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|Slow Money : Columbia River edition : Friday, 17 August 2018 09:28 PDT : a service of The Public Press|
Upper Connecticut River Valley
northwestern and central Vermont
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There is science, logic,
reason; there is thought
verified by experience.
And then there is
– Edward Abbey
Slow Money to Fund Healthy Food System
by Tom Stearns
Hardwick Group Are Guinea Pigs for the World
The Slow Food movement has been changing the way people think about food, grow it, prepare it, and eat it. It is the polar opposite of “fast food.” It is with great respect, admiration and partnership that Slow Money takes its name. Slow Money is an organization that funds the farmers and businesses that embrace the concept of Slow Food.
Since June 2008, our group has been conducting research and feasibility studies to learn what farm and agricultural based businesses need in terms of financing and support. We have met with many non-profits, including NOFA-VT, charitable foundations and existing lenders, who have years of experience in doing this work. One of our tasks will be to partner with the state leaders and not to reinvent the wheel. The role of Slow Money is envisioned as a behind-the-scenes supporter, building relationships and following the leads of local organizations and entrepreneurs.
Why is the money needed?
Growing businesses need financial capital at different times to invest in equipment, infrastructure, people, and marketing. This can be challenging for a private company. It can borrow money from a bank or community lender, but this can be difficult if collateral is scarce or if debt service cannot be funded out of cash flow. A second option is to bring on investors, selling them part of the business in exchange for their capital. This has the advantage of avoiding monthly payments on a bank loan, as investors usually get their payout on the sale of the company. Bringing on investors generally requires an “exit strategy.”
Most mission-based businesses, however, especially small farms don’t want an exit strategy that involves a sale. But, they may still need money to grow and bank debt may not be feasible. Also, social missions such as local control, local ownership, and local jobs are not valued by the traditional financial community.
My seed company, High Mowing, recently found itself in the challenging nowhere land between investment and debt. We had grown quickly from 2000-2007 and needed every dollar (and more), to grow into a more sustainable size so that we could continue to offer organic seeds to the growing ranks of organic farmers and gardeners. Our mission, and the reason I started High Mowing, is to support the rebuilding of healthy, locally-based food systems, not only in Vermont, but beyond.
I had potential investors interested in buying a large percentage of the company, but that would mean giving up control and risking the mission. I feel strongly that the independent-minded organic farmers in this country need an independent seed company. I needed a creative financing solution that gave me the flexibility of not servicing major debt while the company was growing and didn’t have the end game of selling out.
Enter Slow Money.
How is Slow Money different?
Most investment strategies are based on maximizing financial returns. Little attention is paid to environmental or social returns, or on the long-term impact of the investment. You buy, you sell, you move on.
Nor are traditional investment strategies about building relationships or integrating businesses within a community. Slow Money, by contrast, builds portfolios that support the rebuilding of food systems in strategic and synergistic ways that offer long-term solutions. It’s no different from a farmer diversifying his crops (or an individual investor diversifying a portfolio.) Don’t put all your eggs in one basket.
Here is an example;
Problem: Lack of resources and infrastructure for sustainable meat production in Vermont
Typical solution: Raise money to build a slaughter house – estimate $2 million.
Slow Money solution: Raise money to build a slaughter house – $2 million AND invest in an entire collection of companies and non-profits to actually “fix” the local meat food system. Possible other investments would be in; an existing or new meat processing facility, a producers’ cooperative, a sales and distribution company, a marketing company for local markets, a technical assistance and educational program for meat producers and a major effort to get local meat into local schools, government buildings, hospitals and more.
This might eventually be more of a $20-30 million dollar investment over a 3-5 year period, in integrated phases. This approach would go much farther in addressing the challenges of a “meat food system” that will be sustainable over the long-term. A slaughter house, by itself, will not completely address the problem.
Slow Money’s approach is to study the problem in depth, involving all stakeholders, then finding investors who interested in a portfolio of a range of businesses that collectively provide a solution to a problem. Through creative design and financing, these investors will get their investment back, with a modest return (by venture capital standards) of 5-8% while the local food system is revitalized. Eventually, the original money is available to do it again, either on a different part of the food system or in a new location.
Here is the mission of Slow Money:
• To promote entrepreneurship that preserves and restores soil fertility, appropriate-scale organic farming and local food communities;
• To catalyze increases in foundation grant-making and mission-related investing in support of sustainable agriculture and local economies; and,
• To incubate next-generation socially responsible investment strategies, integrating principles of carrying capacity, care of the commons, sense of place and non-violence.
The vision is as big as the problem. A broken food system needs to be fixed and part of that solution is related to funding. Woody Tasch, president of Slow Money and author of a book by the same name, puts it this way:
The task at hand calls for a new kind of fiduciary entrepreneurship—a new prudence, a new urgency, a new vision of capital markets designed to usher in the age of restorative economics. We are seeking system design innovation capable of facilitating the flow of many billions of dollars over the next decade, supporting broad-based cultural transformation.
Vermont is a small state that prides itself on collaboration and practicality. There are already dozens of farmers, business owners, and others partnering with Slow Money. The major Slow Money partner in the state is The Center for an Agricultural Economy in Hardwick. We’re the guinea pigs, but that’s ok by us. If our model works, we’ll be happy to share it with the rest of the world.
To learn more about any of this please visit www.hardwickagriculture.org or www.slowmoneyvermont.org.
Tom Stearns is the coordinator for Slow Money Vermont and is a Founding Member and Advisory Board member for Slow Money USA. Tom also is the founder of High Mowing Organic Seeds and President of The Center for an Agricultural Economy both in Hardwick. Tom has served on the NOFA-VT Board for 3 years as well. He lives in Wolcott with his wife Heather and their two girls Ruby and Cora.
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