Two years ago Transition Colorado (a 501c3) got a kick-start from an individual who was so inspired by Woody Tasch and the Slow Money approach that he wound up entrusting our organization with a $1.5 million ten-year no-interest loan so we could begin investing in local food and farming enterprises.
This was a game-changer for a small grassroots non-profit. And after a year of receiving conflicting advice from a host of advisors, last fall we finally formed Localization Partners as an LLC. We plunged in, began investing, and started exploring how we could catalyze investments in local food economies. Among other things, we capitalized a Boulder-based startup food distribution company called Source Local Foods, which is up and running.
Then in March of this year, I got a call from an investor in Grant Family Farms, saying that the farm was headed towards the cliff, and this time it could be permanent. He wondered if Localization Partners could help somehow. Now, Grant Family Farms is not just any farm. It is the oldest and largest certified organic farm in Colorado, with nearly 2,000 acres under cultivation. Five years ago it launched a CSA, whose membership has grown to nearly 5,000 members today. The farm also ships produce to major retailers from Texas to the East Coast, and is even producing more than 400 acres in all-organic wheat, corn, and alfalfa.
And this farm is not just a piece of ground, but a collection of smaller plots spread over several miles, mostly irrigated by center pivots drawing upon an ancient underground stream. As a food production system, it’s impressive, beautiful, inspiring.
For us, this farm was too important to let it disappear.
To take this on, we organized Localization Partners Consulting LLC, and Localization Farm and Asset Management LLC, and Jim Ott took the lead in what would eventually become a massive turnaround operation.
To begin with, we knew it was essential to get this season’s crops successfully planted, cultivated, harvested, and sold, and to get the CSA members served. We figured all of that would generate significant revenues, and some profits. But our projections showed that even with the CSA the whole operation would be significantly cash negative until about mid- to late-August, a rather breathtaking prospect, but one very familiar to many farmers these days.
We decided we would have to raise $1.5 million in the course of a few weeks to finance the season’s crop. We created a simple investment vehicle, a six-month promissory note at a fairly high rate of interest, which was backed by the crop and guaranteed by Localization Partners. We reached out to individuals we knew, including members of the Slow Money Investment Club. I’m delighted to say that these individual members, including Localization Partners, invested $650,000. All told, we were able to raise $1.6 million, and since we’ve had a great crop on the farm this season we anticipate that all of that money will be paid back by the end of the year. That’s Phase One.
Phase Two, underway now, is a radical restructuring of the farm into several enterprises, each of which needs to be capitalized, each of which needs its own management team. We see this becoming a network of farm-related operations, ultimately encompassing perhaps 10,000 to 15,000 acres in the Front Range.
To help capitalize all of this, and to be able to invest in a variety of other food and farming enterprises, we’re now organizing a Localization Partners Enterprise Fund, initially pooling $5 million. We need to complete this round by early next year.
Through all of this, we helped catalyze a Slow Money Investment Club. We decided to model our group after the No Small Potatoes club launched in Maine. I have never experienced anything more chaotic, or more frustrating, or more inspiring or more promising than getting this little group going. Woody became a member of the club, as a recent arrival in Boulder, a local resident. Everybody has put in $5,000. We made our first investment this September, making a $12,000 loan (three years at 3%) to a one-year-old company, LoCo Food Distribution, based in Ft. Collins.
—Michael Brownlee, Co-Founder of Transition Colorado and Localization Partners LLC
Slow Money Maine’s network continues to flourish with farmers, investors, funders, and entrepreneurs gathering every other month for showcases and networking. In July, farmers, a grain broker and a butcher from Aroostook County up near the Canadian border gave an inspiring presentation about the potential to expand grain, grass fed beef and vegetable production to feed Maine and the northeast region. A fun initiative this summer has been a farm-to-summer camps project, which brought fresh, local foods to camp dining halls. As of September 1st, the Slow Money Maine network has connected farmers and food businesses throughout the state to $3.8 million, primarily in the form of loans and grants. Of that about $2.5 million has gone to infrastructure businesses that support Maine farms – vegetable processing plants, a grist mill, a slaughter house, a feed grain mill, a distribution company and a multi-farm CSA. We are planning our third annual all day Slow Money event for November 15 in Belfast. See Bonnie Rukin’s article in NOFA’s fall newspaper, the Natural Farmer for a detail rich review of all the activity in Maine.
—Bonnie Rukin, Coordinator of Slow Money Maine;
—Linzee Weld, President of No Small Potatoes
We’ve launched a formal Slow Money working group. We met for the second time, with over 30 attendees, to focus on the role it might play within the existing PVGrows structure, and the broader capital structure of the region. Given the finance partners in our community, and the Pilot Loan Fund, we agreed to focus on two layers of the capital spectrum:
- Equity or near equity that key infrastructure businesses cannot obtain through conventional sources. The group debated whether it would be better served by bringing individual deals to individual investors, or by pooling funds. We didn’t get too far into this topic, and tabled this for a later agenda item.
- Looking at ways to make crowdfunding more efficient, by providing some sort of vetting, or connection portal, so that local crowdfunding efforts in the region can tap into a network of potential investors.
During the second half of the meeting we had Real Pickles owners Dan Rosenberg and Addie Holland present a textbook example for a real, established, deeply mission-credible firm’s need for Slow Money. They are looking to transition the business to a worker-owned cooperative and need unsecured equity to assist them in that transition. They don’t want near equity, because they are not borrowing to ramp up, and the cost of capital would be too high in that model for them. This was a perfect example of the kind of respected business that a Slow Money chapter could assist in its efforts to raise patient capital. They need capital that would encourage the business to maintain its local procurement commitment, and deep commitment to keeping its ownership and production local.
As I’ve discussed with Woody and Michael over the years, everything we do here is really Slow Money. So, we get tripped up at times speaking of the work of the Slow Money chapter versus the Loan Fund, or the Community Capital Fund that is on the drawing board. It’s all Slow Money, and it’s exciting to bring layers of capital together, within the PVGrows banner, or outside of it from the partners at the table.
With respect to the Community Capital project, here is an update on that: We have worked with Michael Shuman and Jenny Kassan to help us assess the assets and needs of the region, relying heavily on work that partners have already done here, and to match those to a legal structure that will allow us to raise a community capital pool from unaccredited investors, at relatively low minimums. Michael is writing up a handbook to assist other communities in generating their own community capital pools, and that should be available this Fall to all Slow Money members. We are in the process of determining the best structure, given the legal limits and institutional challenges and opportunities that characterize our community. We hope to make those choices together this Fall as well, and begin the process of moving a fund towards actualization in 2013.
To be candid, the Pilot Loan Fund continues to struggle to find good investment opportunities. The Fund seeks businesses that are viable, but not fully bankable, and because it is managed by a CDFI, it lacks the flexibility that a community capital or investment club fund might have. But, in our community, it goes beyond the investment terms. We have spent a lot of time speaking about business development and entrepreneurial capacity, and what it will take to build the kind of pipeline we will need to rebuild the local food economy. I’ve been reading Carole Peppe-Hewitt’s exciting stream of emails, and really think it would be great if she could share her story on generating deal flow. I have heard other chapters struggle with the same issue as us, and think it would be great to hear from them, and Slow Money Maine, on how they are able to get so many investment opportunities to present themselves.
—Jeff Rosen, Co-Chapter Leader, Pioneer Valley Slow Money Chapter
Slow Money Northwest has successfully expanded so that we now have project managers in Seattle and Portland. Both regions will hold pitch sessions this fall. Our engagements thus far have connected three enterprises with four investors totaling $445,000 in investments. We’ve tracked additional investments that were networked beyond our meetings to show six enterprises engaging 19 investors in investments totaling more than $934,000, with a separate land purchase investment totaling $3.4 million.
Our new Farmer Reserve Fund teams up impact investors with a credit union to extend their risk appetite for new farm business loans. We cover the agreed-upon 20 percent default rate by depositing funds in an interest-bearing account. For this first round we received $5,000 in donations that covered $25,000 in loans, with $15,000 of that already supporting three new farm businesses. Other groups and investors already want to engage further, with one foundation trying to figure out how to replicate this loan model in their region.
—Tim Crosby, Director, Slow Money NW
The Ohio Slow Money Chapter, started in January 2012, facilitated two group loans in April, one for $9,000 to Lucky Penny Candy, a subsidiary of Lucky Penny Farm based in Kent, as a short-term loan to provide matching funds for a value added grant to commercialize farmer Abbe Turner’s stunningly good goat cheese caramel. The second is a $10,000 short-term working capital loan in Storehouse Tea Company, in Chagrin Falls, an organic and fair-trade venture. The capital boost is enabling them to access new markets across the state.
In June, we facilitated a $50,000 loan between an individual investor and Snowville Creamery, a presenter at the second national gathering in Vermont, to buy the creamery a new milk truck. In July a $100,000 seed investment was also finalized for Azoti, a Columbus-based startup running an online platform to distribute community supported agriculture (CSA) shares and help local farmers grow.
We organized our first farm visit in Granville in July and held our first entrepreneur showcase in Columbus on August 16th, with 5 presenters and more than 30 people in attendance. There’s a local group in Cincinnati that has been meeting twice a month since May 2012 and is ready to move to the investment stage, initially on a network-only basis, but with the goal to launch an investment club soon.
Before the Ohio chapter was created, at least $350,000 was invested in local food businesses by individuals inspired by Slow Money. One beneficiary was Lucky Penny Farms, who received $300,000 between 2009-2011 by lining up about 30 investors who each lent different amounts to capitalize the farm’s start up and expansion. Another was Snowville Creamery, who received $50,000 in early 2012 from two individuals to purchase processing equipment needed to launch the yogurt business. That’s in addition to the new $50,000 equipment loan mentioned above.
—Filippo Ravalico, Slow Money Ohio Coordinator
Slow Money St. Louis formed Gateway Harvest, a food and farm investment club, in May 2012. Gateway Harvest made its first loan commitment of $5,000 to Local Harvest Grocery, which will be opening a second store this fall. We catalyzed an additional $20,000 in loan commitments to Local Harvest Grocery from outside sources, as well as an additional $10,000 loan to Local Harvest Cafe. The investment club was featured this past June on “Precious Earth,” a news segment that airs on two local stations. Chapter members also took part in a panel discussion at a St. Louis “Locavesting” event with author Amy Cortese this past June. Slow Money St. Louis was a viewing party sponsor for TEDx “Changing the Way We Eat.” The chapter hosted a workshop in January 2012 on Business Planning 101 at the Missouri Organic Association Conference.
—Kelly Childs, Slow Money St. Louis
Slow Money Boston had an entrepreneur showcase in April 2012; six businesses presented, and at least one is currently in conversation with a potential investor as a result. Our next entrepreneur showcase is scheduled for November 2012.
We launched an investment club called Sprout Lenders with 14 members in March 2012 and are currently reviewing our second round of applications.
We also organized a June 2012 event with Slow Food to help pull together the two organizations. Chapter members had a great time discussing the synergies between our two organizations and got folks excited about more collaboration together.
For fall 2012, in addition to the entrepreneur showcase, we have scheduled a facilitated roundtable discussion with the different stakeholders in the regional food-system. There will also be a Business Planning 101 workshop and a presentation workshop for entrepreneurs that will cover how to best present your business plan to investors at a showcase or other networking event.
This winter we are co-hosting, with the Sustainable Business Network, a day-long seminar with Michael Shuman on how to create local investment vehicles.
—Julia Shanks, Regional Leader for Slow Money Greater Boston