Scotts Miracle-Gro, the lawn care and fertilizer giant that has opened up a secondary business as a pioneer in cannabis and hemp cultivation, is launching a $50 million corporate venture capital fund called 1868 Ventures.
Is it strange that a fertilizer company would commit to a $50 million fund to invest in two to three startup companies per year over the next few years? It's 2020, folks, nothing makes sense.
Except this might.
New discoveries around crop cultivation, the development of organic pesticides and herbicides, and the wave of new applications for hemp and cannabinoids in manufacturing, healthcare and legal recreational use are creating new opportunities for the business, and Scotts Miracle-Gro is looking to capitalize on them.
At least, that's the word from the company's chief financial officer, Randy Coleman.
"The company is doing extremely well in both of our big businesses," said Coleman. "A lot of that ties back to the budding cannabis industry."
For those who don't know, while Scotts Miracle-Gro is humongous in the hedgerow business, it also has a subsidiary called Hawthorne Gardening Company, which it created in 2014 to service the specific needs of cannabis growers.
"We identified some areas that we knew we needed to supercharge a bit," said Coleman. And after a discussion with members of its board of directors, the company decided to turn to Touchdown Ventures to help power its new investment arm.
Investment areas the company intends to seed with its follow-on financing include technology to help with controlled agriculture environments and plant genetics.
"A lot of that work is being done in our Hawthorne business up in Canada," said Coleman. "Down the road as laws change in the U.S. we might do more there… Right now the R&D we’re doing around hemp is in Oregon."
The company will also look at ways to boost its e-commerce and direct to consumer channels as more Americans use online commerce instead of shopping at physical retail locations. Coleman said Scotts Miracle-Gro sales were up 200% on digital channels, including Amazon.
Finally, natural products and sustainable packaging also are interesting to the company, said Coleman.
"I really like the exposure to more ideas and spreading our risk around and opportunity around," he said.
1868 Ventures will be stage-agnostic and investments will range between $250,000 and $2.5 million, looking at companies primarily in North America.
To help with the firm's venture initiatives, Scotts turned to Touchdown Ventures, a firm specializing in corporate venture capital. Touchdown will work closely with senior executives at Scotts Miracle-Gro to operate the fund, the company said.
“We are enthusiastic about the capital investment, industry expertise, and customer validation that Scotts Miracle-Gro can bring to innovators in lawn and garden care and controlled environment agriculture,” noted David Horowitz, co-founder and CEO of Touchdown Ventures, in a statement. “We believe Scotts Miracle-Gro will be the partner of choice for entrepreneurs seeking to create a competitive advantage for their startups in these categories.”