For many of us working on local food system development, one of the biggest challenges is forging the infrastructure needed to aggregate, process, distribute and market locally grown foods. These businesses are essential for meeting increased demand for local foods while creating jobs, connecting farms with buyers, and bolstering struggling local economies, both rural and urban. A major challenge has been attracting the capital necessary to finance local food enterprises, particularly new businesses just starting up.
As I drove the 700 miles from Minneapolis to Grand Rapids, Michigan for the annual Business Alliance for Local Living Economies (BALLE) conference in May, I was hopeful that the discussions would provide new insights and strategies on attracting capital from commercial lenders, institutional investors and foundations. While some of the discussion focused on those issues, many of the speakers and workshops involved stories of successful business ventures brought about by attracting the necessary investment dollars locally.
In many instances, business ventures were capitalized entirely by community members or through equity raised locally from individuals that made it possible to later obtain conventional loans and other sources of outside investment. Many of the BALLE examples were championed by folks who were committed to their community and contributed the time and energy needed to attract other like-minded local investors around the vision of a vibrant, resilient local economy.
Over the last decade, many new vehicles for attracting local investment dollars have been developed. Local investment opportunity networks have formed around the country to enable entrepreneurs to introduce themselves and their business venture to local investors.
Slow Money groups are linking local investors with food-related business ventures. Various internet-based vehicles have also been created.
These efforts are beginning to leave their mark. Some progressive financial institutions, such as the Alternatives Federal Credit Union and its social venture capital fund, are creating new financial products to attract local investment and developing new programs to assist entrepreneurs with business planning and development. Foundations are increasingly using their endowments or grant dollars for “impact investing” or program related investments (PRIs), most commonly in the form of loans.
Although there is the potential for abuse, recently passed federal legislation eases certain security law requirements that pertain to crowdfunding, and should make it easier for average citizens to invest directly in businesses. It will also enable enterprises to more readily connect with small, individual investors within and beyond their local community.
While the financial barriers for nascent food enterprises remain real and significant, my time at the BALLE conference highlighted that the ball, thankfully, is moving in the right direction.
