Investing in Local Food: Putting Your Money Where Your Mouth Is

Food
Dec 19th, 2019 | By Amy Leibrock

For those of us who make an effort to support local food production, seeking out local food at farmers markets, grocery stores and restaurants is probably part of your regular routine. You might have even joined a CSA or asked your grocery store to offer more local food.

All of this is extremely helpful and appreciated by local farmers and producers, but if we want to do more to build a robust food system in our communities, there are many ways to invest above and beyond our weekly grocery budget.

Chances are high that many farms and food businesses in your area are in need of investment to scale up to the next level. Or, maybe the producers in your area are constrained by a lack of infrastructure, like processing facilities or distribution services. There could be a new indoor farm in need of start-up funds or an aspiring organic farmer that needs help securing land.

As the demand for local food continues to grow, investing in this area may yield returns for you as well as your wider community. These businesses contribute to local tax revenue, create jobs, benefit the local environment and strengthen community resiliency. The Fair Food Fund, the impact investing arm of Fair Food Network, for example, estimates that every dollar they’ve invested in local food has generated nearly $9 in community benefits.

If you’re interested in this idea, you can get started by getting to know the food system in your area and looking for opportunities that align with your values. Are you interested in increasing food equity? Supporting land conservation? Creating employment opportunities? Boosting regenerative agriculture? Here, we’ve put together an overview of different investment avenues for potential investors of all levels.

CROWDFUNDING

Crowdfunding seems to be everywhere these days, and with good reason. Crowdfunding campaigns are simple to set up and easy to take part in. Usually organized through an online platform, they can be an effective way for businesses to raise money from a large number of donors to fund a project. The structure of crowdfunding campaigns varies; they can be based on donations, rewards, debt, or equity. Most sites let you search by location and topic so you can find businesses and projects looking for support right in your area. Even if you aren’t able to donate much, you can help their cause by sharing campaigns with your social networks.

Donation-based sites like gofundme are useful for people and businesses who need smaller amounts of money or have an emergency need and have a good social network to draw from. For instance, the owners of Redwood Roots Farm in Bayside, Calif., recently lost a lease to their water source and are raising money to install a new system before spring.

For rewards-based crowdfunding platforms like Kickstarter and Indiegogo, your money can serve as a donation or you can choose a reward in the form of merchandise, business credit, or other perks if the fundraiser reaches its target goal number.

Credibles.org is a rewards-based platform strictly for food businesses that lets customers buy upfront credits that they can use later at the business they’re supporting. Credibles businesses usually offer perks for higher levels of support. For instance, Good Sense Farm and Apiary, an urban farm in Washington, DC, offers supporters who pledge $220 a $20 bonus credit plus a ticket to a foraging walk or workshop. Upfront support like this helps these small- and medium-size businesses fund their ongoing operations and growth and deepen relationships with customers.

For those looking to make a larger investment, Localstake is a crowdfunding platform for investors that want to support local, growing businesses in need of raising amounts in the $50,000 to $500,000 range. Localstake supports several investment structures, including traditional and revenue share loans, preferred equity, and convertible debt. The platform vets each business profile and performs background checks on management teams and credit checks on existing businesses. Successfully funded investments include an Indiana butcher shop and processor of local meat and a producer of sparkling fruit tonic made with local Michigan fruit.

There are also crowdfunding platforms available for accredited investors that involve businesses looking for larger investments. On Crowdfunder, for example, most companies are looking for early-stage fundraising. Crowdfunder covers a variety of industries, including food. One startup on the platform, American Ag Energy, is currently raising money to develop hydroponic greenhouses heated by waste energy from power plants in the Northeast. Crowdfunder does not perform any due diligence on the companies on its platform, so it’s up to investors to connect with the business and do their own research.

Another option for accredited investors is Harvest Returns, a firm that connects investors with opportunities in all types of agriculture, including vertical farms, hydroponic farms, and aquaculture, many of them small family operations. They also offer the Sustainable Agriculture Opportunity Zone Fund, which invests in the agricultural industry across economically disadvantaged regions and comes with some tax advantages. Harvest Returns does have a vetting process, but advises investors to do their own due diligence.

SLOW MONEY

Perhaps no organization is more associated with local food investing than the Slow Money Institute. It was founded in 2008 by Woody Tasch around the concept of connecting investors to the communities they live in by supporting organic farms and local food businesses. Slow Money now has self-governing chapters around the country which take a variety of forms, including public meetings, on-farm events, pitch fests, peer-to-peer loans, investment clubs, and nonprofit clubs making 0% loans. Find a chapter near you at slowmoney.org.

INVESTMENT FUNDS

As an alternative to investing in a single farm or company, look for investment funds that focus on food and agriculture. Here are some options to explore:

RSF Social Finance is a financial services organization that allows investors to support social enterprises, including food-related businesses, through loans, grants, and investments. A variety of options are available for different types of investors.

Farmland LP buys industrial agriculture farmland and increases its value and its value to the environment by securing organic certification and supporting sustainable land management practices.

The Fair Food Fund provides catalytic capital and business assistance to local food businesses throughout the value chain that have an impact on social equity. They offer five- and 10-year notes to accredited investors that receive a modest return on investment.

AgFunder is a venture capital firm that invests in food and agriculture technologies. The fund is periodically open to new accredited investors.

There are also investment funds established to support particular regions. Local Farms Fund is a community impact farmland investment fund in the New York foodshed that provides land security and a path to ownership for early-stage sustainable farmers. Sustainable Local Food Investment Group (SLoFIG) invests in start-up and early stage food companies in the Chicago foodshed.

Community Development Financial Institutions (CDFIs) are regionally based financial institutions certified by the U.S. Department of Treasury that provide credit, capital and financial services to underserved communities. CDFIs could help open a grocery store in a food desert or fund job training programs in the food sector, for example. To find a CDFI near you, check out the Opportunity Finance Network’s CDFI Locator.

This overview of local food investing avenues is by no means an exhaustive list. There are exciting things happening in this space and many opportunities for investors at all levels who want to be part of growing a more sustainable food system. We encourage you to explore what’s happening in your area and get involved, but keep in mind that any investment comes with a level of risk so make sure to do due diligence before pursuing any investment.

To learn more about investing in food and agriculture, visit Invest With Values and locavesting.com.

Tagged: local food, investing, impact investing, slow money, crowdfunding

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