean there’s probably a bunch of people that are wondering like hey investing in in farmland now I mean how does that work I mean on on acre trade I mean let’s say I’m an investor and I put let’s say like 1 of the minimum investments that that are required on each one of those projects I mean. How does that work am I like waiting on cashing out am I like waiting for distributions every year or or how what should I expect as an investor. 

Carter Malloy: So as an investor we we put the information of each farm on the website you go on there and you know it’s a few clicks. It’s pretty easy to do once. You’ve become well enough educated I think that is the most important part is is upfront education and having investors that really dig in and study and. Call with questions and and learn the investor experience beyond a ah, very simple online financial transaction is then you’re exactly right for for most farms. There will be some forms of distributions that come each year you you can make you can make money two ways in farmland investing usually. 1 of those is from income right? You know the farmers paying your rent or revenue share the other is that the land itself can appreciate underneath you as well and the combination of those 2 is what’s what’s created the strong historical returns for for farmland so through our platform you you get exposure to the cash flows and we we can you know have have that go out into the individual. investors’ wallets to to receive those distributions and then in terms of recognizing the appreciated value of farmland should there be any that is that can be captured usually through the sale of the entire farm at the end of life usually life is measured kind of 5 to 10 years. There are also times when a a farm may sell earlier than that and then there’s the opportunity for secondary sales right? So there is a minimum 1 year lockup requirement after which if you’d like to for for most of the farms. You could sell a friend or family and we’ll help facilitate or through another platform then we have also built our own secondary market. So that that is fully from a technical standpoint 100% ready to go live today. We are tying up a few last things. But. Would would expect to get that live very soon.

Alejandro: So imagine Carter that that you got to sleep tonight and you wake up in a world where all of a sudden division for are trader is fully realized what does that world look like.

Carter Malloy: This is a fun one. It requires us to Zoom out a little bit from the core investing platform our our mission as a company is to empower our customers to buy and sell land smarter with advanced technology data and expertise. So we the the farm the land transaction itself is. Business goal for us and helping people to to buy and sell so at at maturity. our our goal our business goal is to become the default platform for land transactions globally.

Alejandro: it I love it I love it now you know it’s incredible. The the consciousness now around the farmland and and the food and all of that stuff I mean you see now people like bill gates. You know that are like 1 of the biggest you know owners of farmland in the us. So so what do you think is triggering. Triggering that because I mean it is is quite a lot of people now that are trying to get involved with farmland.

Carter Malloy: There there are a number of reasons that people get involved I think it’s also important to contextualize something like 40% of Farmland is rented where where the farmer does not directly own their land. But but then an extremely small plot part of that. Is actual professional investors right? So private equity in Farmland is like thirty forty billion ah from 3000000000 a decade ago so growing like crazy but 30 or 40000000000 relative to to $3000000000000 of farmland in the us is is a drop in the bucket like literally a point of market penetration. Bill gates’ ownership of $1000000000 of land or whatever the number is in in context of how much farmland there is in the united states is teeny teeny tiny and and so it’s still very very early in terms of of outside folks getting and interested in land. And we’re seeing some really positive benefits of that in terms of bringing capital into rural communities helping farmers grow their business investing in sustainability. So I think as a whole the trend is positive. There are certainly bad players and and negative repercussions in places but but as a whole and for our business in particular. Really excited about the the the social good that we can have both in terms of sustainability that weve we enroll our farms in in various programs and and then also just helping farmers grow their business. That’s really what we’re most excited about 1 of the things we’re most excited about coming to work every day.

Alejandro: Now there is a certain I’ve heard that there are certain restrictions on how you’re able to go about buying land right? like there is certain limitations like in certain states. So how do you typically overcome you know, like that type of um of hurdles. So.

Carter Malloy: It depends on the state and the ownership structure and what the restrictions are as a whole. They’re not material restrictions and they’re They’re limited to a few geographies.

Alejandro: Got it now imagine Carter that that I put you into a time machine and I bring you back in time a little bit earlier. You know than that point that you told you that you know that the best thing in bitcoin was about idea but imagine i. You have now the chance of having a sit-down with that younger carter and you’re able to give that younger Carter 1 piece of advice before launching a company. What would that be and why given why you don’t now.

Carter Malloy: How there’s so many things I want to say in myself I think the most important one is listen more than you speak without it doubt in in every context in regard listening and understanding people is is the most important thing you can do in business.

Alejandro: You and how do you go about doing that in order to really build the culture. You know of your business because I mean as you were saying you’ve come from like 20 employees to over a hundred employees and I find that to certain degrees all about. Retention being able to to allow people to see that there’s a future for themselves within the organization. So how do you go about that using implementing that listing to making sure that people are excited about what’s coming for that. So.

Carter Malloy: Yeah I think again like listening means empathy, right? so so really if you’re listening means you’re trying to understand the other person’s viewpoint. So so one is certainly employing tons of of empathy and and when you do that you’re able to then should be able to most of the time. Recognize are our goals as as individuals aligned and if so then then let’s rock and roll if not then then no and I think for us like maybe the best stat about our business like the unfortunate side is we have let go of something like 10 employees. We’ve only had 1 actually leave so we’ve we’ve. Over 4 years we had at 1 person voluntarily a trip out of the company so we are while there’s tons of things messed up and challenges and fires every day and all kinds of problems along the way the thing that I and we are the most proud of by far is they get to come to work every day with a bunch of truly aligned

Alejandro: So I love it So carter for the people that are listening. What is the best way for them to reach out and say hi.

Carter Malloy: Yeah, Badass individuals.

Carter Malloy: There is a website http://acretrader.com you can certainly go to and check out. She was an email info and acre trader anytime or or to me directly my first name an acre trader.

Alejandro: Amazing. Well Carter. Thank you so much for being on the dealmaker show today.

Carter Malloy: Um, thank you Really appreciate it. It’s been fun.

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