The Slow Money Alliance is re-imagining financing options for local food systems.
By Jennifer Conrad Seidel • Photos by Molly McDonald Peterson
The magazine in your hands is part of a national movement seeking to establish regional food systems that are sustainable environmentally as well as economically, where new ways of making food flourish alongside new ways of making money. In short, this movement wants to create a vibrant alternative to the industrial food system.
For this movement to grow, it needs local-food advocates and financial advisors to devise alternatives to the typical financing structures that promote quick growth and a fast buck.
Rumors of Change
As editor of Flavor, I’ve talked with those who have owned foodrelated businesses for decades and others who have great ideas for businesses they’re trying to launch. One of their common frustrations is that most options for raising capital, such as smallbusiness loans and venture capital, aren’t the right fit for local food systems, whose goals are often modest and very long-term. They have to be very creative in raising capital, or they have to go without.
For example, the nonprofit Local Food Hub near Charlottesville, Virginia, initially sought some capital from Albemarle County’s economic development fund, since the local economy stood to gain from increased agricultural production and sales. Its request was rejected: County supervisors felt the hub was really a high-risk venture capital project. At the eleventh hour the hub found other financing—a combination of government funds (from the Nelson County Economic Development Authority), grants (from the Blue Moon Fund and the Bama Works Fund), and private donations from individuals including author John Grisham and Dave Matthews Band manager Coran Capshaw.
This quandary is increasingly common as the demand for local food grows and entrepreneurs try to meet it. We at Flavor have faced this issue ourselves, since we are a for-profit publication with a social mission and are unwilling to compromise our principles to maximize earnings. So when we heard about a new organization conceived specifically to address the financing needs of the local food movement, I picked up the phone and called the man leading the charge, Woody Tasch.
Taking a cue from the international Slow Food movement, which seeks to reclaim the simple pleasures of cooking and eating that are being lost in our fast-food culture, Tasch coined the term Slow Money. In 2009, he published a book entitled Inquiries into the Nature of Slow Money: Investing As If Food, Farms, and Fertility Mattered.
Tasch is as experienced with financing sustainable agriculture as one can be in this relatively young movement. For more than 30 years, he has been involved with organizations and companies that manage capital for socially oriented projects and businesses. Until recently, he was CEO of Investors’ Circle, which has facilitated the investment of $130 million of so-called patient capital in over 200 “entrepreneurial companies that enhance bioregional, cultural and economic health and diversity” since 1992.
He has also worked for, chaired, and consulted with dozens of companies, organizations, and NGOs. Notably, he was treasurer of the Jessie Smith Noyes Foundation, which made a substantial investment in Stonyfield Farm, now the largest producer of organic yogurt. In 2008, he founded the Slow Money Alliance, a 501(c)(3) of which he is chairman and president.
Facilitating a National Discussion
Unlike his other ventures, the Slow Money Alliance is not raisingcapital or distributing grants. Instead, it is facilitating a national discussion that Tasch hopes will lead to the creation of new investment models. The alliance is an advocate, a catalyst.
“It’s about creating social capital,” explained Tasch. “It’s about making investors and individuals aware that it’s important for them to put some of their money to work in local food systems.”
The alliance’s goal is to see a million investors investing 1 percent of their assets in local food systems in the next decade.
Slow Money groups are springing up across the country. The alliance is still in its early stages, so these are brainstorming sessions. Localities are looking to address their own needs, not solve national problems. Yet it is clear that the same issues are being faced nationwide: Everybody needs local processing and distribution. Everyone is struggling with land preservation. Restaurants looking to buy ingredients locally are opening everywhere.
“That’s why having some national infrastructure in place can be catalytic,” said Tasch.
A Food-First Profit Model
The alliance sees itself as part of a grassroots movement in which the needs of the food system determine the investment structures being proposed, not the other way around.
“We’re starting where the energy is, rather than where the big money is. People who are ready to do this already recognize the importance of it. They are willing to spend some time and energy on the invention process.” Once the investment models are in place, Tasch expects that the money will be there, saying, “There’s a lot of pent-up demand.”
Tasch distinguishes two ways of investing. On the one hand, we can allow financial practices to determine our agricultural practices. This is the profit-first model, which usually promotes unsustainable farming practices that depend on fossil fuels and agribusiness technology to squeeze more yield and more money out of the land. On the other hand, we can allow our agricultural principles to influence our financial practices. Call this the food-first model, which puts money toward a sustainable growth that acknowledges limits and seeks to benefit not just a few distant investors but the many people working and living in a local foodshed. At present, almost all of our investments in agriculture follow the former model, not the latter. So far, local food innovation has outpaced local finance innovation.
Building New Models
Traditional financing instruments are not always applicable to developing food systems. As Tasch explained, it is difficult to invest in small food enterprises: “They’re for-profit, so they’re not good candidates for philanthropy, and they’re way too small for venture capital or traditional small-business thinking. You have to approach it with an integrated mindset that recognizes these are for-profit businesses and that also understands the centrality of local food systems and small food enterprises in preserving soil fertility and creating healthy food.”
Tasch stressed the importance of the local food network as much as the individual businesses in that network. But the prevailing financial models—for stand-alone small businesses, for nonprofit organizations, for promising high-yield companies—offer no clear way to invest in such a network or to even recognize it as something worth investing in.
One structure proposed has been dubbed “slow munis”— municipal bonds that deploy funds to a portfolio of small food enterprises in a local food system. Bonds would be available starting at small denominations, perhaps $1,000, and bondholders would be able to see their money at work in their communities, much like bonds sold to build schools. The slow muni model still needs to be designed and tested in a municipality: Funds will have to be raised and invested, and it isn’t clear yet how long it would take to determine whether the experiment had succeeded in one place and could be reproduced elsewhere.
Another approach looks to create a national pool of capital to supplement what is raised on a local level. According to Tasch, this modest fund, which may start at $5 to $10 million, would be capitalized by a limited number of very large investors—either foundations or very high net worth individuals. It would be used to co-invest with members of the Slow Money Alliance who want to buy farms in their region, thus preserving farmland and getting the next generation of sustainable farmers started. “Right now I would say we’re in exploratory discussion phase,” said Tasch, “looking at how we could deploy a small fund like this in a very high impact way and capitalize the flow from hundreds or thousands of small investors around the country to scores or hundreds of organic farms.”
A New Neighborliness
Most business owners face the challenge of raising capital and providing a return to investors without compromising their independence or, in this case, their focus on a progressive, local mission. Rooted in the community and focused on issues like humane treatment of animals, they may fear losing control of the company.
Investors involved with Slow Money understand these values and are not out to make a killing, assured Tasch. “We want to prioritize social and environmental impact and allow financial return to arise organically out of that process. We don’t want to force enterprises to change because of the way that the capital was provided or because of the expectations of the provider of capital. We want to be organized around the needs and the independence and the mission of the enterprise.”
Local Versus National?
Although he is a champion of small, hyperlocal enterprises, Tasch welcomes to the table sustainable businesses that function nationally. “Even though the aspiration is local—meaning we’re trying to get more money focused locally—we all recognize there’s no such thing as 100 percent local. There is always a balance between local and non-local. Non-local can be regional, it can be national, or it can be fair-trade.”
He points to Organic Valley, a national company that happens to be a co-op, so its profits benefit many small communities. “It’s a $500 or $600 million business owned by 1,300 or 1,400 organic farmers. It’s bringing product to millions of consumers. So is that national or local? It’s both. And it’s a very important connector.”
Bigger Than a Bread Box
The global economy demands larger, faster, more. Tasch’s mantra is slow, small, and local. “You don’t have to say everything in the world has to be slow, small, and local in order to invest in slow, small, and local. You just have to believe that we need more balance,” counseled Tasch. “It’s incontrovertible that we’re severely imbalanced and are heading toward an even greater imbalance, at our peril, in both the food system and the financial markets as a whole. We need to get to a place where it’s not either-or.”
For Tasch, the concept of regional solves the dilemma. But how big is a region? “It’s bigger than a bread box and smaller than a multinational,” he answered. There’s plenty of room within a region for enterprises of all sizes that reduce food miles and have more transparency for the investor.
Weighing the Risks
In a recent interview, Tasch was asked about the risks involved in what he’s proposing. “Someone asked me, ‘How are you going to get investors to do this? It’s awfully risky.’ I said, ‘Don’t you think it’s scary or risky to have your money in China?’”
The Slow Money Alliance may seem poised to take advantage of wary, post-financial-collapse investors, those newly suspicious of companies conflating size and financial security. But Tasch does not guarantee the success or sustainability of enterprises just because they’re small and local. “Most small businesses fail. Most start-ups fail. That’s just the nature of the beast. It’s very hard to start a business. It’s hard to be a farmer. It’s hard to start a local processing facility. It’s hard to grow a CSA.” Investments are risky, but risk is not unique to small, food-related businesses.
He points again to Organic Valley, which may be the biggest, longest-running illustration that taking risks on local food can pay off. According to Tasch, the investors who have been lending money to Organic Valley have been earning 6 percent for 15 or 20 years. “When the co-op started, every traditional investor said, ‘That’s the craziest thing I’ve ever heard. It’s all the risks of a small business and none of the upside.’ But think about how cool 6 percent a year looks on money that’s supporting a network of growers working together to create a national organic brand for what they produce.”
Not Hard to See
The way Americans view their food is changing, slowly. Despite bestselling books, celebrity chefs, and White House residents touting the value of knowing your farmer, local food still accounts for an almost negligible percent of food consumed nationally. Tasch is not looking for a food-system apocalypse. Instead, he is organizing for slow, steady change.
“I would call it a rebalancing rather than a collapse and rebuilding,” he said. “You don’t have to believe the whole industrial food system is going to collapse in order to believe that it’s worthwhile to invest in its rebalancing.”
It is our hope that our foodshed, with the nation’s capital at its center, can play a prominent role in this rebalancing.
Slow Money Alliance
No Slow Money groups have been started in the
Jennifer Conrad Seidel is the editor of Flavor.