INTERVIEW: Jesse Henry is CEO at Michigan-based Heartland Industries, a biotech startup that engineers hemp materials as additives for polymers to produce stronger, lighter, cheaper, and more sustainable end products. Henry is also a managing partner at Cloud Nine Capital, an investment firm focused on supply chain technology commercialization. He was previously chief of staff at Intersection Capital, an investment bank in San Diego. Before that, Henry ran corporate trainings under Tony Robbins, the motivational speaker.
HempToday: How do you characterize the post-CBD-crash environment? Just how hard is it to raise capital for hemp these days?
Jesse Henry: The CBD market crushed farmers, which had a ripple effect across industries. Because of the price volatility of CBD, farmers and investors became hesitant about hemp. Even though industrial hemp and CBD are completely different, in the court of public opinion, it’s all “hemp.”
One of the main reasons that raising capital for industrial hemp is difficult is because there is no “Uber” of hemp. Without a large ‘unicorn,’ there’s no success for an investor to replicate. Investors are trying to mitigate their risk exposure, and new markets like industrial hemp can be overwhelming for an institutional investor to build a thesis around.
HT: Everybody says we need to move away from petroleum-based polymers, but what are the makers of those polymers doing to support that shift?
JH: Biopolymers are a great, long-term play. Eventually, the scale of biochemical conversion plants will allow biopolymers to compete with petroleum-based polymers on price. Today, that’s not the case.
The large plastics producers, compounders, distributors, and manufacturers are always concerned about price. It’s not realistic that any of these companies are going to increase their cost basis by 10% to 20%. Bioplastic today has a price point that’s orders of magnitude higher than petroleum-based plastics. So, sustainable alternatives need to be commercialized on a cost-neutral basis.
The producers and compounders of petroleum-based polymers want to embrace the transition toward sustainable materials. They know that their customers, the plastic molders and original equipment manufacturers (OEMs) have sustainability mandates that have specific key performance indicators. Some of the initiatives that are spoken to in these sustainability mandates are: Carbon footprint reduction mandates; reduction of plastic usage; increase of recycled content; increase of bio content.
Plastic companies that use high-performance bio-based additives will be in a position to lead their industries’ sustainability efforts. We are working with the plastic compounders at the base of the manufacturing supply chain to make sure they can effectively distribute hemp-filled plastics.
HT: Where can advanced technology best be applied to speed up the development of the hemp industry?
JH: Technology can catalyze the advancement of the hemp industry in many ways. Crops like corn and soy have had decades of research and development. The hemp industry could gain a ton of value by advancing some of the agricultural initiatives like seed genetics, propagation, farming practices, and field equipment. Our grant from the USDA will help us quantify the impact of industrial hemp and regenerative agricultural practices on soil health. With reliable data on soil health and carbon sequestration, hemp has an opportunity to enter into corn and soy crop rotations across America.
Heartland is finding advanced technologies that have successfully been commercialized in other industries that can be retrofitted and embedded into the industrial hemp supply chain. We don’t have to recreate the wheel. Our team is focused on advancing technology by leaning on advisors across agriculture, plastics, manufacturing, supply chain, advanced materials, and automotive.
HT: Talk about the importance of sustainability and carbon sequestration as a part of Heartland’s strategy.
JH: In 50 years, Heartland will be a carbon company. The USDA grant is the first stepping stone that will create the underlying data set to turn that vision into a reality.
Today, carbon credits (on the voluntary markets) for agriculture are in their infancy. Over time, Heartland’s ability to sequester carbon in soil and finished materials will be solidified. In terms of end-market applications of hemp, one of the things we’re trying to quantify is the carbon implication of switching from traditional plastic additives like talc and fiberglass to hemp additives.
Sustainability is the engine that brings carbon sequestration into mass manufacturing. Carbon-negative high-performance plastic additives solve a massive problem for manufacturers that rely on plastic.
Our first hire was Eric Austermann as Chief Sustainability Officer. He spent 25+ years running sustainability for Jabil, one of the earth’s largest contract manufacturers. Eric and his team built sustainable supply chains for Fortune 500 companies that needed to replicate their manufacturing footprint. Sustainability is the lifeblood of our business.
HT: You announced late last year that Heartland had secured financing to build a hemp fiber processing factory that could eventually process 1.5 million pounds of hemp per year sourced from Michigan farmers. How many acres does that translate to?
JH: 1.5 million pounds would be 150 acres at 10,000 pounds per acre. Any product we can’t supply through our own farms we could source through the spot market.
HT: What’s the key to getting Michigan farmers to put those crops in?
JH: Trust. We pay our farmers on time and do what we say we’re going to do. We’ve worked with these farmers to understand what works and what doesn’t. Through working with farmers in Michigan, we have dialed in the standard operating procedures necessary to scale industrial hemp farming. Our farming community expands through handshakes, introductions, and contact forms on our website.
HT: What are those important in-between steps required to prepare inputs from hemp so additional retooling of existing plastic compounders and molders is not required?
JH: Hemp (and every other bio-based material) does not naturally, or easily, bond with plastic. The trick is to engineer the hemp material so it can be bonded with plastic with high performance at high percentages. We distribute our hemp materials in the form of powders and pellets that are mixed with different additives. These additives modify the performance of the hemp in the plastic.
For us, the key was to really understand the problem of the plastic compounder, plastic molder, and OEM. Our materials have been engineered specifically based on their feedback.
HT: What are some of the more exciting applications or bigger opportunities for industrial hemp in the broader polymers industries? Where do you see the first opportunities for such plant-based composites?
JH: Opportunity is everywhere. There is more than enough room in the sandbox for everyone to play. Being a Detroit-based company, we have a strong footprint in automotive. Personally, I see lots of opportunities in both packaging and building materials.
I’m really excited about the broader opportunities across the mobility sector. By reducing the weight of an object, performance properties go up, and carbon footprint goes down. Materials like hemp are up to 80% lighter than other plastic additives it replaces.
HT: Tell us about the Hemp4Soil project, and what are the plans and current status?
JH: The Hemp4Soil project will help Heartland collect the earth’s most comprehensive dataset on industrial hemp farming and regenerative agriculture practices.
Currently, we are finalizing the team of agronomists and farmers that are going to be working alongside the USDA and Heartland in the Hemp4Soil program. It’s looking like we’ll have somewhere between 150-200 acres under the study. The program will be kicking off this spring.
Our plans are to work alongside farmers in states across America who see industrial hemp making a huge, long-term impact on American agriculture.
One of the things we’re really focused on with the Hemp4Soil program is cross-correlating datasets by using both traditional and remote soil testing methodologies.
For traditional soil testing, we will be using the Haney test. For remote testing, we will be working with Cloud Agrinomics to remotely test carbon in the soil from multi-spectral cameras on satellites. On the back end, our systems will make sense of the data so that Heartland and the farmers we partner with are able to make informed decisions.
HT: How does a tech entrepreneur end up in hemp?
JH: That is a great question. At its core, Tim (Almond, a tech entrepreneur who serves as Chairman at Heartland) and I are focused on commercializing technologies that create efficiencies in the physical and digital world. In the physical world, we need to realize that most of the raw materials we rely on every day have a really high carbon footprint. With population growth and increasing lifespans, our planet is consuming more materials. This makes it our responsibility to figure out how to reduce the carbon footprint of the raw materials we rely on every day. Understanding these trends gave birth to Heartland, our market positioning, and our underlying replication model.
Fortunately, industrial hemp-based plastic additives, if engineered properly, can help manufacturers produce stronger, lighter, cheaper, and more sustainable products. All we have to do is create a reliable industrial hemp supply chain with product consistency so that manufacturers can tap into carbon-negative raw materials.
In the digital world, operational efficiencies can be created through data compression. Files are getting bigger, and there are more of them every day. Outside of Heartland, Tim and I have multiple plays in the data compression market because we see a value proposition (long term) with the ability to compress and encrypt information. The technologies that we have access to will put us miles ahead of our competition when it comes to analytics, security, and running a supply chain that leads our society into the fifth industrial revolution.
In both the physical and digital world, Tim and I are focused on sustainable solutions that create long-term supply chain efficiencies. So far, it seems like we’re on the right path.