Coronavirus drawing venture capital to regenerative ag – Steward

Dan Miller says a focus on portfolio resilience in the context of the coronavirus has broadened the appeal of regenerative agriculture among venture capital investors, as many look to personally source food from small local farms.

The founder of Steward, a self-styled ‘crowdfarming’ platform for regenerative farms, said it has experienced an uptick in interest among certain investor groups as they seek diversification options amid the covid-19 crisis.

“We’re having more conversations with venture firms now,” Steward’s founder and chief executive Dan Miller told Agri Investor.

“The high-net worth investor has evaporated – they are figuring out how they are going to afford everything. But [for] the professional investor who has a venture fund, has committed capital and needs to do deals because that is the business they are in, this now presents itself as much more attractive – particularly for a lot of the agtech firms that are heavily invested in conventional ag and are realizing that they may need to put investments into diversified ag.”

Miller estimated it had been over the second and third full weeks of March that the pace and scale of inbound interest in Steward had picked up. This accelerated a fundraising process that had been underway informally since January.

Farmers are now simultaneously in need of capital, he said, as the closure of farmers markets and local populations’ desire to source their own food from local operations due to covid-19, create a need for systems to coordinate e-commerce, order management, packaging and delivery.

“They are going from serving restaurants and a mix of customers at farmers markets to, overnight, shifting to direct retail sales, and that takes a lot of capacity,” said Miller. “They are basically making a five-year business transition in a week.”

Steward offers investors exposure to a diversified REIT that owns mortgage loans on a network of 16 small farms. The REIT primarily offers first mortgage loans with interest rates of 8-10 percent to farmers, vetted by Steward, which require capital to expand operations that are generally less than 100 acres.

Retail investors can invest a minimum of $100 through Steward, said Miller, adding that the average investment ranges between $500 and $1,000 on deals that go up to a few million dollars each. Investments from family offices, he said, have ranged up to $500,000 on loans offered through the platform.

Miller believes covid-19 has helped expose the shortcomings of the post-World War II conception of agriculture modeled on manufacturing. He said this has meant that only around 2 percent of the US population now has a professional connection to agriculture – a figure that was closer to 50 percent in the 1890s.

He added that he has been encouraged by fact that half of the farmers Steward supports do not come from agricultural backgrounds.

“We need millions of more farmers and we need millions of more people supporting farmers,” he said. “We tried to reduce the number of farmers and increase the scale of the farms. That did not work out very well for health and nutrition of food, for health and logistics or ecological challenges.

“We have to change, whether its forced upon us or not. This [covid-19] is the type of event that forces it upon people to understand the changes they have to make. I do think it’s going to catalyze that type of change, but it’s going to take a long time. This is not a quick fix.”