By Barry Adams
The Wisconsin State Journal.
Whether they harvest honey, make sausage or brew beer, small-scale food producers face many of the same challenges.
One of the biggest is coming up with capital to expand, add equipment or employees.
Recognizing that some investors want more than just monetary returns, Slow Money Wisconsin was founded by Grant Abert as a non-profit in 2009 to connect for-profit food entrepreneurs with those looking to invest in the local marketplace. Abert, a philanthropist from Hillpoint, also co-founded the Wisconsin Community Fund, the Donor Collaborative of Wisconsin and Sustain Dane.
In May, Slow Money Wisconsin, in conjunction with the Local Investment Opportunities Network, will hold its third annual Business and Investor Showcase where selected food companies present their businesses to a room of potential investors. In the inaugural showcase in 2013, eight local food entrepreneurs received more than $600,000 in funding. In 2014, there were 31 applicants, double from 2013, with nine companies selected, four of which received funding.
In 2014, another step was taken to help aid local food businesses when Slow Money Wisconsin teamed with Forward Community Investment and Willy Street Co-op to create the Willy Street Co-op Local Vendor Loan Fund. The revolving loan fund is designed to help co-op vendors grow their business.
Applications are being taken for this year’s Business and Investor Showcase, scheduled for May 1 at the Lussier Family Heritage Center in Madison.
The deadline for applying is 11 p.m. Feb. 15.
Q: What sets Slow Money Wisconsin apart from other organizations that help entrepreneurs?
A: We help in a very specific way. We help both investors and food business entrepreneurs find each other. We’re not out there doing local food fairs or giving business advice on how to bring down production costs. We have a very specific mission, and we think it’s a really needed niche to be filling and that is helping entrepreneurs understand the financing that’s so desperately needed to continue to let cash flow happen and businesses to thrive, grow and expand. We’re also really trying to educate local people who want to move their dollars from Wall Street to Main Street figure out a way to connect to these food businesses.
Q: But your investors don’t expect 10 percent returns?
A: That’s where the “slow” comes in. We’re all about a slower financial payoff but a much larger and faster dividend than a typical Wall Street dividend, if you account differently. If you account for keeping quality of life high, for having healthy foods for your family, healthy soils and water and a dynamic local economy, we think it compares favorably if you do your accounting a little but differently.
Q: Is it difficult to find investors?
A: We have many whose spirits are willing and a growing number that are writing checks. There are many hurdles of culture and practice preventing local money from reaching local entrepreneurs in a relatively safe manner. We are trying to also shine light on any solutions from around the country that’s proving to help investors feel safe and confident in taking some risk but not undo risk in moving money toward these small companies that desperately need it.
Q: What is the financial knowledge of your businesses seeking investors?
A: There’s a wide variance. Some are quite sophisticated but many are not. We’ve identified this as a gap in the ecosystem of technical assistance being offered to food businesses. Lots of places offer technical assistance based on production needs or supply chain and efficiencies but an extremely small number of organizations offer this kind of advice in how to make themselves loan-ready for either conventional or venture capital investment. An even smaller group does that with the special needs of food businesses.
Q: Are banks a viable option for these food entrepreneurs?
A: They tend to be seasonal, and bankers aren’t accustomed to that. The upfront costs are a little higher and margins a little narrower (with our businesses). Bankers, by and large, are accustomed to commodity farm practices and those kind of risks. A diversified vegetable farm or a business that strings from that — though they can usually show they have great growth potential and reliable customers and they can usually show some track record of success — they still fall into a real blind spot for a lot of typical traditional lending.
Q: How do you recruit businesses for the showcase?
A: We have an application process that just opened (last week). They fill out an application and then we have a panel of experts who understand the food and farm business. (They are) volunteers who are willing to sort through whose ready for this type of opportunity and who is not quite there, yet. We are there to provide a venue for the businesses to share their story to investors…. We are not in any way suggesting or evaluating risk. We’re offering an opportunity for people toget to know one another.
Q: Is there a typical investor?
A: We like to say if you eat, you’re somewhat of an investor because your food dollar choices really do matter. But there are people that want to take that to a little higher level. We run the gamut to people who are willing to spend 0 on a gift certificate to a new startup restaurant as a way of prepaying.
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People who pay up front for CSA shares often graduate to investor and then we have people who maybe have a new inheritance. And then we do have accredited investors who are looking for a solid local food investment. The Madison LION group has been a very good source for helping us tap into active local investors.
Q: But there is also a coaching aspect, correct?
A: One thing we think we do well is educate entrepreneurs about their (financials) so that by the time they get through the Slow Money Showcase, even if there’s been no relationship built between private lenders and entrepreneurs, usually the coaching they receive for free after they’ve been chosen helps them to understand their own cash flow and profit and loss and to think like a banker.
Q: What do you see happening with local foods in the next five years?
A: Local food has been hot, and it’s going to stay hot. We are moving in a slightly new direction but one that is still as good for local foods as it could be. People are beginning to understand “real” food that has fewer middle men and fewer ingredients on the label or less processing. And that plays right into the hands of local food producers.