A Wharton grad hopes there's money in fungus

The Wharton School teaches a lot about finance, less about fungus.

Graham Phillips grew up in Philadelphia, collected several degrees at the University of Pennsylvania, including from Wharton, and started his professional life with a Wall Street firm.

But Phillips grew plants indoors as a child and developed an entrepreneurial outlook as an adult. So after time in New York, Boston and Los Angeles, in July he moved his wife and two children to a 100-acre farm formerly owned by his grandparents in New Hope.

And with them came BioOrganics L.L.C.

The small business makes and sells mycorrhizal fungi.

What?

(Organic gardening experts, give us a moment.)

Fungi, of course, is the plural of fungus.

Mycorrhiza (pronounced my-corr-rye-zuh) means the symbiotic relationship between the tiny fibers of a fungus and the roots of a plant.

In natural soil situations, plant roots, fungi, earthworms, bacteria and other forms of life, microscopic or not, form mutually beneficial relationships. BioOrganics makes several combinations of fungi spores, all but one of which qualify as organic. The spores hover around the roots of a plant until the plant decides which ones it likes.

"Mycorrhizal fungi has been around for millions of years," said Phillips, 38, who bought the business from Don Chapman, who founded it in 1996 in Palm Springs. Phillips said the business was profitable but declined to specify numbers.

BioOrganics recently started selling in more retail shops, but the powdered mixture in 3-pound canisters or 25-pound bags is sold mostly to commercial growers. That group includes vineyards, several kinds of tree farmers, landscapers, golf courses, sod farms, potting-soil companies and nurseries.

Like other slices of the organic sector, this part of the "soil amendment" category of products is born of concern that use of chemical-based fertilizers over the last 40 years is harming soil and contaminating water.

Phillips is happy that he has save-the-earth customers, but he says he does not rely on them.

"I talk to farmers who think organic is for hippies and they're interested in it for the biological aspect," Phillips said. "They look at it as living soil and as a cost benefit. You can use less fertilizer and less water."

There are two categories of mycorrhizal fungi, and a few plants that don't respond to either.

Not every fungus is created equal, but the anti-fungus products commonly seen in stores would kill BioOrganics' spores, Phillips said. If growers and gardeners want to use fertilizer, he suggests they apply a small amount of a dry organic version. On another level, theoretically, large fertilizer companies might view Phillips' product or his competitors in this business niche as a threat since growers would use less fertilizer.

"This niche is still too small for them to worry about. I know they are looking at it, but, yes, it would be a threat because the grower is using less fertilizer," Phillips said. "The plants are more disease-resistant, with stronger root systems, so you don't need fungicide and all the other things that chemical companies make."

Phillips is careful about his proprietary formulas, but before he worries about big-company competition or selling his products in big-box retailers, he has to finish setting up his operation at the former dairy farm located off Creamery Road. The red-and-white milking parlor, still with entry and exit ramps for the cows, is the production facility.

Phillip's father, Walter, is a lawyer and former prosecutor in Philadelphia. His parents ran a bed-and-breakfast from the main house, which Graham Phillips said dates from the 1700s and has an oven within the huge - and perhaps original - stone fireplace just inside the current front door.

Old tractors with paint peeling from wooden wheels sit in one shed. Barns shelter a few horses, pigs and an ornery goat rescued from unhappy homes, but some of the space might be converted to storage for BioOrganics products or an office. For now, Phillips has a desk in the spring house, which was used to store milk and meat in another era.

"It's more than eight days a week and 25 hours a day," Phillips' wife, Layla, said of the family's small business. Besides caring for their young son and daughter, she helps with marketing, the company newsletter and its website. She grew up in Los Angeles but said the new, more rural home was a better spot for their children. "We've come here to grow. It's our New Hope."

Phillips discovered BioOrganics via a website, where a business broker posted information after founder and one-man operator Don Chapman, 70, decided he was ready to retire or look for another idea to turn into a business. Chapman, a gardener for fun and a marketer by profession, said he sold his previous business, which measured TV advertising, for millions when he tired of managing 300 employees.

"When you start these up, it really helps if you have an idea of what you hope to do," Chapman said. "If you want to make it into a large business, it's different than doing it for personal enjoyment. Graham wants to grow the business, so he will do things differently than I did. I think he'll do a good job."