Will the Real Sustainable Ag Investor Please Stand Up?
Sarah Wechsberg is an entrepreneur focusing on sustainable agriculture. She can be found on Twitter @TheEcoFoodie.
I’m an entrepreneur in the sustainable agriculture and food marketspace, and just received my M.B.A. in Sustainable Enterprise from the Green MBA program at Dominican University. As I look out across the sustainable agriculture and food world, I see myriad opportunities as well as brilliant entrepreneurs seeking to push the conversation forward.
However, what we are in short supply of are the right investors. In the business world, there is a lot of discussion about what investors want: high ROI, high risk and high return, low risk and high returns, security and liquidity or the simple refrain, “We want our people on your board.” This chatter is mainly from venture capitalists, who may not be the ideal investor for sustainable food and ag startups. The existing VC model does not work in an innovative sustainable marketplace, because their valuation system breaks down when faced with long-term sustainable security and the true cost of production. As the sustainable agriculture moves from its current niche state to a broader piece of the economy, it is worthwhile to ask just what the ideal investor in sustainable agriculture looks like.
I spent two weeks talking to other food and ag entrepreneurs from coast to coast about this very topic, Unfortunately, the image I gleaned from this experiment was uniform. An ideal investor for sustainable startups is an angel investor with deep pockets, patience (in that they will wait for their ROI) and one who values long-term sustainability as well as environmental and social responsibility. Furthermore, the ideal investor is one who is mostly hands-off, but is as passionate about the business and idea as the entrepreneurs.
There was a recent conference that brought together sustainable ag and food entrepreneurs with investors in the same room, or rather the same banquet floor of the NYC Marriot. The conference was Agriculture 2.0, put on by New Seed Advisors.
I heard about the conference via twitter only a few days before the event took place, but because I saw such an opportunity, without hesitation I whipped out my credit card and booked a trip to New York. Mind you, it took a great deal of consideration (with some attendant anxiety as well) in order to spend the money in a tight startup stage. However, pitching a business to what was billed as a captive audience is hard to come by as a sustainable entrepreneur. I had to jump at the chance. I was at the conference for two reasons, to network with other food and ag entrepreneurs as well as investors, and to pitch a business I’m working on, Cityscape Farms.
There isn’t a single word that describes my experience at the conference, so instead I’ll just paint a portrait. First off, there were a lot of serious looking men in a sea of suits. This is the standard portrait thus far of an investor conference including the rich and dark-colored banquet hall without windows or natural light. Despite this rather drab and depressing setting, there was an exciting energy flowing through the mornings’ conferences.
I was nervous and anxious, and had no idea where to start. The style of the conference involved networking with food (always awkward – let me eat this strawberry as I pitch my business) and various presentations from investors and entrepreneurs. Throughout the day I approached people from all sectors yet found myself talking mostly with other women who generally seemed more approachable than the stern looking businessmen. What was interesting is that most of the women at the conference came from either the academic or media worlds and therefore were present more to observe and report than to participate.
I observed the other entrepreneurs and noticed they approached the investors like bees to honey. It was never the other way around. And this is extremely telling. The entrepreneurs looking for capital were much more enthused than the investors. When I followed this behavioral pattern myself, starting by introducing myself, asking about them, and then pitching the business, I felt a chilly response from the investor. At times that chilliness approached near total disinterest. What was I doing wrong? I’m pretty good at reading people, and it was quite challenging to maintain their interest. How do you get through to an investor and make a connection? At times I felt isolated in a room of 100+ people.
The conference overall was a fascinating experience, and definitely the first step in starting the dialogue. However, I left the day feeling very confused about the role of the investor at that conference. What were they there for? To learn about the sustainable ag sector? Sure, Ok. Did they actually want to meet entrepreneurs though? And, what about more socially and environmentally minded investors?
Reflecting back, I’ve decided that the entire setting and mood of the conference was off. To start, this conference would benefit from a more natural setting, where we can see the sky, trees, water, and maybe a farm as the backdrop. Second, charge the investors with the idea to go to this conference to learn as well as to meet entrepreneurs, and listen to them. Maybe even have a meaningful dialogue. I think one of the biggest challenges in the sustainable agriculture space will indeed be bridging the gap between financiers (who are used to a different vocabulary and culture) and sustainable advocates, businesses and entrepreneurs. It is true, many people involved in the sustainable agriculture sector have a lot to learn about traditional investors and the finance world. But without a doubt, the impression I left the conference with was one of disappointment that the investors seemed so out of place.
If we are ever going to improve our economy, improve our food system, launch good solid and innovative ideas into the market, we need to have a more personal and real dialogue between entrepreneurs and investors. Lets get rid of the suits, quit the ‘death by Powerpoint’ presentations and start by sitting down with fresh air, open ears, and real conversation.
Why not get rid of the business culture and costumes we’ve created and get down to the heart of what we’re doing here, which is to bring good ideas and good investors together to launch a great business? And a great way to start is by hosting investors on our turf. Let’s move away from all those drab hotel ballrooms and awkward coffee breaks, and let’s show the next generation of investors just exactly what we do. More importantly let’s show them where we do it. It is there that they will come to see first hand the tremendous opportunities to do good and make money. They will meet the people taking back our heritage as an agrarian economy. Sustainable farms, dairies and ranches surround every major city in America. Why not move the location of future conferences onto working farms? Is it unusual? Sure, it’s unconventional, but its not that radical. And frankly, sustainable agriculture is all about ushering in a new way of doing business.
Let’s start a real dialogue and in the process, cast off the old customs that seem to inhibit real sharing, real trust and a level of comfort that is so crucial to sustainable agriculture.
[...] This post was mentioned on Twitter by Kim Calhoun, Mkt Mgr. Kim Calhoun, Mkt Mgr said: RT @TheEcofoodie: RT @Zacharycohen New Blog Post: "Will The Real Sustainable Ag Investor Please Stand Up? @TheEcoFoodie http://bit.ly/2WncO [...]
This is the very reason that I did not attend this conference. Even though I had much longer notice to the meeting, it was obvious from the information that I had received months earlier, that this was not the place to meet an investor interested in doing good for the neighborhood.
I'm not sure that major investors are really needed in all aspects of creating the infrastructure that you are searching for. I'm not saying that they are not needed at all, just perhaps not as much as they are given credit for. Begin small and work your way up. There are a multitude of very available grants for agriculture opportunities. If someone happens to be in a rural area, then that opens a whole new aspect of grant availabilities. Farm credit services is also an excellent funding source for agriculture projects in addition to the grant opportunities. Knowing your department of agriculture and your county extension agents is an excellent first step to actually finding these viable funding opportunities. Also excellent networking is knowing your Small Buisiness Administration contact in your area. Ours was an invaluable resource to our own operation. I'm just saying that there are other methods for some of these ventures. We took a very small little custom butcher shop and turned it into a shiny new modern USDA facility that is coveted by many. Grant it, we did the work. Noone handed us the building. We invested greatly, but we were planning for this expansion for nearly 10 years. We saved a portion of our revenues for years to create what we have now. We also used the USDA grants available to farmers and producers, as well as the SBA and our local banking institution. It did not happen overnight, but it is all ours. We answer only to our customers and that in itself is reason enough to give it some thought.
Sarah- I am organizing this one day pre-conference as part of the 30th annual Ecological Farming Conference in January 2010, located at the beautiful Asilomar Conference Center in Pacific Grove, CA. I don't have any more agenda details yet, as I am booking speakers, but you should consider attending! I plan to integrate multiple networking opportunities throughout the day and I assure you, this will be a jeans & comfy sweaters kinda crowd! Save the Date: 1/20/2010! Look for more details in late October at http://casfs.ucsc.edu
Here is the brief description:
Title: The Business of Sustainability: Growing health, wealth, and ecological integrity in our food system.
Description: From the field to the plate, businesses along the food chain are shaking the roots of the American economic system, which typically encourages consolidation, cost-cutting, and shifting costs onto others such as marginalized workers or planetary health. Newer business models are popping up all over, from tiny fishing villages in Alaska to college towns in Florida to big cities in the Midwest that are better for people, the planet, and our collective pocketbook. They are embodying what is described as the “triple-bottom-line” in which the measurements of business success are much more than how the profit & loss statements read. With a diversity of ownership structures, start-up financing, equity strategies, marketing techniques, etc., these businesses are showing the way for a new form of commerce that makes money while making good. Intended for both aspiring entrepreneurs and those already immersed in business, this pre-conference will have a variety of practical workshops and inspirational speakers for whatever stage of food and farming business you are in. Anyone and everybody is invited, but we especially encourage aspiring food and farming entrepreneurs, business owners & managers, academics & researchers, students, NGOs, funders, and government agency folks to attend.
rebecca
how about a blog post on this?
id be happy to post and market it!
Z
How's about when I get the speaker line up a little more firmed up, I
will send you a post. Probably about 2 weeks or so.
Are you interested in coming? Speaking? What is your specialty?
-Rebecca
Sarah,
My company, NewSeed Advisors, co-hosted the Agriculture 2.0 Conference. We worked very closely with conference co-host SPIN Farming (an urban farming company that caters exclusively to sub-acre farmers with very limited budgets) to create a conference that would be productive and comfortable for both bootstrapping entrepreneurs and well-heeled investors.
The challenge was to pull off a serious, professional conference, to speak openly about the issues of raising money for sustainable agriculture, and to attract a group of busy, easily distracted investors, without disenfranchising the entrepreneurs who can make sustainable agriculture a reality. This was no easy feat.
It is unfortunate that you felt uncomfortable approaching investors, but that part of business-building is difficult for even the most experienced entrepreneurs, much less for a young woman. Disappointingly, most investors are older men (even socially responsible investors tend to fall into this category), which is an immutable fact. We can't change everything, so we have to learn to work with the system. As a woman investor in the sustainable agriculture sector, I feel your pain times ten.
Suggesting that capital raising would be easier if you could do it on your terms, on your turf, is impractical. Look at any sector that has successfully attracted private sector capital, and look at the way that they've done it. Healthcare investors don't convene at hospitals to meet healthcare entrepreneurs, any more than media investors meet in printing factories or in television newsrooms. Investors and entrepreneurs typically meet on neutral territory–like a conference center–and network to try to find matches.
It isn't a perfect system, but nearly all of the entrepreneurs who attended Agriculture 2.0 felt that they had found a likely source of capital through connections made at the conference. Similarly, I've heard from countless investors that they're working on investment opportunities that they discovered at Agriculture 2.0. So, to a large extent, your experience was unique.
You see, nothing makes investors happier than finding an attractive investment, one that nobody else knows about, that will deliver strong returns. (Investors want to invest, because investors who don't invest don't make money.) That being said, investors want the same things from their capital that you want from your retirement savings–they want their money to grow. Business plans need to make sense, no matter the sector.
The sooner sustainable agriculture learns that private capital is THE ONLY WAY for an industry to grow (and that relying on grants and donations is completely unsustainable), the faster we'll see changes in the agriculture sector, which is, I believe, what we're all gunning for.
This conference was a first step. Like all first steps, there is probably room for improvement, and as you and I have discussed, we would welcome your input on the next conference, which will be in San Francisco (your turf) in March 2010.
We hope to see you and Cityscape Farms in a more prominent role at that conference, and I will promise to personally introduce you to investors (as soon as I understand your business plan.)
In fact, we can give each other pep talks before we walk into that skeptical, analytical, testosterone-loaded crowd. I admit, that part isn't easy for me either.
–Janine Yorio
Managing Director, NewSeed Advisors
Janine
Thanks for your honest and authentic response to Sarah. From talking with
Sarah as we developed this post, it is clear that she never regretted
attending the conference and remained excited to see what you and New Seed
Advisors develop into. Thanks for taking the time to comment on the post.
And if you would like to pen a rebuttal of sorts, or even just your
perspective, please know that I would be happy to publish, without censor as
always
Zach
Hi Janine,
I'm really glad you responded to my post. I appreciate the dialogue. I know that we have spoken about these topics, and it's important that the readers see your response. A dialogue about the topic and seeing all the sides (especially from the investors side) are critical.
Zach is right, I do not regret the conference at all…I'm really glad I went! It was a great first step towards a very important need in this space. I learned a lot about the investor world while at the conference, and despite how comfortable it was or wasn't, I am so glad that I was a part of it.
I look forward to assisting with the next Ag 2.0 and making it an even bigger success.
-Sarah
Hi Rebecca,
Thanks for the comment. I am definitely interested in your conference topic and the possibilities around the concept. Please send me info via email > sarahw06@gmail.com
-Sarah
Great post Sarah! I had the pleasure of meeting and talking to you in person. I think I confided in you that I was shy about networking myself!
I had a different experience at the conference. Granted, I was not there to find investors; I was there to get a better understanding of this growing movement we are all part of and talk to potential clients for my social media and web design Company.
I agree with Janine that investment is necessary. We need REAL money to change agriculture.
I found the Farmer's Diner model so inspiring because it was the perfect combo of hard work and money making GOOD things happen.
I spoke to a lot of very excited people who had been in contact with Janine and said that she was moving mountains for them— the money is there. I hope your post helps you connect the dots in terms of getting investors. I really think the web is key to this movement.
In terms of being a woman in finance, I can relate because I am a woman in farming. I even have problems getting my father to take me seriously. As the oldest of four girls I was always my father's right hand but when it comes to viewing me as a farmer in my own right, I struggle with being taken seriously.
I am so pleased you brought up how being a woman in this world is challenging we should support each other because our cause is so important! I am looking forward to the next conference because I think it is going to be better! In some ways I feel like it was a big blind date with the investors needing to be wooed. I feel the conference was such a success because it really demonstrated all the opportunity and need for investment. Maybe next time, they will be wooing you!
I wish you all the luck because you seem to be unto something very cool! If you need any blog exposure, please contact me!
Great idea. Bring them to the farm, give them a tour, feed them a fresh meal, give them a clean glass of water and then “Let's Talk”. Tell them to leave their suits at home.
Thanks for filling us in, Sarah. I had a few colleagues attend Ag 2.0, but I didn't personally attend. I was at the Slow Money conference a few days before and it was quite the opposite from what you say Ag 2.0 was like. A few, but not many investors, and definitely not in suits. Someone suggested to me the other day that Janine of New Seed should gather the investors and Woody from Slow Money should explain the sustainable food sector to them. Would be an interesting hybrid.
What is clear is that there are significant efforts underway not only to gain control of our food system, but to do it through private, nurturing capital. Kudos to Janine for organizing the first Ag 2.0 conference. And thanks to you, Sarah for sharing your thoughts to move not only the conversation, but the principles forward.
Hi Sarah,
I attended the Ag 2.0 conference, and I presented as well. I do understand wanting to get the investors on your turf, physically and mentally, and I think there are ways to do it. However, there is also a need and an opportunity for sustainability-minded people to really put themselves in investor's shoes and be able to talk about all three bottom lines of triple-bottom-line investments — especially the profit line. That was the opportunity that Janine created at Ag 2.0, and I was personally impressed with both the quality of the presenting companies and the quality and interest level of the investors.
I've been delivering capital returns with social benefits for 20 years, raising capital the entire time, and it is possible and it does deliver great results. But raising investment capital for socially-beneficial businesses means you have to be MORE skilled at the financial side. That is the price of getting more capital to companies that do good, and it's worth it. Otherwise it's philanthropy, and that's fine, just don't put a sheep in wolf's clothing. Just like you're inviting investors to come to the farm, I invite you to come to the boardroom and feel just as at home there.
We're essentially neighbors (I live in Marin and work in SF), and I'm glad to meet with you and help however I can. You can reach me using my first name at our domain (our website is http://www.FarmlandLP.com). I'll share what we do as an example of what's possible: We're a U.S. private equity fund, and we buy conventional farmland and convert it to organic, sustainable farmland. The sustainability part of our business actually makes us more profitable, and we're providing a valuable service to investors, the environment, people who eat, organic farmers (by providing them with additional organic land), and more. It is possible to accomplish social goals and deliver solid investment returns. It takes _more_ work, but it's worth it, and it's vital.
Best wishes,
Craig Wichner
http://www.FarmlandLP.com
wow craig, what a thoughtful and exciting comment, thanks so much for
contributing!
Thanks for this reply, Janine! The sustainable food sector needs a better grasp of the brutally harsh realities of start-up land, which this post summarized nicely. There's no way this will go ANYWHERE without the ability for everyone to dance with the prevailing paradigm.
Real capital, which is what it will take to accomplish anything, demands both a well-researched and identified market opportunity AND an experienced management team. People ultimately invest in people. The plan has to be rock soild, but at the end of the day, investors are investing in the management team.
[...] finding innovative ways to connect capital with sustainable business [...]
Times, they are changing. But for Americans change comes after, not before the crisis. In agriculture all things are time critical as it is in finance. But Risk measures for agriculture becomes very different when Mother Nature is the real player. Thats why we have the factory farms of today to manage mother natures risks. And until we are ready to accept Mother nature in all her foibles (sp) and understand that what we are about to lose is the on the job talent that never comes from text books on how, what, when and where (actual farm management) which use to be pasted down from one generation to the next, sustainablity itself becomes nothing more than a dream. Understand mother nature is the boss, she is the decider, only through hard learned lessons by the people on the ground do you have a chance. Ag is culture and we are very close to losing ours. I know I'm at the leading bleeding edge of this conflict, time is critical, but I do know this the dollar in paper form has less that 5 calories and tastes even worse.
Zachary- I have a blog post for you. Do you have an email I can send
it to?
-Rebecca
[...] finding innovative ways to connect capital with sustainable business [...]
The sustainable food sector needs a better grasp of the brutally harsh realities of start-up land, which this post summarized nicely. There’s no way this will go ANYWHERE without the ability for everyone to dance with the prevailing paradigm.