Arkansas Inc. Podcast: AcreTrader Founder and CEO Carter Malloy

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TRANSCRIPT

Carter Malloy:

This is Carter Malloy. I'm the founder and CEO of AcreTrader, and you're listening to the Arkansas Inc. Podcast.

Clark Cogbill:

Welcome to the Arkansas Inc. Podcast. This is Clark Cogbill. I serve as director of marketing and communications for the Arkansas Department of Commerce. On this podcast, we love to share Arkansas business success stories, and today we've got a very intriguing guest with a unique business success story. Our guest today is Carter Malloy. He's the founder and CEO of AcreTrader, based in Fayetteville, Arkansas. 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. He was previously a managing director with Stephens Inc., one of the nation's largest family-owned financial services firms based in Little Rock, Arkansas, where he was an equity research analyst focused on the data and analytics and property technology sectors.

Prior to Stephens, he owned businesses focused on internet marketing and sustainable fuel technologies. He's a graduate of the University of Arkansas with a bachelor's degree in physics. In 2018, Carter founded AcreTrader, a land investment and technology company that empowers its customers to buy and sell land smarter through advanced technology, data, and expertise. Since its founding, AcreTrader has broadened access to research, buy, sell, and invest in land for thousands of investors, registered investment advisors, farmers and landowners across the U.S. and Australia. I really like the way it's described on the AcreTrader website at acretrader.com where it says simply, "Farmland Investing. Simplified." Carter Malloy, welcome to the Arkansas Inc. Podcast.

Carter Malloy:

Thanks, Clark. Happy to be here.

Clark Cogbill:

Well, Carter, the origin story of AcreTrader really begins with you growing up on a farm. I'd love for you to tell us about that experience and how it really influenced your future endeavors?

Carter Malloy:

And to be explicit, I grew up with the farm being the place that I love to go. My family, or my parents separated at a very young age, and so I actually spent most of my childhood growing up in Little Rock, so I was from the big city. But I spent all of my free time and weekends out on the family farm near Stuttgart. Between the two, I just grew up around farmland, always loved and appreciated the farm and having that sense of place, being there in Ulm and Stuttgart and Humphrey and love that part of the world, and I'm really lucky to today have that be an important part of my career to be working in the world of farmland and working with farmers every day.

Clark Cogbill:

And what kind of crops were grown on that family farm?

Carter Malloy:

At the time we had a little more cotton. Today, it's more so rice and some soybeans and some corn.

Clark Cogbill:

Okay, so the farm's still with the family?

Carter Malloy:

That's correct.

Clark Cogbill:

All right, great. Well, give us the behind the scene story of AcreTrader and what's the origin story there and what led you to launch the company?

Carter Malloy:

I spent a dozen years working in the world of professional equity investing. And I absolutely loved it. It was a really fun phase of my career getting to study companies and trying to understand and dissect businesses, in particular technology companies. In the background I've been buying and selling land or farmland, some of that with my dad and just absolutely loved it. It's super fun to have this physical asset that produces something as part of investment strategy and to get to work with folks in rural America and work in the world of farming and with farmland. Really it came down to conversation between my dad and I in 2017 where he was talking about investing in Bitcoin. I was making fun of him and using expletives even to insult him. Whoops, I think it was like $600 or $800 or something.

Terrible, terrible advice on my part to my dad, to which he responded, "Man, I sure wish we could find a way to securitize farmland and make it more accessible for more people." And so if anything, the actual kernel of this business came from my dad rather than myself. So, been very happily working along that same theme since that moment in time.

Clark Cogbill:

Really the idea came from your dad, you had some experience in the investment world, and did you see this as just an opportunity that people weren't taking advantage of?

Carter Malloy:

Yeah, I think what I saw was here's this monstrous asset class, right? It's three or $4 trillion of farmland in the United States. We're not talking small farms that we may go to on the weekends. When you zoom out, you look at the entire U.S. it's an absolutely monstrous industry. And one with real issues of capital access, real issues of the aging farmer and ability to expand operations and capital formation. Just having investment dollars in rural America be available to the farmers. Inversely for folks that want to have exposure to farmland and want to invest in those farmers and want to own a piece of rural America, it's really, really difficult to play a part in that story. That's really what presents the business opportunity for us is that we're working in ... When we think about the world of land transactions, of which there's a 100 billion or so, upwards of a 100 billion every year in the U.S. where farmland trades hands either way.

Can we come into that market and provide value, provide value to the farmer or the family or the person that's selling the land, and likewise provide value to folks interested in investing in that? And that's really the genesis of what we do is try to create winning outcomes for folks involved in farmland transactions, and really, really exciting to be where we are today on that journey.

Clark Cogbill:

Yeah, let's talk about that a little bit more. Talk to us about the impact AcreTrader has on farmers. If I'm a farmer, why is this potentially helpful to me?

Carter Malloy:

Yeah, I think we, if you look at our website, it's all about investing. It's all about helping the investors put dollars in. But we're a two-sided marketplace, so there's investing and there's dollars and that requires real marketing and scale as a business to find investment dollars. The other side of that marketplace is the farmers and the families we work with throughout the U.S. and Australia as you mentioned. And that's far more of a relationship business, right? That's really important that we have one-on-one relationships with the folks we're working with there. We have today about a 1,000 qualified, what we would call a qualified farmer throughout the U.S., as an example. That's of tens of thousands we've spoken with, but about a 1,000. We say, "All right, you fit the profile of who we're wanting to work with, which is a farmer that's got real years of farming left and interested in growing their business."

As you can imagine, many farmers want to grow their business. They've got some expensive machinery, they've got often a payroll and a staff. They've got economies of scale, and the more seed they buy, the better a deal they may get, as an example. So farmers we work with are business people first and foremost throughout the U.S. What we provide is a different way for them to grow their operation. It's hard to find land, and it's even harder to buy that land. You go to the bank, you get, say it's a $3 million piece of property, the farmer may have to put up a million and a half dollars. I don't know about you, but not a whole lot of folks I know got a million and a half dollars just laying around. We come in and partner with that farmer to help them acquire land and grow their business on.

Clark Cogbill:

Okay, got it. If a farmer, take a farmer that has a farm that anywhere in the U.S. or Australia for that matter, working with AcreTrader, is that essentially, could you compare that to somebody launching an IPO essentially saying, "Okay, like a company offering shares of its company to the public, is that what's happening with a farmer offering chunks of farmland to private investors?"

Carter Malloy:

I think that's a pretty fair description, in that each farm goes into a unique vehicle, a limited liability company effectively. You're putting each farm into what we call a special purpose vehicle that the investors can then own a portion of. From the farmer's side that's exactly right. They could be part of that vehicle. They can have financial upside attached to that in cases. And for the investors, rather than going and buying a $3 million farm, they can invest as little as $10, $20,000 into that vehicle.

Clark Cogbill:

So, it really opens up that market for a much broader audience?

Carter Malloy:

That's right. If we think thematically about our goals as a company, it's to bring transparency and liquidity and access to this market. And I think if we continue to do so in a way that provides winning outcomes for the farmers and the investors we work with, then we expect we'll continue to build a big business along the way.

Clark Cogbill:

And I'm going to come back to that farmland as an asset class, but I want to talk to you about your feelings about land on the AcreTrader website under what drives us. It reads, "Land is our passion." Obviously, this is not just a business idea for you, you feel passionate about land. Can you please talk about why you feel so strongly about land and making it more accessible?

Carter Malloy:

Yeah, I think it's, look, we all have differing feelings about different things and things that we love for a perfectly good reason or a perfectly not good reason. It doesn't really matter. And for me personally, look, I think most people feel the same way. We're invigorated by wide open spaces, that connection with the place you are or a sense of place. And for me, that's manifests itself on a specific farm in Humphrey, Arkansas where for me it's just this really wonderful feeling to be out and have a sense of place like that. I think for us as a business, if we can provide that opportunity for more people, that's a lot of fun. And along the way, we can also adhere to a collective mission of being good stewards of land and being good stewards of relationships with capital and with farmers throughout our country.

Clark Cogbill:

That's great. It certainly is a blessing when what you do for your business is something that you're very passionate about and that's clear. Okay, so behind the scenes at AcreTrader, how does AcreTrader do what it does? How do you make farmland available to buy through your website? How does that work?

Carter Malloy:

I had mentioned a little bit of this earlier, but to simplify what we do, an individual farm, so let's take 160 acres in Illinois, that farm would go into a specific LLC or a Limited Liability Company. So, then we take that LLC and put it on a website, on our website, acretrader.com, and the individual investor can own a piece of that. So they can come in again, rather than buying a multimillion dollar asset, they can come in and invest, say, $20,000 and own a portion of that LLC. What that gets them is the potential to earn upside in a few ways. One of those is they can earn income, so the farmer can pay rent or do a revenue share or profit share, depending on the lease structure of that particular offering. So, the investor can make money through income and they can also make money through potential appreciation. That farm can go up in value over time and the investor can make money when that farm is sold.

That combined, that income plus appreciation has been about an 11% return over the last several decades. This isn't, oh my gosh, I'm going to go get rich. And we really like that. We like that this is a boring, straightforward asset that has shown a relatively consistent appreciation and income characteristics compared to most major asset classes. We were after very simple, slow and steady compounding as investors and as a company, there's no guarantees in life. Doesn't mean you're always going to get that. But I think what's fascinating about farmland is you rarely hear somebody say, "Look, I doubled my money last year in farmland," but you also rarely hear them say, "I lost all my money in farmland."

Clark Cogbill:

Yeah, right. Well, that's a perfect lead into my next question. One of the things, one of the really interesting things I think on the AcreTrader website is this interactive graph that tracks the cumulative returns of major asset classes indexed to 1990. And it's interactive. You can see the value of different asset classes over time, including the S&P 500, gold, U.S. government bonds and other assets, including farmland. And it's very clear, farmland performs very well over that time period. And to me it also seems, Carter to be one of the more stable assets, which is what you've just talked about. And sometimes it's like, "Well, look at the data, the data tells a story and you can interpret what that story is." It seems like farmland is a hidden gem when it comes to investing. How would you characterize it?

Carter Malloy:

I think you've just said something really important, which is, look at the data, I think. And of course, history is no guarantee of future results, to be explicit there. But at the end of the day, look, I'm emotionally invested. I love what I do and I love getting to work with the folks that I work with. But over time the love language of finance is numbers. Making sure that investors understand what they're getting into, what the risks and rewards are and what the historical performance has been like. I think you've hit on some important points there, which is that really our investors are attracted to the potential for slow and steady compounding of wealth. It's kind of like Bitcoin, but the opposite. What we're really after is something very simple, tangible and understandable, but produces, it produces something that we all need. We grow food, fuel, and fiber on U.S. farmland, and there are more and more people in the world and there's less and less farmland to grow that for them.

Clark Cogbill:

Yeah, the data is there for people to interpret. So I love that. I love that interactive graph, and it sure does look like a very stable growing asset class over that time period. You've had some recent expansions, AcreTrader is evolving, you launched something called Acres and you've become a broker dealer. Can you explain what these are, what acres is and why these were strategic moves for your company?

Carter Malloy:

I think if we're to boil down what makes us different, what's special about our company, there's plenty of ways to go out there and learn about farmland and there's even growing ways for people to actually go and make investments. So when I try to boil down what makes us special or what makes us different, it's fairly straightforward in my own mind or my own opinion, and that is sourcing and diligence. First, speaking to sourcing, that means going out and finding land. That broker dealer license allows us to do quite a bit more there in partnership with farmers. And that's the key asterisk there is that we ultimately through that broker dealer, which is like to say it is a major headache, would be a dramatic understatement of the regulatory requirements to own and operate a broker dealer. But we feel strongly about doing so.

One very simply, we want to be compliant. And two is it gives us a wider range of opportunities to work alongside farmers to help them build their business plan, to help them go out and raise capital and pay success-based pricing. The broker dealer or BD really helps us in that regard in the world of sourcing.

Acres, which lives at acres.com is our land research platform we built for diligence. If you're going to go out and try to understand the value of a piece of land, it's hard, really, really hard. And my dad owns a little bit of farmland. It's like, "Hey dad, what's this asset worth that's so important to you?" And he could tell you pretty well what it's worth, plus or minus 25%. And that's the market we work in. I mentioned earlier these themes of transparency and access and liquidity.

The broker dealer drives us specifically at bringing liquidity and access. And acres.com, this tool that again, we built for ourselves, it's to try to avoid a bunch of data science buzzwords. It's a place to find information to help you value land. Lots of different mapping layers, comp sales, and just really, really great depth of information to understand land and to provide transparency within that market. So that's the whole point of Acres is we took this tool that a large team of engineers and data scientists have built for us internally, said, "Hey, let's give away a lot of this functionality to the market for free and help bring more transparency to this market." And look, we're not pure altruists. We want folks to see that and say, "Hey, we want to work with AcreTrader, because they're helping us and they can help us get a fair shake."

Clark Cogbill:

That's really smart. You built it for yourselves to make life a little bit easier and you thought, "Hey, this can be part of our business model. This can be something that is valuable information for the public that expands our customer base."

Carter Malloy:

You got it.

Clark Cogbill:

All right, you're a growing business. Recently we had the opportunity to visit with you in Fayetteville, the AcreTrader offices, very slick on the square there in Fayetteville. Got a techie feel. We enjoyed our time with you recently. Thank you for letting us come in and visit with you. How has Arkansas-based venture capital helped you grow? AcreTrader?

Carter Malloy:

We were fortunate as a business that I and several of us here had existing relationships around the technology and investing ecosystem. That certainly helped in the early days to attract those investment dollars, what you call angel investing. Arkansas economic, AEDC, sorry, was helpful for us in that specific early phase of raising capital as well. We are very appreciative and proud of the support that our state and people within our state provided to us. As we've grown in later stages of investing, what's fascinating is it's actually become a thesis for a lot of venture capital firms to invest in what they would call flyover states. Us here in the middle of the country. And there's a lot of folks going out and explicitly looking only in the middle of the country. I'll give you an example, Steve Case, who's the founder of AOL.

Clark Cogbill:

AOL. Yeah.

Carter Malloy:

Has a fund, Revolution's Rise of the Rest fund, and the entire investment pieces of Rise of the Rest is, the next great companies are going to be born in the heartland and not necessarily on the coast.

Clark Cogbill:

Yes.

Carter Malloy:

They're an investor in our business. They're an investor in lots of businesses, fast-growing technology businesses throughout the country in the middle of it that look like us. It's really cool and encouraging to see more and more growth of that type of venture capital. And there's a number of firms, a number that are invested directly with us, including Narya Capital, Drive Capital, that are similar in that approach. And it's really, really exciting to think about where we are headed as Arkansas, as Northwest Arkansas and regionally as well in that I think the middle of the country appropriately garner more and more attention for growth, equity and venture capital.

Clark Cogbill:

It is promising, and we're very excited about it. You could run this company from anywhere. You were very intentional about starting and running AcreTrader in Fayetteville, Arkansas. I think, correct me if I'm wrong, I believe you were in California and you decided to come back home to Fayetteville to start this business. Why did you make that decision?

Carter Malloy:

To put it simply, because I like it here. I'll build a business case in a moment, but I came to college here in '99. I just love this place. My wife and I met here. We've always had an affinity for the place, and you're exactly right, I was in San Francisco and my friends thought I was insane that I was moving from SF to Arkansas to start a technology company. But I think beyond the emotional like, "Look, this is my happy place and what place I want to raise children." And my wife and I couldn't love it more living here today. The reality is there's strong rationale to build a business here, and it was part of the thesis as well for us.

There's great talent, a lot of really amazing folks here and earlier in middle of their careers that want to work at growth oriented businesses and that this is a relatively inexpensive place to do business. Our rent is probably a quarter of what it would be in San Francisco, so we are proud to call Arkansas home and there's never been a day of regret of building a business here versus somewhere else.

Clark Cogbill:

You mentioned talent. Well, first of all, we're certainly glad that you decided to start this business in Arkansas. You mentioned talent earlier, you've been able to find and recruit the talent you need. Do you find a good portion of that talent in the state, in the area?

Carter Malloy:

As a general statement, yes. The reality is, is the folks available for work in this region in particular Northwest Arkansas, but there's some incredible, incredible talent here. And so we've hired a lot locally, but we have to also be cognizant of the entire MSA Metropolitan Statistical Area, something a little north of like half a million people. That's not a whole lot of people. And so for some specialized jobs, there may only be two people in the whole area that do that. We have moved people here from Austin, Dallas, Boulder, Maryland, New York, Seattle, so been plenty of other places. I love that we've been able to also bring some incredibly talented folks to work here. Some of those folks no longer work at AcreTrader, but they've stayed in the region. And so we're pumped that people move their families here, they fall in love and they stay and they help us to grow and to build further.

Clark Cogbill:

Yeah, I love that. I don't know what your remote work policy is, but it sounds like you're not talking about hiring somebody in Boulder and they're always going to work remote from Boulder. Some of those examples you just mentioned, they're moving to Fayetteville to work for AcreTrader, right?

Carter Malloy:

That's correct. We've got to call it a special handful of situations where folks are remote, but we maybe we're old school, but we really like being together and being able to have that in-office osmosis and challenge each other constantly in this environment.

Clark Cogbill:

Yeah, again, being in your office for part of a day recently, I could just feel that vibe, the energy in your office. It's definitely a cool place to be. All right, something I hear when I talk to people in different industries in Arkansas, big companies, small companies, all across the state. I think one of the real advantages of doing businesses in Arkansas is this collaborative culture, a spirit of people and their willingness to work together. Have you seen that? Have you seen a collaborative spirit in northwest Arkansas with the entrepreneurial community, with the tech community? What does that look like?

Carter Malloy:

It is been amazing, to be direct. Look, do I wish there were more angel investors here? Yes. Do I wish there were more startups here? Yes. And I think I'll always feel that way. But to zoom out and think about the amount of help we've had along the way, we would not be here without, it is incredible. And to be specific there, Startup Junkie here in Fayetteville has been really helpful for our journey. And then we've had literally dozens of people act as advisors to me, to our business, to other people that work here and folks just coming to help out, not because they're here to scrape dollars out of us, but they genuinely care. I think it is our responsibility as a business and as people to return that favor within our community. And we absolutely do. And we'll continue to try to because it's been really, really cool the amount of love we've gotten around this place.

Clark Cogbill:

That's really great to hear. And I think it is a unique thing to Arkansas. I don't think you get that everywhere. And again, it's something we consistently hear, because I know your business is thriving today, but I know those early days, those can be challenging. And I know that Startup Junkie team and they're very helpful on the ground with somebody who has a very early stage business, or even just an idea. To get that support early on, not only from somebody like Startup Junkie, but from other business leaders in the area, I'm sure is vitally important.

Carter Malloy:

Yeah, I think so. And look, it speaks to our culture as a state and having spent too much of my life on airplanes and other cities and places, I think that sets us apart. And I try to, or folks ask me why I like living in Arkansas. You walk down the street in any major city and everybody's got their heads down and you definitely don't make eye contact, right? Maybe some folks open the doors, walk along the street in Fayetteville or Little Rock or Stuttgart, or you pick your place and people make eye contact, they smile at you and they wave at you. And it's a friendly, wonderful place to live. I'm thrilled we're here building a business and I couldn't be more proud of the folks I work with and the amount of support we've received from our community.

Clark Cogbill:

Great to hear. All right, Carter, a few final questions for you. If you weren't running AcreTrader, what do you think you'd be doing?

Carter Malloy:

Working. I enjoy working and hanging with my children. That's my two priorities. Give me any job in the world, professional musician and producer. I think that would be a ton of fun.

Clark Cogbill:

At the same time?

Carter Malloy:

Yeah, absolutely.

Clark Cogbill:

Do you play a musical instrument?

Carter Malloy:

I do. I try to play music every day in my life. It's a fun, creative outlet, so play a number of different instruments depending on the day of the week and what our kids want to do as well.

Clark Cogbill:

All right. If you had to pick a favorite restaurant in Arkansas, which one would you choose?

Carter Malloy:

Atlas. It's a two blocks from where I sit right now in Fayetteville and I'm just absolutely in love with it. I mean, it's a fancier place, but it's just awesome. If I'm looking for a steak, that's an easier one, that's Doe's, ate there last night.

Clark Cogbill:

Yeah. Okay. Yeah, we've got a Doe's here in Little Rock.

Carter Malloy:

Oh yeah. My parents got engaged in the original Mississippi Doe's in the kitchen. I kid you not.

Clark Cogbill:

Wow, that's fantastic. If someone was to find themselves in Fayetteville and at Atlas, at the Atlas restaurant, what do you recommend?

Carter Malloy:

It doesn't matter. It's all good. They really, really put out some great dishes. And again, it's like a fine dining kind of place, but man, they do an awesome job. Actually I'm going to go to the opposite of the spectrum for a moment and say, "Wright's Barbecue in Johnson is the best barbecue in the state and I'm willing to fight if somebody disagrees with me." I think that-

Clark Cogbill:

That is passion. That is passion right here. And it's noteworthy that the podcast is not sponsored by Atlas or Wright's Barbecue, but I'd just like to talk about good places to eat around the state, and we've got a lot of them. There's so many wonderful places in Arkansas. If you were going to pick a weekend destination, you could go anywhere in the state, where would you go?

Carter Malloy:

Oh man. Our family farm 10 out of 10 times, so Humphrey, Arkansas is where I would hang out.

Clark Cogbill:

All. All right, you heard it here. Well, I've been talking today with Carter Malloy, founder and CEO of AcreTrader. Carter, thank you so much for spending time with us today on the Arkansas Inc. podcast.

Carter Malloy:

Thank you, Clark. It's been a pleasure.

Clark Cogbill:

You've been listening to the Arkansas Inc. podcast. This is Clark Cogbill, director of marketing and communications at the Arkansas Department of Commerce. You can subscribe to the Arkansas Inc. podcast on Apple Podcast, Spotify, Stitcher, and other podcast apps. For more information about the Arkansas Economic Development Commission, and to sign up for our monthly newsletter, visit arkansasedc.com and connect with us on LinkedIn, Twitter, Facebook, and YouTube. Thanks as always for tuning in.