Deal focus: Loam Bio’s agri-climate offering resonates with investors

Loam Bio, Australia’s best-funded agricultural technology start-up, has developed a scientifically complex and globally unique approach to climate change mitigation based on enabling crops to extract more carbon dioxide from the air and store it in the ground. From a practical application perspective, however, the solution couldn’t be more straightforward.

Farmers get access to a potentially lucrative second source of income via the carbon offset market simply by coating their seeds in Loam’s powder-based product. The process is no different from what the farmers are already doing to protect their crops from pests.

“The key overlay to this technology is that it doesn’t require a change in behaviour from the farmer,” said Tim Bishop, co-founder and managing director of climate-focused investor Wollemi Capital, which recently led a AUD 105m (USD 73m) Series B for Loam with US-based Lowercarbon Capital.

“The competition today in essence requires the farmer to do something else, such as regenerative farming practices or cover cropping. Loam’s technology allows them to still plant their seeds as they ordinarily would and till the soil as they ordinarily would. The one thing they must do is put this liquid or powder in the same bucket as the seeds are and make sure they are coated.”

Loam has enjoyed a broad range of international and domestic support from the outset. Salesforce CEO Marc Benioff’s Time Ventures led a Series A round of AUD 40m in late 2021. This also featured Lowercarbon and Acre Venture Partners from the US, Hong Kong’s Horizons Ventures, and local players Main Sequence, Clean Energy Finance Corporation (CEFC), and Grok Ventures.

They all re-upped in the Series B and were joined by Hawktail and Thistledown out of North America as well as GrainInnovate, an agtech fund established by Australian investor Artesian and the government-backed Grains Research & Development Corporation (GRDC).

This interest crystallised into what is easily the largest funding round seen in Australia’s agtech space. But Mike Zimmerman, a partner at Main Sequence, adds that Loam is exceptional in that the company sits at the nexus of agriculture and decarbonisation – which translates into relevance to a wider subset of climate-focused investors – and it has a solution capable of global impact.

“There is a lot of talk about the potential of different decarbonisation solutions – it’s almost like there is a Holy Grail, some kind of carbon removal technology that is scalable and cost-effective. Loam delivers high-quality and predictable carbon removal, and it is scalable and cost-effective. That’s why a lot of capital has rallied behind it,” he said.

“They are talking about gigaton-level carbon removal. The company could contribute 10% of the carbon removal required for Australia to meet its 2050 net-zero target.”

Relevant theme

McKinsey & Company projects that global carbon markets will be worth USD 1trn by 2050 and soil represents the planet’s largest terrestrial carbon sink, holding three times more carbon than the atmosphere. Paul Hunyor, Wollemi’s other founder, cites research findings that an additional 25 gigatons of carbon – or 10% of all emissions generated by human activity – could be captured in soil.

Tegan Nock, co-founder and chief product officer at Loam, played down the company’s specific climate ambitions, but she was frank about the scale of the addressable opportunity. If Loam’s product were applied to every hectare of soy currently being cultivated in the US alone, annual cumulative emissions reductions would be enough to mitigate the aviation industry.

“We have a long way to go, and a lot depends on mass uptake, but the potential is significant,” she added, speaking to AVCJ the week that Loam formally launched its commercialisation programmes in Australia after years of trials involving farmers and third-party verification.

Established practices for enhancing soil carbon capture focus on regenerative farming. Intended to rebuild broken carbon cycles by mimicking native ecosystems, they include maintaining continuous vegetation cover, eliminating tillage to reduce soil disturbance, and restoring diverse microbial life by reducing the application of chemicals and synthetic fertilisers.

These efforts stepped up with the onset of what Hunyor refers to as “the revolution in microbials,” characterised by agtech start-ups pursuing more scientific solutions. Pivot Bio, which is backed by the likes of Temasek Holdings, has developed a biological substitute for nitrogen-based fertiliser, while Loam claims to be a pioneer in microbial-enabled soil carbon sequestration.

A farmer coats seeds with a microbial inoculum before sowing and the plants and microbes work together to build carbon in the soil. The technology is designed to increase carbon capacity within microaggregates – compound soil structures comprising mineral, organic, and biotic materials bound together by various processes – and thereby support long-term storage.

Trials indicate that Loam’s inoculum is capable of building 3 tons to 6 tons of carbon dioxide equivalent per hectare per year. According to Nock, this is 200%-300% more than would be achieved purely through the introduction of conservation-driven farming practices. It can also lead to improved soil health, nutrient-rich crops, and higher yields.

“What we like about this form of carbon capture is it comes with many additional benefits. It makes farming more sustainable, regardless of how that is monetised. Offsets are one monetisation option; another is insetting, where you charge a premium for crops because they are part of a carbon-neutral supply chain,” said Hunyor.

“There is also an exciting degree of permanence to Loam’s carbon capture. When you look at their scientific data, a high proportion of the carbon capture they get is MAOC [mineral-associated organic carbon], which is more permanent. That was an important element for us.”

The core technology originated from a University of Sydney research project into the kinds of fungi best suited to enabling carbon sequestration in a soil microbiome. The project received government funding but then lost it, the professor in charge retired, and the work was nearly thrown out.

However, New South Wales-based agronomist Guy Webb had come across the research at an industry conference and recognised its commercial potential. He contacted Guy Hudson, previously a managing director at agriculture and food technology accelerator SparkLabs Cultiv8, who put together a non-profit organisation that assumed responsibility for the project.

Nock had studied agricultural science and worked for the GRDC and appeared destined for a career on the family farm when she was invited to participate. Hudson, Nock, and Webb were the three co-founders of what ultimately became Loam; now Hudson is CEO and Webb is head of agronomy.

The company has run trials in Australia and the US. In each market, it targets the most widely cultivated crops by land area – wheat, barley, and Canola in Australia and corn and soy in the US.

“Loam is working with the soil biome, so there is no standard product you can apply across different soil types. The biome of the soil and the biology of the crop has an impact on how treatments interact with the soil. The company is doing a lot of work sequencing naturally occurring microbes in the soil to identify what works in different situations,” said Main Sequence’s Zimmerman.

Spread the word

Nock acknowledges that effectiveness levels will always vary, but notes that trials have generated “relatively comparable results” across different geographies and soil types. Loam works closely with farmers to track performance. These interactions also offer insights into the target customer base’s understanding of carbon building and how it can integrate with existing agricultural inputs.

Outreach efforts have been formalised under a project advisory unit known as SecondCrop, which helps farmers understand their carbon footprint, how to build stable carbon into their soils, and the value of carbon as a new commodity. The advisory unit also provides end-to-end services, essentially plugging farmers into carbon projects and handling tasks such as measurement and validation.

“For growers, it’s really about understanding what carbon markets have to offer and the nuances of the carbon building process. We want to help them make the right decisions for their business, but we are starting from a point where there is limited awareness,” said Nock.

In this sense, Loam’s expansion challenges are twofold: penetrating fragmented farming industries and spreading the word about the value of its product, and scaling up manufacturing to cope with the consequent rising demand.

Wollemi is confident that Loam can become one of several global leaders in the microbial field, citing the ease of product adoption and the ability to produce high-quality carbon offsets that are compliant with the demanding Australian regulatory regime. Moreover, the firm believes it is only a matter of time before soil carbon sequestration is regarded as a sub-class of infrastructure.

Founded 18 months ago, Wollemi has a corporate rather than a fund structure, raising capital for through new share issuance. This positioning is intended to facilitate investments of long duration and maximum flexibility – and Loam is representative of the type of company it wants to support.

“We are not private equity, venture capital, or infrastructure, and there is no close-end nature to our vehicles, we are permanent capital,” said Hunyor. “We want to work with these businesses, de-risk them, and turn them into an investable asset class. They can be like the wind and solar of the future – heavily de-risked and well understood.”

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• Topics
• Australasia
• Early-stage
• Technology
• Cleantech
• Agritech
• Agriculture
• Australia
• Main Sequence Ventures
• Wollemi Capital
• Grok Ventures
• Clean Energy Finance Corporation