Investing in Regenerative Agriculture and Food

Food, Farming & Funding – Why Aren’t we Speaking More About the Role of Regenerative Finance? - Groundswell 2023

August 29, 2023 Koen van Seijen
Investing in Regenerative Agriculture and Food
Food, Farming & Funding – Why Aren’t we Speaking More About the Role of Regenerative Finance? - Groundswell 2023
Show Notes Transcript Chapter Markers

A dynamic session speaking to both funders and founders about their experiences with financing in the realm of food and farming. Recorded live at Groundswell Agriculture  2023, Koen van Seijen in conversation with Tessa Etkin-Silver of Be the Earth Foundation, Ruth Anslow of HISBE Food and Marc Jones of Wildfarming Co.

The conversation will address some of the functions of the financial system that aren’t supportive of this sector as well as some of the innovative ways that these shortcomings are being dealt with. First we will hear a high level overview from the funders perspective and then we will delve into two specific case studies where alternative financing models have supported the businesses to grow. We believe there is a gap when it comes to conversations addressing finance’s role in supporting the regenerative transition as well as the need for finance to transition to more regenerative principles itself. There are a handful of people having these difficult conversations, but we want to bring them to the mainstream. Whether you are a founder, a funder, or a farmer, this conversation is for you.

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Speaker 1:

Hi everyone. Thank you so much for joining us for one of the last sessions of the day, for a session on food farming and funding. It's really exciting to be talking about regenerative finance along with regenerative agriculture here. Obviously, everyone's kind of on their own regenerative journey in some way and I feel really privileged to be amongst a group of people that are so passionate about kind of this transition and this way of being, whether you're at the start or the end. But from my experience, I find that we're talking about the funding and the finance side a lot less, which is okay. Obviously, farming and food is the problem, but what we believe is that a lot more money needs to flow into regenerative agriculture in order for it to become much more mainstream and large scale. So we want to bring that conversation to grounds. Well, there's not that many people talking about the finance side, and when we started to prepare for this, I was determined to try and put statistics on here talking about how much funding there is going into food and farming in general and how little is going into regenerative. But there is basically no data on that. So if anybody has stats, please come talk to me because I'm very, very interested. We wanted to do something where we said look around this room, this is how much funding there is. One person is the amount going into regenerative, but actually it's probably even less than that, considering how many people are in the audience and how much money is really out there. So, anyways, just to briefly walk you through how the talk is going to look and then, yeah, we'll jump right in. So my name is Tessa, I work at an organization called Be the Earth. It's a foundation that does both philanthropy as well as impact investment, and we are focused primarily in food and farming. So we fund a lot of organizations, individuals like people who are here, and we run a number of programs that support individuals and organizations as well. And, yeah, these are founders or directors of two organizations that we have funded, and I will let everybody introduce themselves in a second, but what we're going to do is we're going to walk you through two case studies, led by the amazing Koon, who can kick us off with the next introduction.

Speaker 2:

Thank you so much. I'm Koon. I have the great pleasure to interview many people in this space of regenerative agriculture and food on the role of money and so asking the question what is the role of finance? What is the role of money as a tool? And as I think it is a very important tool not the most important one, but definitely an important one and we I'm using the collective we here as a sector should definitely be better and get better at using the tool. There's a lot of money out there, maybe not the right type of money we're going to talk about that here as well but there is a lot of money out there and it would be a shame of not putting some of that, let's say, pulling down some of that and putting it to work in the soil, and we have been doing interviews on that topic about 250 and counting from farmers to investors, to funds, to soil scientists, always asking that question. I'm very happy to be here and doing it live, in a shorter version today and with an amazing panel. So thank you so much, first of all for coming the last session before beer and snacks, so that's an honour to have you all here, but I'm going to hand it over to you for a brief introduction to my life.

Speaker 3:

Hi, that's working. Yeah, so I'm Ruth, ruth Anslow, and I'm co-founder and co-MD of an organisation at a social enterprise called Hispe Hispe Food and my other co-founder and co-MD is over there, it's Jack. And yeah, Hispe is an alternative supermarket, a supermarket built for the real food and farming movement, and we're doing a case study on it which I'll expand on.

Speaker 4:

Hi everyone, thank you for welcoming me. My name is Mark Jones and I manage the wild farming company. Wild farming is a regenerative agricultural company that aims to scale the regenerative farming system developed by our co-founder, andy Cato. Andy speaking tomorrow, and so I'm reluctant to sort of butcher his incredible journey, especially as he might be in the room, and that would be particularly embarrassing. But, needless to say, andy went on a journey about 15 years ago that ended with him refining a system of farming that prioritises soil health and biodiversity while sustaining a robust, yielding arable crop. On the back of that journey he found two companies. Wild Farm, our sister company, which I'll provide a bit of context on, is kind of. It's an end-to-end supply chain that on one end, offers on one end of that supply chain offers farmers who grow in a system that is similar to Andy's a premium offtake for what they grow, and on the other end, it offers businesses bakeries, cafes, marks and Spencer's now a truly regenerative product, and wild farming is just one small part of that supply chain. We're taking the system that Andy developed and scaling it across the UK. In doing so, we partner with progressive landowners and we also look to lease and invest in land ourselves. We will be a small part of that supply chain but, we hope, an important one, helping to act as a lighthouse for other potential regenerative farmers, as well as driving innovation and supporting their journey.

Speaker 2:

Super. We're going to hear in a second or in 15 minutes what the funding journey has been and why and how. But we're going to start with you. Do you remember the moment you decided or needed to attract outside funding? Because it's quite a decision to let other people literally quote, unquote, into your kitchen. Also, with money, there are interesting power dynamics there we were going to get into. But like, do you remember that you and or with your co-founder, and okay, we need outside funding, is that?

Speaker 3:

Yeah, it was the day we signed a 15 year lease on a shop in April 2013, and we only had about 80 quid in the bank. Because we believe in throwing your hat over a wall, you have to follow it. Yeah, my sister and I had been living in Brighton and working on a business plan for, and a blueprint for, a new kind of supermarket. We called it Hispy because that stands for how it should be. This is one of our stores.

Speaker 2:

So not your normal super tiny. Yeah, it's, because it's a proper supermarket. It's a proper supermarket.

Speaker 3:

Yeah, and the whole idea is to create a blueprint for a supermarket that works for regenerative food and farming. So it's mostly local suppliers. There's a big plastic free section. There's a lot of sustainable and eco brands. We think very carefully about helping people reduce packaging and, probably most importantly, we give most of the money we get to our suppliers, which is a bit of a revolutionary concept in supermarkets, and we invest most of our money in the local economy. So we're kind of reinventing supermarkets for the regenerative food and farming movement, because it's really important to connect consumers and everyday shoppers with this stuff. So the whole point of this, of Hispy, is to connect people, everyday shoppers, with some of the concepts that we know are important for the future of food through the avenue that they know, which is a supermarket. So, anyway, we signed a lease on a shop with no money in the bank and we had to very quickly raise money, and also we had spent three years building a crowd, a following, of people that were interested in what we were doing. So we talked to banks who weren't interested in lending to sisters with no trading experience alone and money to open a shop, and so we went to crowdfunding for proof of concept. So we spent three years building a crowd. We had to raise 200 grand to open the shop and get it out to this standard and it started with a blog and a crowd fund for 30 grand and the rest came from there, from different sources.

Speaker 2:

And do you remember when Hispy still one of the best names there came on your path or came on your radar? Because these are things, especially funding people that are in it know it takes forever. People that are not in it might underestimate that this is something that takes a lot of time. It needs to fermentate, it needs to really, before it clicks and the money is wired. Do you remember more or less when they came on your radar?

Speaker 1:

basically, yeah, it actually existed for much longer than Be the Earth has in its current form, and we met Ruth and Jack almost two years ago when we were starting an accelerator program, and they were post COVID, which obviously wasn't a nice time for supermarkets that have a storefront Really, I'm not going to butcher your story for you but they needed to find more funders, basically, and they joined our program, which was absolutely amazing. The second I met both of them, I was like you are it? You need to continue to exist. There's so many amazing businesses out there that don't attract the right type of funders because there's so few funders like that. So we came in much later in their journey really, and we're still in the process of that funding journey with Hispy actually.

Speaker 3:

That's right. And then we went to the accelerator. It was 10 years into our trading journey and we raised about a million and a half along the way from different sources. But COVID well, the first year of COVID was a shit show. I'm sure it was for a lot of people. But yeah, it battered us and we needed outside help to invest back into the business to grow out of that problem. So Be the Earth was the right people at the right time, because not only were they offering investment, but they offered us an accelerator and mentorship to help us get out of survival, met a mindset and into growth mindset again.

Speaker 2:

So it means you're a second shop. Yes, so no, you're a chain.

Speaker 3:

Yeah we're a chain now. Well, tesco started with one store, and so did we, so that's what I would say. So, yeah, we had to survive COVID just, and we've been on an investment journey to get ourselves back to trading where we should be, because customers after three years are only just coming back to shops like ours.

Speaker 2:

When you started a funding journey like that, what are the sources in or what are the types of funding? The sources are different, but the types of funding you Felt were possible or most close within. How did you end up and what kind of funding did you end up with with the earth?

Speaker 3:

Well, we investigated lots of routes. We looked at VC funding where people you know they're dropping in a big amount of money to Expand as quickly as possible and then draw money out within five years. They want to triple, quadruple, Five oop all their investment in five years.

Speaker 2:

I'm guessing that didn't fit your, no, it didn't fit.

Speaker 3:

Because you know, we've got a business that's based on delivering values and social values alongside money, and we can't do a return that quickly unless we hyper franchise and if we hyper franchise we lose the value. So we needed more patient capital, someone who got where we were coming from and understood the principles of regenerative farming and food and what we were doing and and so, yeah, we looked at the traditional routes and we looked at Loans and we looked at selling shares in the business. But actually what we needed was incubation and I think that that that actually be the earth is kind of incubating us with that Mentorship journey, with that acceleration journey. And then finally, they offered us match funding. So that's been a really good mechanic for us. It's a long-term loan that's convertible into shares and we're now doing a big crowd Funder what's long term in this case? Oh, so it's well, we it's over up to seven years, but we don't pay anything for the first two years and the idea is that we're Raising the money we need to turn around the business in its current form to get us back to being scalable. So the mechanic that we're using is a crowd funder. There's some funny sounds. Put it, put me off a bit, sorry. So, yeah, we've gone back to crowdfunding. I mentioned that the first thing we did to raise money was crowdfunding. It's about going out to the public and saying this is a rallying cry for supermarkets, this is what we care about, this is what we stand for, and we've always been really good at rallying that crowd. So this this is live, this campaign would love you all to have a look at it and to share it and see what we're up to. And every pound that we raise through this crowdfunding is being matched by, not only by a Viva in the crowdfunding mechanic, but by be the earth. So it's a really great way of raising the money that they will match and it's been a lot of fun. It's a. It's a big marketing campaign. The campaign page shows what we're doing with the in the store, what our work looks like and it's got customers and suppliers engaged again after a really weird three years where people went, went away. So the crowd funder is our, is our way to unlock the funding from be the earth and and it's a really good collaboration.

Speaker 1:

You have something to say yeah, I was just gonna add, in terms of the mechanics of the agreement, there's not actually a set or defined repayment point. So basically it's modeled. The repayment is based on revenue, so it's a percentage of revenue that you have to repay. So if revenue is below expectations, then it could take however many years. Basically, the reason she said seven is because what we modeled was At seven years, that's when it's expected to be repaid. If kind of they hit all the milestones in their projections which, as I'm sure everybody knows, is never the case sure, maybe you float above, you float below, but it's very, very unlikely that people actually do hit Exactly what they're what they're anticipating. So yeah, the the model we we put together is called revenue-based financing, which is meant to kind of incentivize. Alignment yeah alignment, really, and it's intended not to be extractive. So you know, as an investor, what's the point of Investing in something and then continuing to extract from it, because actually, in the end, if you extract so much, there's gonna be nothing there. So it's meant to really, as you said, align interests. So we're taking out, but obviously you know be the earth is very privileged in that the first thing we're looking for is impact, not profits, and that's definitely not the case for every funder.

Speaker 2:

Yeah, and just to add on that, I think the revenue Finance piece is talked about a bit I wouldn't say even a lot, but happens very, very rarely, and so we need a lot of innovation on the finance piece to to align investor and investee, because often it's it's a very Interesting power dynamic where the power lies with the investor and in this case, actually you're in the same boat and so that's. That's interesting. How was that to do that then, with the crowd? Or to to even Because I see often the people how revenue shares great revenue, it's it, and then they end up going any way for a loan because it's simply easier and the accountant understands it, and the notary, etc. Like how difficult was it to do a different type of funding inside, of course, a Relatively traditional thing which is a supermarket?

Speaker 3:

It wasn't difficult. It was. You know, it was a Deal and an agreement that was worked out with an organization that knew us really well by then and they could see what we needed, which was patient capital, and it was a very creative solution to what we needed. And, yeah, no, and once we had that commitment to match fund from them in this loan that would be released as we raise the money, it was easy.

Speaker 2:

That's nice to hear. I want to make sure we have time for for mark as well, and we're gonna have time for a few questions at the end. So I'm gonna thank you so much. It is way too short to to capture the whole journey, but still it's a, it's a taste of of a very interesting funding journey which takes years and a lot of I mean it's. You make it sound easy for sure it wasn't, but come for for the, let's say, the- war story.

Speaker 3:

It's easier than some of the stuff we've been through recently.

Speaker 2:

I can imagine yeah but you'll be around also for questions. Yes, of course, thank you so much so mark for you the same. When, first of all, you decided you and I'm using the general you around a Wild farming and wild farm to set up a specific, almost development company, was it immediately clear you wanted to raise, or you needed to raise finance, or when did that moment happen? So okay, we need outside funding because, as I said, with those, it's quite a Commitment. You let people into your kitchen, people with money and different power dynamics. Was it clear from the beginning? Or do you remember when that Happens? Because you come from the finance world, like you're used to this language, but this is a different beast.

Speaker 4:

Yes, fundamentally from the beginning we knew that we would need to raise capital and there were a couple of different reasons. So on the wild farming side, that is purely focused on on the farming, andy had moved over from France and had taken over a 300 hectare farm in Oxfordshire and we had a contract farming agreement to manage a farm just outside Peterborough and so we needed to raise money at that point to invest in infrastructure, farm equipment.

Speaker 2:

So there was a bit of urgency, and that's why it was a bit of urgency.

Speaker 4:

I mean, yeah, I feel like a startup is is well, building the plane as you're flying it, and it certainly felt like that. We wanted to get seed in the ground, we wanted to really start to to drive the farming operations forward, and so we need to go out raising money for infrastructure, for machinery by machinery it turns out it's quite expensive. I had hard palpitations as I saw Andy Walk up and down all those sort of rows of machinery there, knowing what might come down the pipeline there, like drive, working capital, seed agronomy and then operations as well, financing operations and Looking at sort of giving us runway to grow as well.

Speaker 2:

It's a bit like signing a lease and then having to actually build a supermarket a little bit, yeah and then. But you don't want to miss the season, like if you're supermarket, you open a bit later and not I want to say not too much happened, because of course your cash flow isn't that nice, but if you miss the season you miss a year exactly then? Who do you call? Where do you start what? What's the first step? Asking for some friends in the room.

Speaker 4:

So if I guess, if you looked at what we needed it, if you had three years of financial statements, if it was a sort of cookie cutter farming model, you know, machinery, working capital, you could go to financial lenders for that banks, asset financing but ultimately we didn't have those things. We were an early stage company and, moreover, we were an innovative company. So different yields, different inputs, just very different to anything that any sort of lending institution will have seen before, and so that quickly became clear that we needed equity.

Speaker 2:

But you tried. We actually didn't try too much.

Speaker 4:

No, I mean I put my investor hat on and thought would I lend this company money? At the moment? I had no idea what they were, working capital cycle looked like, had no idea what the cash flows would shed off to be able to repay it. We were quite confident. But if you don't have three years of financials, I can understand why they wouldn't lend. So at that point we thought, okay, we'll go out and raise equity and additionally a small amount of flexible debt alongside that as well, from Ecosia. Unfortunately, I was introduced to Tessa by, I think Robert Reed is in the crowd today and, yeah, tessa can tell her side of the story then.

Speaker 2:

Yeah, what do you remember from? When did it get on your radar? Because this feels like a shorter journey almost, and it was need and urgent need to get literally, like Mark said, seed in the ground. Like, do you feel that sense of urgency then when you have that first meeting, or is it really getting to know each other and see if there's something to be financed, or how does it happen?

Speaker 1:

I definitely think it was much longer than Mark would have hoped.

Speaker 2:

That's a general theme in investing and investor investee.

Speaker 1:

I think we met in December and the investment closed just basically in the nick of time and summer two years ago. Yeah exactly so, as you said, we were introduced, and I mean with Ruth. Obviously she hit the nail on the head and said we had built a relationship already, right, so we could move really, really quickly because there was already trust there. And I think that's what's missing in a lot of relationships really knowing that the founder can do what they say that they're going to do, and not wanting to step in and take over, because that's simply not.

Speaker 2:

Because everything sounds amazing in a PowerPoint and a spreadsheet.

Speaker 1:

Exactly, exactly. So there was definitely a huge piece of understanding the business. We brought in tons of people from outside First, even just to know is this new regenerative way that Andy Cato is farming really good? Like we don't know. I'm not a farmer myself, I can't make that judgment call. So we brought in other experts and had tons and tons of conversations. But also we weren't the only funder, we were one of many, and I think what Mark was alluding to is part of the journey for us was also introducing other funders. So not saying, hey, we'll be the last ticket or we'll be one of, but actually we'll be one, but here's 10 others that we think you should talk to. And, very happily, a lot of those people had amazing conversations and were really impressed by what they were creating and actually in some cases, we were able to have do share, do diligence, so assess the opportunity of wild farming together, have calls which ended up taking less time, and also we understood what questions other investors had as well. So it really worked bringing other investors along on the same journey and the same timeline and reaching out to our network that we knew was interested in similar things. So that's definitely a key principle that we operate on at Be the Earth. We never like to be the only person in the room just because then people are always going to come back to us, and also it's great to have different connections. People bring more than just a paycheck. They bring connections, relationships. So a lot of the other funders we brought are people that can add way more value than we can in many other ways.

Speaker 2:

Yeah, just full disclosure. We're personally part of that small, a very small part of the funder group as well. And, mark, how does that work? Like, how many people do you talk to? What's that dance? Or herding cats Because you said it took longer than, or you said it took longer than expected. How do you make sure somehow it gets through the finish line? Maybe there's a bit of FOMO play in there, like how do you make sure you get the money on time on board, because otherwise it's quite a hit or miss, let's say in terms of year, like what's what's that process like?

Speaker 4:

Very stressful, but, as Tessa said. So I think the first thing to say is that when you think about going out and raising money, and whether you're raising equity or debt, there are different pools of capital out there that have different term times, that have different return profiles, that are interested in a variety of different additional outcomes. And if you start off and you have a good sense of what will the return profile be on this, do a little bit of rudimentary modeling, build a bit of a pitch deck and then go out and start to speak to investors, particularly in this regenerative space, particularly in the impact investing space and even VC and actually all sorts of sort of commercial lending. They do want to crowd other investors in. They want to take other people on the journey with them. It shares their risk, it shares due diligence cost and we certainly saw that and then it's just about, I mean, really taking them on a journey, the sort of, I guess is the expression. You know. It's very difficult to invest in a single data point. You want to invest in a line of data points, see a company's growth, really drill into what they're trying to achieve, the journey that they've been on, the trajectory that helps you set milestones in the future, understand if they say they're going to achieve X and they do it, then you can follow on that in that round. And we didn't necessarily have that relationship at the beginning but over that sort of six to eight months time we were able to build it with that group of investors and take them all on a journey. Take them down to the farm. Understand what we were doing, meet Andy, drill down into the farming technique. Look at the financial model. Understand. You know what yield this was viable, what yield it was exciting, at what price this worked and really just get their sort of kick the tires, get their head under the hood of the car, whatever the expression is. But take them on a journey. Let them understand and know the business and get them as passionate as you feel about it and sure, at the end of it you know you do have. You need often one or two investors to say we're going to lead on this. Tessa was kind of brilliant in herding a lot of cats at that point when we said, look, we need to do this now, we need to plan, we need to get the money in the bank account to be able to allow us to do that and we think we build a big enough relationship or a strong enough relationship at that point that they feel strong enough vouching for you and taking those other actors on that journey. And then, once you start to get one or two over the line, there is definitely FOMO. There is kind of okay, if they're doing it, then maybe we should as well, and so, yeah, it's kind of about balancing those relationships, working with them as a group and then taking one or two to get you over the line.

Speaker 2:

And Tessa. What have you learned on the process of both? Actually, in this very different funding pieces, there's a bit of foam out there, there's a crowd here, revenue like what would be, or I mean none of them are done or, if ever, the regenerative journey is done. But what are your main lessons learned here?

Speaker 1:

I mean, I think what I was mentioning before about relationships is one of the key things. Ultimately, it's very hard not to be swayed by whether you simply just like someone right, whether you connect with them and it's really hard to not bring that into a room whether you have a warm introduction, of course that's great. So I think ultimately, from my perspective, the advice is have a lot of conversations and start very, very early, before you even think you might even potentially need money, because from kind of Mark's perspective, from eight months, into it was almost a bit late.

Speaker 2:

No, not even no from eight months in advance.

Speaker 1:

He told me the hard cutoff is this time and I'm like thank you for not putting pressure on me and telling me we have two weeks, because, as investors, we like to say that we can move fast. Because we can, because I'm very privileged that I work for a family office, which means that all the capital comes from one single place, which means we have much less bureaucracy and reporting that's required in order to get an approval. I can call up our principal and say, hey, we need to have this signed off within the next three days. Most people can't do that, but at the same time, that doesn't actually happen in practice. Everyone's busy, and having this long timeline and this opportunity to really get to know people meant that we actually could bring other people into the conversation and we didn't feel like we had to put pressure on any of them and we could still fulfill their needs. So I think having a lot of foresight is very, very vital when you think you might want capital at some point in your business and at the same time, from my perspective, I like choice, but I don't want so much choice because we have so many businesses coming to us saying we'll let you invest on whatever terms you want, and actually every single business is different. There's no denying that. But it's way, way, way more time consuming to come up with the terms myself or ourselves. It takes a lot of work to think what model fits each business, and I don't know all the models out there. So if someone comes to me and says this is the starting term sheet, that's great, I might say absolutely not and you might have to go back to the drawing board. But at least it's not drawing something up from scratch, because when there's absolutely nothing there, it's not something that we're personally gonna feel inclined to push forward quickly.

Speaker 2:

So yeah, and actually, to go back to Ruth, are you different sources of capital, what Mark was saying? Are you? I mean, of course, the crowd and this loan or revenue share? What other sources are you thinking about or using or have you considered as your, I think, not gonna stay with two shops? How do you maybe not hyper-franchise that's a different world but how do you use this funding to unlock the journey forward to four and hopefully 10 at some point, et cetera, et cetera.

Speaker 3:

Well, I mean, our vision is to create a local hub of stores in Sussex, because it's all about scaling up the local suppliers. So we want to Just to give a bit of background.

Speaker 2:

I always love the statistics yeah, I don't have it on the slide like how much of the pound spend in your shop stays in the area and goes to the farmer, compared to the other big ones.

Speaker 3:

The big supermarkets. You spend a pound. At the big supermarkets nine or 10 p goes to the supplier, but at Hisby it's 67 p and we keep most of the money that comes to us local. So in a big supermarket they keep only five p. In the local economy they export and centralize money and it has a very different impact on the whole supply chain. If you're giving most of the money to the supplier and keeping it local, it's very fundamental, but it's actually revolutionary to do it the way we do it. So it shouldn't be, but it's what's needed Hence the name yeah. Yeah, it's the name. So, yeah, we've done a mixture of grants and loans and from social investors over the years. But our next big step would be to raise a couple of million, open two more stores and create an operating model that can be replicated. So we're thinking of quite a sophisticated system that someone in another region could take to create a hub of Hisby stores there. You know, we could franchise elements of it, we could license elements of it. Whatever it takes to have our concepts go nationwide. It doesn't matter exactly if it's a carbon copy Hisby store. It matters that people are using our principles. So we're thinking about how we create an operating model. We need a couple of million to do that and resource it properly. And it makes sense now for us to go for a big equity raise. You know, get someone in equity partners in who can help us create that operating model, who can help us resource the business properly. So it's not just me and Jack, because we're not going to achieve that on our own. And expertise. You know we've had amazing mentorship through Be the Earth. We've got access to world-class retail experts and that's what it's going to take If we're going to really take on Tesco and create a replicable model. That's what it's going to take. So, yeah, we need to turn the corner on where we are now and that the tide is turning post-COVID, through the crowd funder. Please look at the crowd funder, crowd funder Hisby. You'll find it on Google and that's what it's going to take. So, yeah, that'll be. Our next step is to go for a big equity raise with the right people, and we can also crowd fund part of that through someone like Ethics. So we might well crowd fund that so people can have a shot. We like it because it's democratic. You know, a group of people, whether you've got 50 quid or 50 grand, can own part of your business. We really like that concept.

Speaker 2:

And for you, Mark, how does it this funding unlocks, or will unlock, let's say, larger quantities of money, Because to really take on the wheat market, let's say in the UK, you need a lot more, a lot more land, a lot more money. Like what's the vision there in this almost developing development company?

Speaker 4:

So I think, fundamentally, what that money has done is allow us to farm for two years to develop and refine the model and demonstrate at scale that we have a regenerative, profitable model.

Speaker 2:

At scale, meaning just acres.

Speaker 4:

So 800 hectares that we farm ourselves. I don't have the numbers that wild farm source from as well, but significant scale and successfully good harvest, good profitability, nothing to yeah.

Speaker 2:

Successfully as in. You can take those numbers in the future and look at other states, look at other landowners, look at other financing sources and show this is working.

Speaker 4:

Absolutely so. It's allowed us to prove that at scale, both from the financial and operational side, allowed us to feel comfortable with the P&L at the end of every year and say we put more or we put less money in the ground to generate more profit, and we do that with a more resilient and more robust system. And well, we have the financial data to support it as well. And so that money that we raise has just allowed us to feel real confidence in the scalability of that model. And so and I'm talking about wild farming here that then allows us to go out and have conversations with a variety of different actors about how we want to scale in the future. So one of those streams is going out and providing management and advisory services to progressive estates who want to profitably transition to regenerative practices. We can now have those conversations, have the numbers to support us in those conversations and feel confident that when they transition, they can do so profitably, because we're conscious that without this making sense at the bottom line, all of the environmental and all the ecological and all of the goodwill around that is irrelevant. It needs to work at a bottom line level, and we now feel confident in our capacity to do that, so we can have those conversations with landowners, with estates, and we are doing that now. For wild farm, let me say, our sister company. It allows them to go out and engage with farmers. The farming system that we refine on our farm, that continues to be disseminated and those groups of farmers learn from one another across that group of farmers. It's not just us disseminating it out, andy learns from all of the other farmers. There's 55 in the network, 60 possibly in the network. I think that everyone's learning from one another but it allows us to have much more confident in going and engaging with farmers. And, broadly, what the goal of, I think both entities is is landscaper renewal right Is taking brown bear earth that's farmed as a monoculture and taking it into biodiverse arable fields. And we want to scale that as quickly as possible because, well, ultimately there isn't a huge amount of time left 60 harvest, 10 harvest, whatever you hear. We need to be able to do that imminently and wild farm supports that by sourcing from as many farmers as possible. So, as I said, 60 farmers and that allows each of those, as land owners, to feel confident in their route to transition, knowing that they will get a premium off-date market For wild farming. We do that by, as I said, partnering with land owners, but one of the additional sort of opportunities that we're exploring is potentially starting to invest in land ourselves over time.

Speaker 2:

Which means raising significant capital to buy land.

Speaker 4:

yeah, Well, yes, it would ultimately. But I guess this was about with a sort of very finance hat on. I'm not a marketer, I'm not a farmer. It was about me sort of sitting down and thinking about what are the sort of large capital flows into farming and what is supporting conventional farming at the moment, and that is, in often cases, large pension funds, large institutional investors going out and investing in farms and ultimately farming them conventionally, destroying the atmosphere, all of these negative things that we hear about it. And so it was us sort of sitting around and thinking well, is there any way to rejig those incentives ultimately and get them excited about investing in regenerative agriculture? Can we structure those investments in a way that would generate the required return needed for?

Speaker 2:

For pensions, for insurance For real asset investors, exactly To get them comfortable.

Speaker 4:

I think that's the and the truth is that, yes, ultimately, particularly having generated this data over the first couple of years, understanding exactly how profitable this system is, is that the investment opportunity or the investment thesis that we could put forward? Two larger institutional investors, those that are aligned, sure, but others over time, I'm sure is that we can invest in degraded land. You can rehabilitate and regenerate that land by farming or by operating in a regenerative way. Plus, generating a strong cash yield over a long cycle gets to that mid to high single digits that a lot of these pension fund investors want and that, for us, is a really exciting sort of Because, just out of in context, there's so much money in institutional investors.

Speaker 2:

Absolutely, we're not that far from London, obviously, but the amount. I think in these kind of rooms we often forget how much money is managed by institutional players and if we tap into that, that's mostly I mean the money in there going into ag, is going into the extractive side. So what do we need to do? To pull a percentage or a percentage point or whatever it is, to pull into systems like we see here, and that's as soon as that flow starts flowing, we get all the environmental benefits as well and nice add-ons. Maybe we'll get paid for that, which would be amazing. But if it makes sense on the bottom line, some of that starts flowing very slowly, probably because they need to see the three years, the ten years, etc. But you're confident, like if we sit here in a year or two, that we might have the first pension funds or insurance companies or large institutional investors starting to dip their toe into these kind of things?

Speaker 4:

I mean, I think you're starting to see it already. There are a number of asset managers, also focused on regenerative agriculture, that are starting to raise money from larger institutional investors that are excited, or are able to get those investors excited, about the returns that you can generate from regenerative agriculture. And I think it's important to say as well that the promise of regenerative agriculture is not just that it is ecologically and environmentally more sustainable, it's that it's financially more sustainable. You know we want biodiversity because it's great for our environment, but also it means you need less crop protection products. We want constant soil covering because it's good for building organic matter in the soil, but also it makes you more robust to climate change. I mean, all of those elements that provide an ecological and environmental benefit also provide a financial one, and so it's about providing data points for all of these investors, including the pension funds, and helping them to realize that investing in whether it's an SPV or a farm, however they want to invest it.

Speaker 2:

Special Purpose Vehicle, just for that.

Speaker 4:

But investing in those vehicles is a much more financially stable and robust instrument for them to put their money to work, and so it's just about sort of thinking, taking a step back, thinking about the financial systems and thinking, okay, well, how can we catalyze that big institutional investment into supporting something positive?

Speaker 2:

Speak the language, fix the data points and making sure it flows into these kind of things. I want to make sure we have time for questions and open it up as well. We're going to do that with a floating mic. Who's in the back there? I forgot the name of the mic.

Speaker 6:

Hi Christopher Ramsey at Pelican Ag, hi Koon. So I suppose the first thing is I don't think we can understate how integral to the whole space Koon has been for raising awareness, at least within the investment community, for regenerative agriculture Very desirable, and whether that's real asset investment or the venture space, likewise be the earth been there for many years now and it's been really integral to growing this ecosystem.

Speaker 2:

I love compliments, but where's the question?

Speaker 6:

Well, so Wild Fund, we think probably are telling the story best. What we really need at the moment is we need everyone in this room to understand that this space really does need to be nurtured. It needs to be a crusade for more investment in the space. We're beginning to see big food, big ag look at it, but it's still early stages, and so I suppose my question is how can we accelerate that, how can we tell better, invest the stories, and how can we progress?

Speaker 2:

Who wants to take that?

Speaker 1:

I can start. I think it's really scary, actually, when people start looking at things like. You know, mainstream starts looking at things like this because it just means it's ripe for corruption. You know, now people look at the word sustainability and they hate it. You know, a couple of years ago we started talking about regeneration and people already started saying you know, that's not the word you use, this word that's poorly defined and people are just going to take advantage of it. So I do think it's a huge responsibility for everyone, really, but to take the stories and shout about them to the right people and to press people when they say they're doing impact investment that really isn't that impactful, because there's a lot of that, you know. Sure, the SDGs are great. I mean, they're absolutely better than nothing. It's amazing that people are talking about it. It's amazing that people are talking about ESG. You know, environmental, social governance, but that's not it. There's so much more than that. And you know, I was at a conference I think it was last month and someone asked a kind of similar question, but it was to someone in VC, and their response was show me the winners, right. But what they meant was the winner who's delivering them the financial returns first, and that, in my opinion, is not the answer. I think we need to have a much larger mindset shift around winners being the ones that. Yeah sure, financial sustainability to use that word, which I just said we don't like that much, but financial sustainability is important. But actually, you know, a winner is someone who's genuinely making impact in the work that they're doing, and you know. That's why, for us, it was really important to get to know these individuals who are starting the business and to understand, you know, the integrity behind the work that they're doing, the why that keeps them getting up every single day, and, you know, to see that they're not just driven by, you know, creating, generating more profit, because ultimately, that doesn't matter. You know, if the world sees this to exist, who cares? So I do. I agree it's a huge question and it's vitally important to bring more money into the people creating real impact. But we have to be really, really careful around how we share that narrative and to ensure that we're not just talking about impact investment, but actually, you know, making a difference.

Speaker 2:

And there's a piece on who do you tell the story to and what story you tell, because I think for institutional investors also really understand what drives them. It might not even be the profitability, but might be the volatility. It might be the story they need to tell to pensioners. It might be that they have no idea what regeneration actually means or how a plant works Like. We also need to understand that most of the financial world lives in an office and in a subway and in a taxi and in a home and has honestly no idea what a tree actually is. So also there there is a lot of no. I meet them every day and it's like generally starting I'm not saying at a low point, but starting by understanding why ag and food is different than many other markets and really understanding what it means to regenerate. I think would be great to have many more here. Of course, we keep inviting them. They keep not showing up, but to understand what actually, how stuff grows, helps a lot because it makes you understand that it's not a tech startup, it's not WhatsApp, it's not, etc. So there's a lot of lessons there, a lot of education needed. Sorry, and unfortunately many of the pioneers, like Chris and others are doing that education but not necessarily raising the money, because the education one is not always the one that actually raises it's. I'm uploading all pioneers here in the room as well, to educate everybody that is not deep into space and to tell that story over and over again, even though you're not getting the euros or pounds or a yen or whatever in return as investments. But that's unfortunately the pioneers' curse. I think there was a hand there.

Speaker 5:

Sorry, the mic's already here. Yeah, great panel, great insights, thank you. I work for an organization called FAIR, so we are an investor network, so we do a lot of these education piece around regenerative agriculture, sustainable practices for investors so that they are more in tune with what they need to do in terms of funding these initiatives. My question was around the finance of regenerative agriculture, so I'm assuming that you charge a premium on the products that you sell. So is that more from a transition point of view or a structurally regenerate, more expensive than conventional agriculture?

Speaker 3:

Some products. Well, it's difficult because, comparing with the big supermarkets, the big supermarkets pricing structure is already artificial. Because you know, you go into Sainsbury's and they have five different levels of sausages and the very cheapest ones are too cheap and the most expensive ones are hugely overpriced. But we offer sausages how they should be, which exceed the quality and are about mid-priced. It's very difficult to explain price to the customer, so we talk about it being fair price. So when you spend 55p on a pint of milk in Morrison's, the dairy farmer gets a point of a pence. When you spend 55p on a pint of milk at Hisby, the dairy farmer gets 41p and her cows get treated to the manner they become accustomed to and she can afford to pay people the living wage and we get milk from cow to shelf within 12 hours. So it's difficult with price. But people understand the premium. They understand that some things like meat are going to be more expensive and other things like vegetables are cheaper. They're sold loose, they come from down the road and it's about the fairness of the prices that people are getting. But ultimately people know that we're not Tesco, they accept that there's overall going to be a premium and what they're getting for that is much friendlier. Better customer service, better quality of food, the feel-good factor that comes with supporting an organisation with ethics, and that all commands a premium. So, yeah, it's a funny question on price.

Speaker 2:

I hear getting out of commodities like decommodification.

Speaker 3:

Yeah, yeah, customer experience is important to people. They come in and they experience something on our shop. We tend to do this thing where we employ people who, like people, you go into the store and you get a reasonable. People are generally happy to see you and they know your name and people pay for that and they want that. So you know it'sit brings people. It woos people away from Aldi, who are two minutes down the road, and into our store.

Speaker 2:

And Mark going from the artisanal bakeries to a big supermarket actually, or big players, is thatof course it's on a wild farm side, but how Is that difficult in terms of pricing, or are you commanding that or how does it work?

Speaker 4:

I guess I'll talk more from sort of a broader philosophical point of view. I'm not on the wild farm side and not involved in the conversations with the various supermarkets, but fundamentally we know that the world doesn't need another £7.50 loaf of sourdough. That's not what we're going out there to do. We're going out there to drive systemic change and that is only going to be possible if we can produce at a price or sell at a price that is available for a larger group across the socioeconomic spectrum. Now, having said that, food currently isn't paying its own bills, you know we're not saying that we want a £7.50 loaf of sourdough but at the same time, we're also saying that, you know, £50 is arguably too cheap if you look at the impact that's having on health and supply chains, environment. And I guess we have this sort of internal motto at wild farm, and wild farm, which is the road to Gregg's, and Gregg's, as many people know, is sort of a high street bakery, and that goal is about being able to produce at a scale and at a price that can make it available to as large a group of people as possible, but, having said that, always conscious that we need to produce in a way that focuses on soil, health and biodiversity and costs exactly and doesn't in any way sacrifice on those elements, but in general I mean, I like to use the example of Tesla. right, tesla came out and it was £250,000.

Speaker 5:

No one had one or very few people.

Speaker 4:

But over time, as you get operational scale, as you get operational efficiencies, technological improvements. That brings down that cost of production and that price. And regenerative agriculture in terms of the system that we use in the variety of the farmers or that supply to wild farmed. They've only been at it for sort of five, ten years. Conventional agriculture has had 75 years.

Speaker 2:

Which means machinery, seeds, input, everything is. Exactlykind of too perfection and they're not making a lot of money anyway. So imagine ten years, fifteen years of this.

Speaker 4:

Imagine ten, fifteen years where you get these groups that are learning from one another every day, that are driving kind of all of these improvements that are getting more efficient and better, and, yeah, ultimately that does give you or reduce over time that cost of production and allows it to be available to a broader group of people.

Speaker 2:

Yeah, and it's not the first time I hear. I mean, it depends on the crops, I think as well. There are some very interesting crops where you can make an enormous impact without too much impact on the price and the costs are enormous because of input and you can drop it a lot. And I've heard people say they don't see the yield gap too much. They would even be able to produce it without the premiums they can get for organic, regenerative, et cetera, et cetera. So there's an. There are some I'm not saying everywhere, but there are some where the cost piece, of course you have to look very carefully as an investor, an operator, an entrepreneur. But there are stacking models as well. There will be a panel tomorrow on profitability, by the way, or go, and there are pieces there that are even in the current economic system where we're not paying all the bills and are already profitable and able to pay the bills. And I think if we focus on that and put all the money behind education, research, development, which the extractive egg had 18, 90, or in some cases, 12,000 years to perfect, we can get pretty far. Yeah.

Speaker 1:

I just want to add one thing. I think there's also a difficult element in that from a farmer's perspective. Sometimes that extra that you do make is the reason that they decide to convert right. So that's definitely part of the equation. And I remember a couple of years ago at Groundswell, someone I think they might have even been in this tent, but they were saying how one Christmas I think it was during COVID maybe they just read everything that was online about how they could get government subsidies and they basically realized they could make more by not producing food and actually just rewilding, right. They're like I don't care about this, but now I do because it makes more money, right. So there's definitely an argument where, if you want people to transition, you need to show them oh, there's enough money there to make it worthwhile, because there's no denying it's an investment To transition your farm to regenerative. It takes time and it takes money, right. So you want to make more. So I think there's still a little bit. I don't have an answer at all, but just acknowledging there's definitely a gap in terms of, yes, we want to bring the price down for the consumers, but also, as Ruth was saying, we also have to bridge that gap so farmers are paid more, right? So that it's being acknowledged that the work being put in to grow regeneratively farmed food is potentially more.

Speaker 2:

I think we have time for one final question Where's the mic?

Speaker 7:

already with her.

Speaker 2:

Oh, mic is here, sorry, go ahead, evan.

Speaker 7:

Hi Adi Winsekli from Regenerate Ventures. Thanks very much for a great panel talk. Just want to ask obviously, getting more cash or sort of investment into this area? Here's the you're looking at retail investors coming in through crowdfunding and then, for a while, farming company. You're becoming more institutional as you raise more down the line. Is it going to be coming in from retail investors, rallying around from the people in this room and sort of bringing around consumer awareness to this, or do you think it's going to the moving the dial is going to be coming from the big institutions putting in the 100 to 200 million pounds into sort of buying land? Where do you think it's? Obviously it needs to come from both sides, but what do you think is going to be starting to move the dial first, or how do we go about it?

Speaker 4:

I think it's very complex, to be perfectly honest with you. I think there's a number of sources of capital that have to get excited about what is happening in the regenerative space. They have to get those data points, as I sort of mentioned. And yeah, I mean it's just a combination of things. If I go back to the sort of model on what drives that cost of production down, you talk about scale, right, and so you get scale in farming through a number of different ways, but you can get it through investing in land, or you can get it from sort of incentivizing current landowners to transition, and so there'll definitely be some elements. That's investing in land, larger capital, larger institutional investors, I think. Then you have to drive the technological improvements that you needed to make that as efficient as possible. So that's VC investors, ultimately ag tech investors who can try and drive regenerative agriculture to be as efficient as possible. And then you have, let's say, brands that are able to communicate why that's important to consumers and, as I say, sort of realize the premium throughout that supply chain, maybe sort of rejig, some of those supply chains, and that investment is often more sort of fast-moving consumers' goods VC, and so, yeah, ultimately it's a combination of different capital sources. For me these are complex systems with a lot of different challenges, a lot of different financial flows. You need a lot of smarter people than I do sitting down and thinking about how those financial flows work and then trying to rejig them slightly so they can catalyze for more positive outcomes. And I think in sort of filling that gap at the moment is often aligned investors like be the earth right. They are helping to sort of get companies both from an operational point of view to a point where they can be invested in those in sort of larger institutional VC or capital, but also they're helping to sort of build that pool of data that makes it those businesses investable.

Speaker 2:

Yeah, let's not forget, we're extremely early in this journey, not in the regenerative journey, if you look at agriculture et cetera, but the finance question there we're just asking relatively recent, even though it feels like a long time. So it is, yeah, it's very, very early. I wanna Eiruv had a question there in the hand before and I ignored it and I think it's a final one. Looking at time.

Speaker 8:

Yeah, Go at three minutes to go.

Speaker 2:

Perfect. Eiruv is asking long questions and difficult ones.

Speaker 8:

So I'll make it very quick. But on your question, can regent food be the same sort of price as conventional food? It doesn't need to be, because it's so much better. For the same price or a little bit more, you get a huge amount more value, more nutritional value. So it doesn't need to be the same price, it doesn't need to be dirt cheap. But my question is like one of the problems I always see when I'm talking with VCs is that they always say where's the technology, where's this rapid scaling that you can get? So I've noticed that both of the companies, the founders here, are both from the downstream sense, where you're selling to customers. When you're selling regent products to customers, is that where you think the opportunity lies? And what about the upstream?

Speaker 2:

To whom are you asking?

Speaker 8:

Well, Tessa, but obviously the other two will agree with that, I imagine.

Speaker 2:

Where's the magic tech that grows?

Speaker 1:

From a Be the Earth perspective, we're less interested in tech-enabled. I mean, we're more interested in tech-enabled rather than tech-reliant, which is a little bit different to most investors, and for us it's not necessarily a specific point in the supply chain that we're interested in, but we do wanna see that there is a path to profitability, right? A lot of people come to us and say I'm raising this type of money, this is my plan. If I can't look at it and say I agree with your hypothesis, then I can't reasonably say this is something that we can get behind. Look, this is a disclaimer and I'm sad to say it, but we say no more than we say yes, right, and we're merely a drop in the ocean when it comes to capital. So really, the questions we're all asking are so similar, and it's kind of the whole point of this talk, which is that finance needs to be regenerative, just like farming and food need to be regenerative, right, what we're trying to do is to encourage other types of investors, every type of investor, to look at capital a little different, to look at economies a little differently. Capitalism isn't necessarily the only way or the best way, and at the moment it's really what takes precedence, right. But from our perspective, of course, we have to say no and we set not necessarily artificial, but we set boundaries to help us say no. But other investors exclusively invest upstream a lot, exclusively invest in technology, because it has that kind of hockey stick exponential growth that they wanna see. But really all we're trying to do is encourage investors to look at, as I said before, returns in a different way. Whatever you're interested in is great, but it doesn't need to be profit, profit, profit, profit. How do you crush it to be the lowest input for the highest output? Because that actually just doesn't make any sense logically. Just the same way. When a lot of people who are speaking today, I was like wow, that's so obvious. Of course, if your food eats healthy food, if what you eat eats healthy food, then you're gonna have more nutrition, right. The same thing If you're gonna extract from a business, the business is not gonna do as well. One person's gonna profit. Is that gonna be the best output for everyone? Absolutely not. So I think it's really just those same principles. I took a course earlier this year called Regenerative Economics and people are starting to develop principles around that as well, which I think is so interesting because finance is such an important part of this and we really need to shift money. As they were saying, we're a tiny investor, we're one person. If people were to line up here, I wish I could say, yes, we'll throw money at all of you, but it just doesn't work that way. These are two case studies of many, but if only we could show all the people that we aren't able to give money to, which is why the goal is ultimately to pull way more funders in to the same. Yeah to the story. So I hope that answered your question. I know it didn't entirely, but I think it's a wrap, we're on time.

Speaker 2:

Thank you so much for giving your time to us before the day. Thank you, thank you.

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Regenerative Economics and Shifting Financial Investments