Consumers grant fuels ag-tech incubator
Two dozen entrepreneurs with business ideas are talking to the Ottawa County organization.
Great Lakes Ag-Tech Business Incubator, the new statewide incubator launched in December in Ottawa County, has received a $25,000 contribution from Consumers Energy to support new businesses that have an invention or technology idea involving agriculture.
“Consumers Energy is pleased to be a part of this first-of-its-kind business incubator that focuses solely on commercializing ag-technology products,” said Garrick Rochow, vice president and chief customer officer. “A strong agricultural industry is vital to Michigan’s economic success. Consumers Energy looks forward to seeing this investment translate into ag-related jobs and businesses.”
The incubator, a nonprofit corporation started by the Ottawa County Board of Commissioners, specializes in helping farmers and agriculture-related entrepreneurs turn their machine, equipment or software ideas and inventions into profit-generating assets or new businesses.
The incubator is attracting interest and investors from across Michigan and beyond — including one inquiry from Chile.
“We are continuing to build financial support, as evidenced by Consumers Energy. The private and public sectors really like the model,” said Mark Knudsen, executive director of the incubator. Its office is at the Ottawa County government complex in West Olive.
There is no fee for farmers or entrepreneurs to use the incubator’s services if they are selected to be a client. Instead, the incubator shares in a small part of the successful business’s sales.
Unlike typical incubators, the Great Lakes Ag-Tech Business Incubator does not provide physical space for its clients. This “garage incubator” model invests almost all resources in staff who help commercialize ag-technology and propel clients through business hurdles. When facilities are needed for clients, the incubator can broker space (office, loading dock, warehouse) on a piecemeal basis from landlords in the community.
The incubator’s services are geared toward farmers and entrepreneurs who have ideas or inventions that improve farming operations or solve farming-related problems. Depending on whether the client wants to sell or license their invention or whether they want to start a new business, the incubator works with each client to move their concept forward rapidly.
The incubator is about to begin hiring consultants to work with clients full time. These professional services will include: validating concepts, assisting in obtaining patents, developing the market, obtaining regulatory permits, making financial plans, assembling management teams and planning for sustainable suppliers.
“Our board of directors is honored to have Consumers Energy’s support in our endeavor to create ag-technology businesses and jobs,” said Kurt Brauer, chairman of the incubator. “Their generous contribution will directly benefit incubator clients by helping to offset the cost of providing business start-up services.”
The county-sponsored incubator is said to be the first of its kind and is aimed at bolstering the local economy by leveraging the region’s strength in agriculture and manufacturing. According to U.S.D.A. data in 2013, Ottawa ranked second in annual farm receipts in the state at $391 million, slightly behind Allegan County’s $398 million and ahead of Ionia County’s $201 million.
Ottawa County launched a pilot incubator project in 2013, providing instructional support to three small start-ups in Ottawa County.
Knudsen said two key legally binding documents that will establish the financial relationship between the incubator and its clients are still being fine-tuned. The incubator has nondisclosure agreements in place with five potential clients.
“We have three serious clients we are looking to bring in as soon as we have the legal documents finalized, which we are hoping to have done in the next week or two,” he said last week.
Knudsen there are another 20 potential clients under review. Before accepting a client, the incubator board must determine, among other things, that there is a market for the proposed product, that it is patentable and that manufacturing costs will be viable.
“We are getting entrepreneurs contacting us not only from different areas of the state but different areas of the country. We even had an inquiry from Chile,” said Knudsen.
Knudsen was not at liberty to divulge information about the three clients waiting in the wings, but he did say two are already LLCs and one has a patented product.
He said the Great Lakes Ag-Tech Business Incubator has approached the MSU Bioeconomy Institute in Holland and GVSU’s MAREC incubator in Muskegon, discussing the possibility of partnerships if that becomes necessary for certain clients.
Funding thus far includes a one-time $500,000 grant from the Michigan Economic Development Corp.
“In the future, this has to be sustained through the sales of the companies we help get up and running,” he said.
One of the small businesses among the three pilot projects previously completed by the incubator is Grass Roots Energy LLC in Marne, which designs and builds equipment farmers can use to make ethanol from their corn. GRE has pioneered and patented technology that extracts ethanol at low temperatures with less energy than conventional distillation methods.
GRE was founded by and is owned by partners Frank Van Kempen and Scott Sovereign. The two have another business building refrigeration systems for West Michigan apple growers; that experience led to them come up with the idea for an ethanol extraction system, which they got two patents on a few years ago.
Van Kempen said they are still testing their equipment and verifying their calculations, but they have “pre-sold the idea already to a couple of farms.” Their target market is dairy farmers who can grow their own corn and turn it into an enriched high-quality feed for their cows using the GRE equipment. The low-temperature process produces fermentable wet grains, which are not altered as would be the case in conventional high-temperature distillation systems. A byproduct of the GRE process is hydrous ethanol, which is actually about 50 percent ethanol and 50 percent distilled water. It can be sold to ethanol plants for further refinement, according to Van Kempen.
At the relatively low cost of ethanol right now, it appears the enriched animal feed from their process would be more valuable, said Van Kempen. But he and Sovereign believe the ethanol byproduct would help pay for the cost of making the livestock feed, or the sale of the high-quality feed could help offset the cost of making the ethanol. One of the two products will be “close to free or free,” he said.
The cost of the equipment probably will range from $100,000 to $500,000, he said, and some farmers may invest in it cooperatively with other farmers.
The pilot project with the Ottawa County incubator in its formative stage helped Van Kempen and Sovereign with marketing and business planning, allowing them to concentrate their focus on developing the technology.
Before they got help from Ottawa County “we had a lot of bunny trails we were going down,” quipped Van Kempen. “I’m the kind of guy you want building things; I’m not the kind of guy you want selling things,” he joked. “My partner is the same way.”