I am have been sitting in the Slow Money Alliance conference in Santa Fe for a day and half now. Many of the pioneers in the good food movement have shared their stories and insights related to the current paradigm of wealth creation and its impact on the planet and its ecological systems. The overarching message that I hear is that we must reframe our sense of return on investment. We can no longer afford to expect huge financial returns when that means degradation of soil, plants, animals, humans and communities. We must broaden the spectrum of expected returns to include regeneration of human and community health. Health must be part of wealth.
I have been struck by lack of specificity in defining what the alternative return regime will look like. Several times yesterday, people asked in different ways: what kind of financial return shall we seek in Slow Money? In other words, in current market conditions, what can we – the good food movement of entrepreneurs – offer to investors that will still attract money? Several answers were offered indicating that clarity has not been reached. Tom Miller, a co-founder and board member of the Slow Money Alliance, said roughly, we cannot define that number. It depends. At one point, Slow Money’s primary founder and voice, Woody Tasch, said 4%. Kristine Martinez, founder of Angeles with Attitude, a Santa Fe based investor association, said it will be different based on the goals and desires of the businesses and investors. Eric Becker, vice president of Trillium Asset Management, a socially responsible investment entity, said the returns “will” be lower than market rate.
These answers are not the kind that seasoned, professional investors, who hold to the financial paradigm that currently predominates, like to hear. During this dialog among financial professionals seeking to create a new way to finance young companies, the audience became the most animated it would be all day. Why? Because this question of return and what is sustainable is the core of the question that Slow Money offers to all humans today.
For me it was a classic moment of paradigm shift. We cannot answer the new question using the old frames. Return on investment (ROI) is an old frame. It forces us to ask the question, what is capital? The first definition found on the web and offered by Google is “assets available for use in the production of further assets.” That is actually a nice definition, devoid of extraneous concepts like wealth accumulation, which is a value that has become a religion in our day. Slow Money is really asking us to question the current axiom that ROI or return on capital should be 20-25%, which is the rough average that venture capitalists seek because you will double your money every 3-4 years. Clearly, the Slow Money answers offered yesterday do not provide those returns. Slow Money is asking us to accumulate less wealth and to regenerate more health, but it has not clarified the spectrum of returns that can be captured in an investment product in a compelling way.
This reality clarifies that traditional investors are not likely to be the key to Slow Money’s future. Ari Derfel, founder of the restaurant/salon Terrain in Berkeley, actually called it out. He along with Kyra Pincheira, a young food entrepreneur said we need to look to a larger base of individuals who care less about a high return and care more about construction of new system. But as Greg Steltenpohl, founder of Odwalla and Adina beverage companies, said, working with dozens of small equity investors when starting a company is a good way to quickly burn out an entrepreneur trying to innovate. Starting a company is hard enough without answering to dozens of additional bosses, which equity investors become. So a financial intermediary is required, a means of aggregating the small investments of thousands of people seeking to fuel the needed innovation in the food system.
Thanks. I am hoping to be able to "call the question" this afternoon in the big session. I have spoken to many folks today one on one and many share our views. Some feel that it is still too early. We shall see.
I would have loved to attend Slow Money this year, and I wholeheartedly approve of everything the alliance is trying to accomplish. Clearly, the food system needs a shot in the arm and the more passionate visionaries that attack the problem, the better off we’ll all be.
But, at the same time, visionaries occasionally need a dose of reality. Slow Money seeks to reinvent an awful lot, both the capital system and the food system, two of the largest industries in the world. Changing either of these industries, even miniscule amounts, requires massive amounts of investment capital. Consider this: opening one farmer’s market for every 20,000 people in this country would cost about $625 million. And that’s just a drop in the bucket when it comes to retooling the food system.
To encourage mainstream investor interest in sustainable agriculture, NewSeed identifies profit-driven companies that have the potential to improve the agriculture industry—companies that do things like manufacture natural alternatives to pesticides and fertilizers, turn farm waste into energy, or distribute produce from family farms to major grocery chains—and tells their story to the investment community so that capital from Wall Street starts flowing in the right direction.
The more “sustainable agriculture” is associated with low returns, the less private capital will be available to fund it. It’s that simple. A rational investor, whether it’s a hedge fund or a retiree, will always choose to invest money so that it generates the highest and most predictable return with the lowest risk. Our goal is to demonstrate that sustainable agriculture is an industry with tremendous growth prospects and talented professionals focused on generating market-rate investor returns.
Next week in New York City, investors will converge at the first-ever Agriculture 2.0 conference to meet entrepreneurs and discuss commercial investment in this sector. We hope that this conference, in conjunction with positive momentum generated by Slow Money, focuses mainstream investor attention on an industry with better growth prospects than nearly all others.
That’s the clear, compelling message NewSeed is trying to communicate.
For more information, visit www.newseedadvisors.com/conference
I own an operate Coyote Creek Organic Feed Mill, in just three years we have gone from zero to $3.000,000 in sales and all the time being in the black.
There is so much talk about how to increase organic farms. But, there was no opportunity for me to present my mill as an example. We are the only organic feed mill, not only in Texas but in the entire southern U.S.A.
I am seventy-three years of age, and had no idea that this mill would flourish as it has.
We have increased organic grain production in Texas by a large multiple. On the other side, the end product side there are many small family farms that are now producing organic; eggs, poultry, pork, turkeys, also, organic dairies, and the list goes on about how our mill has leveraged sustainable organic farms and farm production in just three short years.
I want an equity partner who will join me to install professional management, and then build three more mills across the southern U.S.
There is a huge pent up demand for organic feed. This in not and idea or a hunch, I took the risk and the proof is in the pudding.
Now I just need some capital investorrs. I will furnish a Start-Up Coordinator, Construction Crews, Accounting and Inventory Control and Equipment location.
I support the philanthropic aims of Slow Money, but I also want to keep in mind that there is a place for capital that expects a Return in Investment.
Contact me if this is of interesnt to you.
I am off to the Farm Fresh Dinner at the Santa Fe conference.
Best wishes to you all,