2012 Year in Review

“ Better late than never” – a wise, busy person

Slow Money NW was very busy this past year, and expects 2013 to be a major growth year. Due to this exciting craziness, our year end report comes a few weeks late. I want to keep things brief, and since it is always best to build on previous work, I want to build on September’s Quarterly Update.

As we enter our third year of operation, we see our track record attracting more attention, businesses, and funding. The highlights for this year involve innovation in microlending, launching an agricultural savings incentive program, securing new funding sources, and formalizing our approach to business assistance.

Seeds of Success
We launched our Seeds of Success savings incentive program in the last quarter. The program, implemented in conjunction with our friends at with Cascade Harvest Coalition, is part of a national effort to help beginnning farmers and ranchers grow their businesses.  We received 37 applications in December, supporting the notion that this type of work is needed. We are busy right now reviewing applications and interviewing farmers. This week the Everett Herald ran the most recent article about this program.

Farmer Reserve Fund
Our Farmer Reserve Fund launched in the second quarter and received a lot of attention for its innovative approach to solving the problem of farmers needing access to microcredit. We received immediate press for this loan loss reserve fund, have held discussions with four other counties in the region about replicating the program, and have responded to calls from others around the country wanting more details. A regional CDFI wondered if we could find them $60,000 that would allow them to make $1 million in new loans. A foundation wondered if they could do the same thing but with a $1 million reserve. Great news, but the best part of our program is that from our initial investement, two farmers from Viva Farms received lines of credit to allow them to expand their businesses. Both farmers had suffered foreclosures during the mortgage crisis and were unable to get credit through normal banking channels, and are now successfully paying down their balances, and rebuilding their credit as they grow their businesses.

We have made 5 presentations about this fund with the next one being a BALLE Community Capital webinar Feb 5th.

Of note: this week the USDA announced their Microloan program. This is very exciting for all involved. We will make sure to let folks know about these funds. We will research the details of this new opportunity to make sure we are not in competition. We are particularly interested to see if they will offer lines of credit.

Angel Professional / Peer Network
We continue to have success connecting volunteer professionals to businesses needing specific assistance, usually financials and cash flow projections, business planning, legal, marketing, and presentation coaching. To date, 42 businesses have received personal assistance. As the number of businesses has grown, we have needed to formalize the process.  We have the good fortune to welcome Betsy Powers and Bert Loosemore, super-volunteer and management team member respectively, who have spearheaded this effort. If you are a business professional or organization interested in assisting food and farm businesses in WA, OR, ID, and MT, please contact us.

Food Investor Network
In previous years we held one accredited investor event per year due to limited resources. This year we held three, with two in Portland. Our hope is to hold four this year. Our fourth quarter Seattle meeting had 6 businesses make pitches to 29 investors, with over $2 million of potential investments entering in to the due diligence phase. The best investor comment from that event: “It is so refreshing to see real businesses with OK presentations compared to polished presentations with shaky business plans.” In two years, with limited staff and minimal outreach, we have helped bring over $5 million in financing to eleven businesses in the Pacific Northwest, and we have all of you to thank for your interest, business submissions, investments, and support.

Strategic Market Research
Our track record and increasing expertise in the field has attracted interest from foundations and individuals seeking to use investment and market forces to transform the regional food economy. During the holidays we received funding from the Robert Woods Johnson Foundation to develop a market analysis and investment plan for the regional farm-to-institution market.

SMNW has consistently heard of interest from accredited investors in a fund that allows investors to pool their resources, both time and money.  A few investors have recently asked us to help them develop a managed fund concept focused on the regional food infrastructure. This conceptual fund would allow us to increase efficiencies in deal volume and due-diligence, and better manage risk which should, in turn, enhance the quality of deals and hopefully reduce or spreading out risk. The timing of this work is perfect as we can align fund research with the other market analysis research we are doing for at least one other grant project. If you are an accredited investor and would like to support this effort, or just learn more, please contact us directly.

Signups to our newsletter and visits to our website, Twitter, and Facebook pages have all seen a steady increase through the year. We are aggressively upgrading our data systems and web presence to accommodate all aspects of growth.

With all of this work comes the need to grow the organization. In the second quarter we brought on Japhet Koteen who has excelled as a Project Manager. Japhet has been focused on finalizing the Farmer Reserve Fund, developing the Seeds of Success project, researching potential fund development, and generally helping grow the organization. SMNW is sharing a Development Coordinator, Ellen Sabina, with Viva Farms and Growing Washington, which means Ellen is busy writing grants. Go, Ellen!

We are proud that we can now bring Japhet on full time. We are currently interviewing for a Business Research Intern and will be seeking a Communication Intern in the first quarter of 2013

Willapa Hills goes Indiegogo!

Willapa Hills, a previous (and funded) Food Investor Network presenter, has created an Indiegogo campaign to help with their next round of funding. Their Grow More Mold Campaign builds on five years of perfecting their craft, deepening their understanding of the marketplace and establishing a network of wholesale, distributor and broker relationships. Says Stephen Huffed, ” We are positioned for significant growth upon securing the needed financial resources to increase production.”

See the campaign here…

Financial help for start-up farmers

The Everett Herald posted an article today about our Seeds of Success IDA program:

Financial help for start-up farmers
By Debra Smith, The Herald Business Journal

Nathaniel Talbot is serious about becoming a farmer.

The 29-year-old relocated from Portland to Whidbey Island to take a farming training program at Greenbank Farm. Now he and his partner, Annie Jesperson, have leased an acre on Whidbey Island and are growing and selling fall and winter vegetables directly to 30 customers.

Their biggest challenge isn’t working the land or finding customers. It’s getting established in a business that is, as Talbot puts it, “highly capital-intensive.” Tractors, land, a greenhouse — the costs of getting started are high even for a farmer who wants to start small.

He hopes a new program will help. Talbot was one of the first people to apply for a program aimed at new farmers and ranchers. If he’s accepted, it will help him save money for a big purchase.

The program is a rural agricultural Individual Development Account. It’s being offered jointly by two local nonprofits, Slow Money Northwest and Cascade Harvest Coalition.

See full article at http://www.heraldnet.com/article/20130114/BIZ/701149980/

Business Research Intern Opportunity

(UPDATE: we have closed down the applicaiton window. Thanks to all who submitted)

Slow Money NW is kicking off this new year with new plans for growth. We will update you very soon about all that is moving; but for now we want to let you know about an exciting opportunity to perform business research to quantify the growth needs within the pacific northwest’s regional food economy. The goal of this work is to better understand which regional food and farm businesses, primarily within WA and OR, are trying to expand their products and/or services, and determine their ability to accept business development services, their readiness for financing, and their financing need.

This is a paid intern position that runs initially from mid-February through June.  The intern will work on several parallel business research projects as well supporting ongoing Slow Money activities, and will participate in our unique approach to growing the regional food economy.

Rockefeller Reports

The Rockefeller Foundation has been investigating the Social and Economic Equity in US Food and Agriculture Systems. As part of this work they have generated a series of intriguing reports with the most relevant being Bridging the Gap: Funding and Social Equity Across the Food System Supply Chain. As explained at their website, “This report examines the current state of funding for addressing the problems in the food system and promotes the goals and the vision for a healthier food system. It analyzes where capital is flowing and where it is not flowing, and what kinds of approaches are needed to increase the flow and effectiveness of capital where gaps currently exist. RSF Social Finance, a Slow Money ally, managed the report. View the report …

Why Does SMNW only do Accredited Investor Only meetings?

To date Slow Money NW has been one of the most sure successful regional chapters in the national Slow Money efforts. Part of that success is because we have have tried to ensure that our efforts were legal and targeted towards what businesses and investors said they needed. Since opening its doors our  in 2010, we have provided business development assistance to 40 WA and OR based businesses and successfully helped 7 businesses secure investments of  about $5  million. We now have a track record that is attracting financial contributions to do more work, but not yet enough to do all that we want to do.

Gearing up for another accredited investor meeting is always fun and challenging because on the one hand we are directly connecting investors with businesses, and on the other hand excluding people who are not accredited investors. The fun and excitement comes from knowing that good people have good businesses worth hearing, and that good people want to help and invest in good businesses working to grow our regional food economy.

There are two federal legal restrictions on public access to private business investment opportunities: that investors be aware of the risks and resilient to the potential losses; and that we only invite investors with whom we have an existing relationship.

First, accred-only events are exclusionary. The SEC has a clear definition of who is, and therefore who is not, an accredited investor. The quick and simplified reason for these classifications basically dates back to the 1920’s when ‘snake oil’ salesman sold uninformed investors items that sounded really good but cost people their life savings, their retirement, their homes. Rules were set in place during the Depression to make sure that people who invested directly in private businesses (compared to public stock exchange listed companies and mutual funds) understood the risks and could afford to make them. Second, violations of these restrictions include public announcement of the investment opportunities, such as posting the details of the companies presenting on our web site. This is why you do not see our current presentation meetings on our website, and why it is only seen through our direct email invitation. For more information about who may receive invitations and attend events, please contact us directly.

For those that do not meet the SEC definition above, and do not have an existing relationship with Slow Money NW, and want to help transform the regional food system, see our post Beyond Accredited Investor Options on ways that you can get involved. Thanks for your patience as we build out what we have started and continue to create innovative, safe, and legal opportunities for people to connect to the businesses we all want to grow.

Beyond Accredited Investor Options

As we work to balance our limited resources and the regulatory maze for connecting investors and businesses we wanted to list a few of the options that are present and emerging.

The recent JOBS Act has proposed making it easier to to crowdfund investments, and hopefully those rules will come out next year. But don’t hold your breath too long since this means that government has to successfully regulate snake oil salesmen, and the agency charged with doing so, The Financial Industry Regulatory Authority, or FINRA, does not really want to; would you? At least there is progress towards this need, but some reports suggest it may become more complicated.

There are basically four structures out there that do allow some pooling of ‘investors’ and friends to build relationships and figure out how to align investments and donations. 

Investment Clubs are a structure that the SEC recognizes. Any one can participate to learn how to invest and sometimes pool funds towards investments. SMNW wants to build out one or a series of investment clubs in the region. We feel the best way is to help organize people in to groups around topics they want to explore. What is needed are funds to hire someone to organize these efforts; or some Uber Volunteer who wants to work with SMNW to take on this idea. We have 1,000 people on our listserv that would love to know more. If you are interested in helping these efforts please let us know!

Direct Public Offerings, or DPOs, allow businesses a limited but more direct raise from any investor(s). A previous presenter Farm Power raised funds in WA and OR this way via the related SCOR offering structure.  There are current efforts to highlight DPOs as a key vehicle in the growth of regional economies, with Jenny Kassan of Cutting Edge Capital helping lead the way. Portland’s Springboard Innovations is coordinating the launch of ChangeXChangeNW, one of the first attempts to create a local stock exchange. They have a Nov 7th forum in Portland for more information.

A Local Investment Opportunity Network is an innovative structure first developed in Port Townsend, WA. LIONs are catching on around the country because they make sense and people want to do more of them. Just search on the term to see the growth of this idea. The trick is that the SEC has not yet reviewed them as legal and safe, but they are now paying attention and auditing at least one network to determine if what they are doing is safe and legal. I will hold my breath on this one as this could set a precedent for how FINRA structures crowdfunding regs.

Online crowdfunding sites like Kickstarter and Indiegogo are great as contribution vehicles. While they are not technically an investment they have helped various businesses raise significant capital.

Slow Money is in the process of rolling out two innovations focused specifically on food and farming. The Soil Trust is just coming online and is working to aggregate donations for use in investments. Look for more info as this really comes online. A new kid on the block is Credibles, also connected to Slow Money, that uses prepayments of goods instead of contributions; basically a gift card model to have people prepurchase product and get more back than they submitted. For example, if you prepay for product from a business with $500 you will get maybe $550 of product. In Seattle this is how Rover’s funded it restaurant expansion, but without a standardized website. If you are interested in this please let us know as we are looking for a group of companies in our neighborhoods who may want to use this model.

Quarterly Update

SMNW was recently asked to prepare an program overview for a regional proposal. This seems to be a perfect way to share what we have accomplised to date. Please contact us with any questions.

Slow Money Northwest (SMNW) catalyzes investment and business development opportunities to strengthen the Pacific Northwest’s sustainable food economy. SMNW focuses on connecting investors interested in food and farming with food and farm businesses seeking investment. Since opening it’s doors in 2010 SMNW has provided business development assistance to 34 WA and OR based businesses and successfully helped 7 businesses secure investments of just under $4 million.

SMNW works from the understanding that funding and financing may be available for low-risk and established businesses as well as high-flying tech startups but not for small businesses and social enterprises the local markets are demanding. SMNW has identified various gaps within the finance continuum for businesses trying to engage in the healthy regional food market segment: business development services; microloans and lines of credit below $20,000; risk tolerance to fund new and small enterprises; opportunities for investors to meet businesses seeking financing; an overarching strategy that better matches supply to demand for healthier food produced close to regional markets; ability for businesses to safely crowdfund from the large, non-accredited investor community.

SMNW has developed projects that directly address these gaps and collaborates with foundations, regional CDFIs, community banks, credit unions, and business development programs where appropriate. Engaged businesses are screened for traditional indicators of jobs, revenue, management team, cashflow, and quality of plan. We also screen for sustainability metrics including sustainable acreage under production, source of ingredients, fair labor practices, and target markets.

The longest running project of SMNW is our Food Investor Network that directly connects investors with food and farm businesses, with regular meetings now occurring in Seattle and Portland. SMNW reviews business plans and makes comments with the goal of preparing businesses for a presentation meeting to an audience of accredited impact investors who understand that a financial investment yields more than just a financial return. The reality is that most businesses reviewed need technical and business development assistance as much as they do financing.

Concurrent to developing these meetings SMNW discovered people in the community eager to help but who were not capable of investing. These individuals now make up the SMNW Angel Professional network that connects professionals to businesses needing finance, legal, accounting, marketing, and business plan development assistance.

SMNW recently launched its Farmer Reserve Fund, a loan loss reserve program that combines the lending infrastructure of an existing credit union, the hands-on experience of a farm incubator, and a limited impact investment to extend credit to beginning farmers who are good risks, but not qualified on paper. Our goal is to replicate this program in King County once we secure a networked due diligence partner who can provide a non-financial review of fund applicants.

SMNW has been contracted to develop a Washington State Beginning Farmer and Rancher Individual Development Account project geared towards incentivizing financial education and building assets for new farm businesses. The project is under development and will launch this winter.

SMNW is helping lead conversations among regional foundations, banks, and investors interested in a more strategic approach to investing in the businesses we need. Current discussions include a tiered investment fund with the potential for a larger, regional meeting in early 2013.

SMNW is closely following the developing crowdfunding regulations with the goal of engaging more people safely in community investment strategies.

Growth of Slow Money NW is constrained by deal flow (ability to connect with aligned businesses truly ready for investment), funding to provide a more formal technical assistance program for small businesses that are not yet ready for investment, and general operating support.

Meet Japhet Koteen, SMNW’s Project Manager

Slow Money NW was overwhelmed with the quality of applicants interested in our recent Project Manager opening. We are excited to have chosen Japhet Koteen who has jumped in with a pickaxe and shovel to keep things moving forward at this increasingly fast speed.

Japhet traces his affinity for local food to his childhood on a multi-crop goat farm in rural Oregon. Over the last decade he has started several businesses including a restaurant, hotel, real estate and renewable energy ventures.  He also spent five years working for local community real estate sage, Ron Sher.  He joined Slow Money to try to foster sustainability at the nexus of food, farms, people and finance.

He currently manages the Beginning Farmer and Rancher Individual Development Account (BFRIDA) and New Farmer Loan programs for Slow Money NW, and is working on a food/farm equity investment fund model.  He consults on land use planning and urban development.

Japhet holds a BS in Engineering from Swarthmore College and a Masters in Urban Planning from the University of Washington.

Slow Money PDX followup

Thanks to all who attended our first Portland event. The NedSpace was perfect, the Hotlips Catering food was yummy, and the presentations exciting and enticing. Thanks again to One PacificCoast Bank for helping sponsor the event.

Just over 40 people attended the event. We had bankers, foundations, equity capital and asset management firms, individual investors, non-profit partners, and our four presenting enterprises. We of course gave an overview of what we are doing and what we see as some emerging national trends. You can download the Slow Money PDX presentation here.

We also found a local lead for Slow Money efforts in Portland. Mailaka Maphalala is the perfect intersection of various efforts in Portland with her Natural Investments work, her partnership with LIONS co-founder and fellow adviser at Natural Investments, James Frazier, her connections with Springboard Innovations, and her genuine enthusiasm for Slow Money efforts around the country.

Malaika has already started planning for the next event in mid June. If you are interested in presenting please Slow Money NW.