“Alternative Funding Vehicles for Good Food & Agriculture”
June 13th, 2018 @ AgTech X
If you’re reading this post, you’re likely already aware of the many environmental and human health consequences of our conventional food system. You probably have also heard of technology companies using software, connected devices, big data, and engineering to raise substantial amounts of money in an attempt to buck the status quo.
But within our current venture capital-inflated environment, the pressure to scale can undoubtedly cause mission-driven founders to compromise on their initial intentions or values. So what alternative funding routes exist for those founders unwilling to make such compromises? And what exactly are the types of solutions they’re proposing?
Those were the central questions we sought to answer at our recent event with Change Food, entitled Alternative Investment Vehicles for Good Food & Agriculture. We aimed to create a space for “good food and agriculture” entrepreneurs to share their funding successes, challenges, and remaining questions, thereby demonstrating to our community of mission-driven entrepreneurs that they are not alone in their rollercoaster pursuit of impactful change. Ten founders shared their stories. Here were some of our takeaways:
Many good food and ag startups are developing technology or ideas that are not immediately testable in the conventional market. Financial returns, therefore, will be slower to develop. A farm growing a rare food product that uses a minimal input of natural resources to produce but is unknown to the vast majority of consumers, for example, needs financial backers who believe in a future food system where products like these are increasingly rewarded. These same investors may also be supporting consumer education initiatives that overlap and multiply their efforts.
Other companies have an inherent environmental and/or social mission in their business model. It might make financial sense, for instance, for a local food distributor to start sourcing more of their items from larger farms as their operations grow – but that would come at the expense of the small, environmentally-responsible farms they started their business to support.
Rachael Mamane of Brooklyn Bouillon discussed just that. Her local bone broth venture, launched in 2010, quickly took off. But the pressures of maintaining her original mission and economic control in the face of traditional investment options pushing her to grow the business unsustainably soon became immense. Ultimately, Mamane was able to hang on in part due to the success of a cookbook she authored on the subject: Mastering Stocks and Broths.
Restaurateur and social entrepreneur Jimmy Carbone insisted that “guerilla funding” options exist within the New York City community. However, entrepreneurs must be willing to engage with and work with this community to align missions. It takes a true grassroots mindset – does this younger crop of mission-driven founders have that? Carbone seemed skeptical.
But Wen-Jay Ying of Local Roots NYC could be a good example. Ying pointed out that many grassroots food operations, including hers, are offering what she calls, “high-quality [social] capital.” This capital manifests itself in non-monetary forms including community impact, high-quality produce, transparency, accessibility, and environmental benefit. She has been able to rely on close relationships with neighborhood coffee shops, bars, and community members to keep costs low and allow her to grow the business without outside investment.
Alternative funding options can give founders more flexibility – but they can also come with new challenges. C. Mike Lindsey, a founder of NexLoop and a current co-working member at AgTech X, was thrilled to have won a major prize competition at the end of 2017, validating his team’s initial idea and design concept. With $100k in winnings, they were excited, but also unsure as to immediate next steps. Did this suddenly mean they should form a business? As a startup, would they be forced to raise additional funds to pay for R&D, manufacturing costs, and hiring talent? With team members based around the world, would they need to overhaul their lives to move to the same city?
Jonas Günther of We are the New Farmers discussed the major challenges of securing grant funding, ranging from finding the right fit to timely access to capital. Coincidentally, our next speaker was able to supply Jonas and others with some encouragement from the USDA. Ian Marvy, the first ever Urban Specialist for the USDA’s Farm Service Agency, urged attendees to dive deep into the huge web of government grants and loans as a first step. Last year alone, the FSA loaned $8.4 billion; $300 million of which was loaned within New York State for the development of food and agriculture businesses, according to Marvy. Often, he pointed out, “the FSA is lending to farmers that the for-profit world won’t lend to.” Since the event, Marvy has been contacted by seven attendees, all of whom are interested in “[financial] resources and connections to broader USDA resources.”
We also used the night to unveil our new database of alternative funding vehicles that will serve as an iterative, crowd-supported tool where funding opportunities can be researched and shared amongst our community. Our vision is to continue growing this open database while soliciting feedback directly from our network of entrepreneurs as they navigate the various resources listed.
Have a funding group that’s not on our list? Use this form to add your suggestion. We ask that your sources focus their efforts on, or have a demonstrated history of, supporting early-stage and impact-driven food and ag startups.
We can grow the Good Food & Agriculture movement. Events like Change Food Meets give us the momentum we all need to continue pushing forward. Check out the next one via our Events Calendar.