Grownetics launches new seed-funding round – exclusive

The company, which only formed eight months ago, has received investment from cannabis VC firm Phyto Partners.

An agtech start-up which develops automated farming, data collection and analysis platforms for cannabis growing, is expected to raise $750,000 in a seed round by April 2016 from investors including cannabis venture fund Phyto Partners, according to sources familiar with the matter. The start-up secured a first commitment of $50,000 in this seed round from a mystery angel investor in late December.

Phyto first invested $100,000 in Grownetics during a bridge round in November, and has a no-vote advisory seat on its board. If Phyto furthers its interest in the company, it is likely to be given a full seat.

Formed just 8 months ago, the young company received its first investment of $20,000 from seed-stage investment programme Canopy Boulder last September in a pre-seed round. It is moving quickly to take advantage of what chief executive Eli Duffy, who could not confirm the specific amounts to be raised this year, says is a unique position in the cannabis industry; although in theory the technology could be used to grow a range of agricultural products.

“The reason why this hasn’t been done before is because the margins on tomato and lettuce are so much lower,” said Duffy.

Grownetics has created software and middleware systems to collect growing data on light, irrigation, carbon dioxide and soil acidity levels as often as every 5 seconds, according to Duffy. This detailed data can then be cross-referenced with required government tests on the plant, creating a data pool of potentially enormous value. The information can in turn be used to automatically instruct irrigation and other farming systems to adjust accordingly.

“Imagine a computer that learns from several growth cycles,” Phyto managing partner Larry Schnurmacher told Agri Investor.

The United States Department of Agriculture has published regulations requiring agricultural growers to be given financial rights to some of the data they collect, but as Grownetics’ data is anonymised and the burgeoning cannabis market is viewed as separate from other crops, it is not clear whether Grownetics would be required to pay the growers who provide data.

Duffy said that in their first month of operations, they generated 10 million data points from their sensor network, and are already in talks to generate revenue from the data they have collected.

“We don’t touch the plant because it makes our work legally less complicated,” he told Agri Investor in a phone interview, adding that his company has $120,000 in sales to date.

“But focusing on cannabis makes strategic sense because it is a new industry and there is a feedback loop. Every single batch has to be tested by the government so we get feedback about the weight, THC and CBD content,” Duffy said. THC is the chemical in marijuana that induces a “high”, while CBD has been used to treat diseases like epilepsy.

The product could also make greenhouse growing of marijuana cheaper and more environmentally friendly, according to Duffy.

Schnurmacher emphasised that bringing down prices was key. He told Agri Investor: “I really believe that this will change the industry. It won’t cost $400 to grow a pound [of cannabis]. We can cut down grow time using a technology that has learned the best way to do it. It can replace a master grower, and can also teach farmers.”

Other recent Phyto investments include Corsica Innovations, who have made an electric appliance for growing cannabis at home, automatically adjusting light and nutrients so that users only need to add water. They have also invested an undisclosed amount in Baker, an app that shows people where they can get specific cannabis strains by ordering ahead.

Grownetics’ software and middleware uses its own algorithm to learn to apply data and analysis to plant care automatically: “It can connect to any hardware that exists. We are not tied to our own piece of hardware to communicate with software,” said Duffy.