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Conway Startup Grainster’s Boasts Wildly Optimistic Projections

8 min read

Grainster, an online grain-trading business based in Conway, launched in August and has since made eye-popping claims of being a $200 million startup and having a potential valuation of $1 trillion in just 14 years.

“From all indications and research conducted, it appears Grainster could potentially be Arkansas’ largest start-up in the history of recorded capital investment in the state,” the company boasted in a March 27 news release. “From a technical perspective, the Grainster Exosphere is one of the largest cloud-based, custom application development projects of all-time.”

And that’s not all.

Chief Operating Officer Cotton Rohrscheib bragged in a March 20 blog post:

  • Grainster will be profitable in less than two years.
  • More than 10 Fortune 500 companies have expressed an interest in meeting with Grainster representatives.
  • It will add about 200 jobs in Arkansas.
  • Its logistics division “will revolutionize an entire industry overnight.”

In an interview with Arkansas Business last week, however, Rohrscheib began providing caveats to his statements.

Rohrscheib said the $200 million figure is really the commitments the company has received from investors to be paid over the next three years — but Grainster doesn’t have that money yet.

“We have agreements in place for $200 million to be raised on our behalf,” he said.

And the person who supposedly gave Rohrscheib and Grainster CEO Layne Fortenberry the $1 trillion valuation has denied making the statement.

“We talked different ranges of trade, but I didn’t put a valuation on it,” Roger Cunningham, who is on Grainster’s advisory board, told Arkansas Business last week. Cunningham, of Atlanta, is a managing director of Daroke Resources LLC, which specializes in mining, oil and gas and infrastructure development for countries.

No known company has or has ever had a $1 trillion valuation. In February, Apple became the first company to close a day of trading at a value of $700 billion.

After being told by Arkansas Business that Cunningham disputed the valuation of Grainster, Rohrscheib said, “Layne and I both thought that he said that.”

Fortenberry said in a follow-up email to Arkansas Business, “I took [the valuation] to be an evaluation of our potential.”

Still, Rohrscheib said that Grainster, which doesn’t have a permanent office yet, is gearing up to have about 120 workers in Conway by the fall. In addition, he said, the company will make a “big announcement” about its funding on May 18, but he declined to offer more details.

Meanwhile, Rohrscheib said Grainster is connecting buyers and sellers of grain and is working on its five other divisions, which will provide services related to the grain-trading industry.

Visitors to the Grainster website have expressed interest in the company’s claims that it can connect grain farmers to buyers across the globe.

“I like the concept,” said Mark Waldrip, a principal of Integrity Grain LLC in Moro (Lee County), a full-service grain buying and selling company.

But, Waldrip said, he is concerned that more volume of grain isn’t on the site. “I don’t know what it’s going to take to attract more volume,” Waldrip said. Last week, the site had about 25 sellers looking for buyers of rice, corn, soybeans, wheat and feed grains.

While the site only connects the buyer and seller, it’s up to the parties to arrange the payment and transport the grain.

“Any new company that wants to market grain has challenges, such as logistic challenges,” said Ethan Branscum, assistant director of commodity activities and economics for the Arkansas Farm Bureau. “How does the grain get from the farmer to the end user? Someone has to make those decisions.”

To move grain from Marianna to Brazil, for example, somebody would have to coordinate the movement of the grain to the Mississippi River and then down the river and out of the port of New Orleans, Branscum said.

“There’s a lot of moving parts when you’re dealing with large volumes of grains to international buyers and even domestic buyers as well,” he said.

Rohrscheib said Grainster will have a logistics component, but it won’t launch until later this year.

In the meantime, the idea for Grainster is gaining supporters.

“The whole concept of Grainster is really, really inspiring,” said Lewis Lucke, who is on the company’s advisory board and, like Cunningham, is a member of the executive team of Daroke Resources. Lucke also is a former U.S. ambassador to the Kingdom of Swaziland in southern Africa.

“It makes markets anywhere in the world accessible to buyers and sellers of grain. That’s a real revolutionary step. The traditional way of buying and selling grain has been limited,” he said.

The Birth of an Idea

Born in Paragould and raised in Greenville, Mississippi, Fortenberry, 42, began working at a rice mill while in high school.

In 1999, Fortenberry’s father bought a rice mill and Fortenberry went to work there. “During this time at the family rice mill, Fortenberry gained valuable skills from the experience of owning and operating the family business,” according to his bio on the Grainster website. “He bought rice from the farmers, processed the rice, and would then market it to the end users. Through this vantage point Fortenberry could see the need for a new system, and this is what sparked his passion to develop Grainster as you see it today.”

Rohrscheib said that Fortenberry also realized that international buyers wanted direct access to American farmers “because the U.S. farmer basically delivers exactly what they want.”

The problem is, Fortenberry said, that today the farmer sells grain just as he did 50 years ago — to the same handful of buyers within a two- to three-county radius of the farm.

“There’s no access to the global marketplace,” Rohrscheib said. “And that’s in a time where every other aspect of agriculture has evolved in the last 100 years. …. So it really doesn’t make sense for the farmer to still sell his grain the same way.”

Fortenberry said he has been working on the idea that would become Grainster for eight years.

Plans for Growth

Grainster’s marketplace is — so far — the crown jewel of the company.

It allows users to use it for unlimited trades for a $500 annual fee. “Basically, we’re cutting out the middleman by providing a matchmaking service for your grain,” according to the company’s marketing material.

Fortenberry claims “20,000-plus” members on Grainster. And Rohrscheib said the company has had “several trades” so far.

They expect the company to expand when its other divisions go live to handle services ranging from payments between the parties to data collection.

Another one of Grainster’s anticipated divisions will be its logistics service, which Rohrscheib hopes will be launched by the end of the year.

“I’m not going to give away a lot of the details yet, but this platform is going to allow trucking companies to become more profitable and it’s going to save the farmer money,” Rohrscheib said. It’s also going to “completely revolutionize the trucking industry.”

Grainster’s website says its mobile app will serve as a beacon for drivers as they move across the county.

“The buyer (or seller) that is responsible for transportation of the grain pushes their load onto our system and drivers in the area or across the country bid it on [sic],” the company said. “This provides the shipper with the best possible rate — and in many cases provides the driver with income on both legs of their trip.”

Rohrscheib said the logistics division should be ready by the end of the year.

All the data generated from Grainster’s site will be sold to firms such as the Chicago Mercantile Exchange, he said.

That information will make it the “largest source in the world for real-time cash grain trade prices,” Rohrscheib said. “No other entity or exchange out there really has that.”

Fortenberry said Grainster’s work on its other divisions is nearly complete.

Fortenberry is Grainster’s only full-time employee, but he said the company hires contract workers — currently fewer than 20 of them. It is using Rohrscheib’s Pleth LLC of Batesville, a Web development and marketing agency. Rohrscheib is a co-founder of Pleth.

“We have a group in Peru and a group in India,” Rohrscheib said. “There’s constantly code being written.”

In addition, Rohrscheib said Grainster had “just partnered” with Farm at Hand of Vancouver, British Columbia, which has 20,000 farms using its farm management program.

Himanshu Singh, a co-founder of Farm at Hand, told Arkansas Business last week that Grainster is “building something really, really cool. … There’s a lot of benefits to the farmer.”

But he said that the partnership involves Grainster promoting Farm at Hand “and we are looking at ways that we can do the same.

“Right now, we’re exploring different ways of possibly working together and different synergies that might exist between our two companies,” he said. “We’re still in the exploratory phase, learning more about their offering.”

Seeking Investors

Fortenberry said Grainster is looking for office space in Conway. He said he plans to have 120 employees by the end of the summer or early fall and 200 workers at the end of two years.

“We’re going to ramp that up really quick,” he said.

He said the employees would be doing “HR, sales, just the typical things.” Programmers also will be on staff.

Grainster also is planning to open a “small office” in San Francisco for its logistics division.

The company said in its March 27 news release that “Grainster acquired it’s [sic] first investor in an impressive timeframe of less than 6 months.”

Rohrscheib wouldn’t say how much money Grainster has raised so far.

He said it cost $500,000 to $1 million to launch the first phase of Grainster. Fortenberry used some of his money and, Rohrscheib said, “we’ve had investors help out.”

And Grainster continues to look for investors.

“There’s still time for investors to get in, not a lot of time,” Rohrscheib said.

Fortenberry said he hopes to attract Arkansas investors.

Rohrscheib said investors in Boca Raton, Florida, and even St. Louis, want Grainster to move its headquarters there.

“So in order for us to be able to stay here in Arkansas, we wanted to have some Arkansas buy-in,” he said.

Fortenberry said raising money for a business was like being a politician. “You really want your home state to get behind you and carry you,” he said.

Neither the U.S. Securities & Exchange Commission nor the Arkansas Securities Department had a filing on Grainster as of last week.

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