Startup Exit Awards - Exit of the Year
CoverCress
Bayer, the Germany-based pharmaceutical and agriculture giant, in August announced it had entered into a shareholders’ agreement to increase its existing investment in CoverCress Inc. (CCI) to acquire a 65% ownership stake in the St. Louis startup. Creve Coeur-based CCI has developed a rotational, oilseed cash crop to provide winter and spring soil cover between corn harvest and soybean planting. The company has said the crop will be used to develop renewable fuel.
In addition to Bayer, minority owners in CCI include Chesterfield-based agribusiness firm Bunge Ltd. (NYSE: BG) and Chevron U.S.A. Inc., a subsidiary of San Ramon, California-based energy giant Chevron Corp. (NYSE: CVX).
CCI’s sale marked a win for local investors who had backed the startup since its founding. Local investors who funded the firm included BioSTL's BioGenerator, St. Louis Arch Angels, Hermann Cos., Prolog Ventures, Cultivation Capital, Missouri Technology Corp., Yield Lab and St. Louis County Port Authority.
CEO Mike DeCamp answered questions about the company.
What made last year the right time to sell a majority stake in CoverCress? The primary catalyst for the majority sale was the product offtake agreement we entered in 2021 with Bunge and Chevron as part of their $600 million joint venture transaction. This gave CCI a valuation based on a contract rather than just on projection. Working with our board of directors, CCI felt it was the right time to explore market interest in the business. We weren’t looking to just “sell” the company, but rather whether there was interest in “buying” the company at an attractive valuation. We conducted a robust auction for the business, which ultimately led to the control transaction with Bayer last August.
Why was Bayer, along with minority owners Bunge and Chevron U.S.A. Inc., the right owner for the company’s future? During the auction process, it became clear that parties showing the most significant interest in CCI represented the upstream component of our value chain – the farmer-facing component. However, both CCI and our board of directors felt it was strategically important that we not lose the value contributed by our strategic investors representing the other components in our value stream — Bunge, representing the midstream oilseed crush processing component and Chevron and (Chevron-owned) Renewable Energy Group, representing the downstream renewable fuel production component. This led to the unique nature of our exit, with our venture investors, founders and employees achieving an attractive exit, CCI maintaining its operating independence, and CCI retaining the strategic support and experience in all points of our value chain necessary to grow the company.
It’s been about a year since the deal. How has the transition to new ownership gone so far? The transition has been excellent and very seamless. From the onset, there was strong alignment among CCI and each of our three owners regarding governance and strategic vision. We continue to have the necessary independence to operate the business as we have in the past, but with the additional benefit of a deeper level of commitment by our owners to provide us with support, guidance, and resources.
How has the launch of the company’s CoverCress crop gone so far? We had a large-scale Founding Farmers demonstration program during our last crop year with approximately 8,000 demo acres planted in the fall of 2022, which were then terminated in the spring of 2023 as a cover crop. The Founding Farmers program was designed to build farmer experience with managing a CoverCress crop from planting until termination. Overall feedback from this group of farmers has been positive and interest in producing CoverCress as a commercial grain product remains strong.
What is CoverCress’ top goal for the next year? Our top goal for the upcoming 2023/2024 crop season is the commercial launch of CoverCress. Our target is to contract at least 3,000 acres with farmers who will plant and cultivate CoverCress and then get paid for the grain that is harvested. We will then work through a group of supply chain partners to move the harvested CoverCress grain downstream from the farm, to handling and processing, and then on to a customer that will incorporate CoverCress in its whole grain form as an ingredient in broiler chicken feed.
Several St. Louis investors backed CoverCress throughout the year. How critical was that to the company’s development? Since our founding, we received tremendous backing from a diverse set of equity investors. Beyond the obvious value proposition of providing us with capital to operate, our investors also had the patience for, and understanding of, the effort and time it takes to bring a new crop to market. This was a critical value proposition that allowed us to execute on our product development efforts in breeding and gene editing over a 10-year period, ultimately positioning us for a commercial launch and attracting the interest we received from Bunge and Chevron for our crop as a renewable fuel feedstock. Our St. Louis-based venture investors included BioGenerator, Hermann Companies, St. Louis Arch Angels, Missouri Technology Corp., Prolog Ventures, Cultivation Capital Life Sciences, Helix Fund, and The Yield Lab. We also received venture investments from San Francisco based Prelude Ventures and Kansas City based Fulcrum Global Capital. Finally, we received strategic investments from Monsanto/Bayer in all financing rounds, Bunge and Renewable Energy Group in our B-2 round and then Bunge and Chevron in our C-1 round.
For links to profiles of winners and finalists in the 2023 Fire Awards and Startup Exit Awards, go here:
