252 Keoni Lee - Why the islands of Hawaii with 10 million tourists a year are the perfect and challenging place for a regenerative revolution

A conversation with Keoni Lee, CEO of Hawaii Investment Ready, about having to import massive amounts of food, inputs, fuel, etc., being at huge risk from climate disruptions and climate change and much more.

Why do we need to take systems change lens into investing? You can’t focus on single solutions and hope that the massive global food and agriculture system will change. Hawaii, with 1,4 million people and 10 million tourists visiting each year, have to import over 90% of its food. Nowhere that is more current than on islands: they are usually far from mainlands, have to import massive amounts of food, inputs, fuel, etc. and are at huge risk from climate disruptions and climate change. 
Look for instance at the Archipelago of Hawaii, which used, before western contact, to produce enough food for 1 million people and, now with 1,4 million people and 10 million tourists visiting, has to import over 90% of its food. Learn more on how investing with a systems change lens in food and agriculture looks like in Hawaii.

Have you ever wondered about the complexities of achieving food security in a region heavily dependent on imports? We take a closer look at how the legacy of plantation agriculture, the rise of GMO seed production, and the impact of regulatory frameworks play a significant role in Hawaii's journey to food sovereignty. Keoni shares insights on how the Investment Ready Program is spearheading this evolution, with their innovative accelerator program and research project focused on food systems.

Finally, we discuss the power of collaborative funding in Hawaii's food system transformation. We highlight the success story of the Hawai'i 'Ulu Cooperative, which is championing the regeneration of indigenous crop production. We also deep-dive into the types of infrastructure investments that could pave the way for a more food-secure and sustainable Hawaii. 

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Transcript

Speaker 1: 0:00

Why do we need to apply a systems change lens onto investing? We can't focus on single solutions, invest in them and hope that the massive global food and agriculture system will change. That's not the mindset we need. Nowhere that's more current than on islands. They're usually far from the mainland, have to import massive amounts of food, inputs, fuel, etc. And are at huge risk from climate disruptions and climate change. They're literally already feeling it. Look, for instance, at the archipelago of Hawaii, which used, before Western contact in the middle of the 1700s, be super abundant in terms of production of food, producing enough food for over a million people. Now, with 1.4 million people and 10 million tourists visiting each year, has to import over 90% of its food. Learn more today on why investing with a systems change lens in food and agriculture looks like in Hawaii.

Speaker 1: 1:05

This is the investing in regenerative agriculture and food podcast investing as if the planet mattered, where we talk to the pioneers in regenerative food and agriculture space to learn more on how to put our money to work to regenerate soil, people, local communities and ecosystems, while making an appropriate and fair return. Why my focus on soil and regeneration? Because so many of the pressing issues we face today have their roots in how we treat our land. Nrz grow our food, what we eat, where and consume, and it's time that we, as investors, big and small and consumers, start paying much more attention to the dirt slash soil underneath our feet. To make it easy for fans to support our work, we launched our membership community and so many of you have joined us as a member. Thank you, and if our work created value for you and if you have the means and only if you have the means consider joining us.

Speaker 1: 1:56

Find out more on comroadcom slash investing in regenerate ag, that is, comroadcom slash investing in regenerate ag, or find the link below Welcome to another episode. So today, with the CEO of the Hawaii Investment Ready Impact Intermediary. Welcome Keoni.

Speaker 2: 2:25

E aloha kohen Pleasure to be here.

Speaker 1: 2:27

I mean, we've had some islands actually in the past Not so many, I will refer to Ibiza, probably very small, very different contacts, and we talked to people working in Fiji as well, and we've featured, actually, an Hawaii company a long time ago, but to do such a deep dive hasn't happened yet. So I'm very, very happy about it. And it's on investment ready program as well, which I have a history with the impact up in Amsterdam and, of course, on an island archipelago that we I learned in the in the pre call just now that is one of the remote, most remote or the most remote one in the world. So there's a lot of interesting challenges, let's say, to explore and, of course, a very interesting, disturbing, challenging and full of potential agriculture history as well. So I'm looking forward to this one.

Speaker 1: 3:14

There might be some background noise. There's a lot of wind on your side, so I hope we get through that with without too much trouble. So welcome first of all here, and I would like to start with a personal question what made you focus on food and agriculture and soil, like? What led you to that path from all the other career paths you could have chosen?

Speaker 2: 3:36

Yes, Well, it's a pleasure to be here and join you on this podcast and share what is the things going on here in Hawaii from a food and egg and regenerative space. Yeah, like you said, Hawaii is the most remote island archipelago on the planet. You know we're 2,500 miles away from the nearest land mass in the Pacific Ocean and you know, for me, as a native person here in Hawaii, food is everything right. When you live on islands, your food and water are critical to your survival.

Speaker 1: 4:22

You have a lot of water around you, but not necessarily the one you can drink.

Speaker 2: 4:26

Yeah, fresh water and food are really important. As Polynesians, as islanders, we come from an indigenous, native worldview of it's a biosentric worldview. Right, the dominant worldview on this planet is anthropocentric, where this thought that man has dominion over everything and that the land and our resources are there for our use and extraction. It's quite different from a native worldview. It's biosentric, where our ancestors, our family, our gods in our culture are our family and when your natural resources, your wind, your rain, your water, your plants, when that is your family and your ancestors, you treat them very differently.

Speaker 2: 5:26

And it makes a lot of sense as island people because when you live on an island, if you deplete or you do not take care of those resources, you die or you have to go and move to another island and go fight somebody else for their resources.

Speaker 2: 5:42

So when you think about that, from just how things existed as island peoples over millennia, we developed a worldview, a value system and practices to maintain abundance, to regenerate our resources. When Western contact happened here in the late 1700s, there was a population estimated between 800,000 and a million native Hawaiians that were living on these islands at that time, which is actually quite similar to the population we have today, hawaii has a population of 1.4 million, and so when we talk about integrating native worldview, native thinking, native practices in a contemporary context, we're not talking about going back in time and making things the way that they were before, but rather how might we be able to repurpose our ancestral ways of thinking and doing in ways to address contemporary challenges. And I could go down the rabbit hole of the history of Hawai'i and how we all call it.

Speaker 1: 6:59

I would love to, because I think there's something where most people don't know Western contact happened and just to describe, you mentioned we managed for abundance, and just to, because this is, of course, an audio podcast, but we're going to make it visual. What would that have looked like? Or not, because we want to go back to the past, but we definitely want to go back to the future. But what would an island or an island group like Hawai'i looked like before the contact? Even if we even know, I mean, there must be still a lot of stories, a lot of songs what would that abundance look like? Because I think we suffer we I'm using it very generally here from not really even being able to imagine what abundance could look like.

Speaker 2: 7:46

Yeah, I mean, we had agroforestry systems that produced tremendous amounts of food from the shoreline, and our aquaculture, with traditional fish ponds and fishing practices through our riparian zones, where we had taro terraces, like wetland and dryland taro terraces, and all the way to the upland where we had agroforestry systems for breadfruit, sweet potato, and it's those regenerative systems of abundance that were created by my ancestors that were able to feed a population back then that's very similar in size to what we have today.

Speaker 2: 8:29

And you know, when Captain Cook first got here, one of the things they noted when they arrived was how fit and strong the people were here. And again, it makes a lot of sense that, how we were able to build these systems of abundance. Like, if you think about how Polynesia was settled, right, by the, by my ancestors, it was done by canoe, right, they sailed purposely across the Pacific and inhabited every single inhabited, inhabitable island in the Pacific. And you do not create a industry of sorts of open ocean celestial navigation if you are not a society that has abundance. Right, if you think about, like, the Renaissance of Italy, right, there was a lot of abundance in those times that allowed for the art to flourish. Right, you don't do art if you're starving.

Speaker 1: 9:36

And the same thing you don't do exploring if you start, you could do it if you're not starving.

Speaker 2: 9:40

I guess, but like to develop a practice of being able to purposely sail between islands that are 2,500 miles apart. That is a science and a technology that has to be developed over many, many generations, and you just don't build those kinds of canoes and that kind of practice if you're starving, right.

Speaker 2: 10:02

So you know, the mere fact that Polynesia was settled in the way that it was, with the canoe and with open ocean voyaging, just kind of gives you an example of how much abundance there was in our societies. And it's those political economies that were created in Polynesia, and particularly here in Hawaii that I can speak to, that allowed us to develop these kinds of sciences and technologies in the ways that we were, my ancestors were the greatest explorers in the history of humankind, right, and we were able to build a political economy here in Hawaii that sustained abundance over many, many generations. Because, again going back to that worldview, when your natural resources are your ancestors and your family, you treat them very differently. There's a sacredness and there's a specialness to how we interact with our natural resources that cause you to make decisions that are going to ensure that there is abundance. Right that we are thinking multi-generationally, how our decisions today affect generations to come, and I think we are seeing that resurgence of that kind of mindset and that worldview and those practices here in Hawaii in really unique and innovative ways.

Speaker 2: 11:34

Going back to the fact that we are on islands those of us that live on islands we feel the pressure of an extractive capitalist economy.

Speaker 2: 11:46

We feel the pressures of climate disruption and climate change, I think about 10 to 15 years earlier than on continents, because the pressures of our geography and the fact that we are living on islands and we're facing sea level rise and changing weather patterns the things that we've been able to depend on for millennia are now shifting right. There's less tradewind days in Hawaii. Over the last 25 years we've lost about 50 days a year of our normal tradewinds. And when you understand our water cycle here in Hawaii, where the tradewinds bring moisture from the ocean that hit our mountains, which capture fresh water, which percolate down to our aquifer, that water cycle is being disrupted because we've lost so many days of tradewind weather. So we see the disruption, we see the pressures a lot sooner, and particularly with our food. Hawaii is a bio machine. We have 300 plus days of beautiful, sunny weather. We have a lot of rain. We have three growing seasons a year.

Speaker 2: 13:07

And yet you import almost all your food we import over 90% of our food right.

Speaker 1: 13:11

Yeah, and after that contact, of course, the abundance was lost and it was extracted, and that's a whole different podcast. But it's very safe to say that the world view that entered the islands was very different from the world view that was there. And can you describe a bit what happened to the agriculture and food space that now led to you being dependent on import for 90 plus percent, of course, with a massive tourism industry of 10 million people not just 1.4 million to feed, but also 10 million people a year coming for X days to visit. So there's a lot of food needed, but at the same time, you also create an agriculture system that is mostly focused on extraction and export. So, because another items that happened as well, like what was the mechanism there and what, where are you now? And it's a very big question. Yeah, I read.

Speaker 2: 14:04

After Western Contact, you know we had the sandalwood trade came here and extracted all of our sandalwood. The whaling industry came and extracted from our whaling population but the third and the one that kind of stuck was sugar. So sugar became one of the biggest industries here in the mid 1800s and it sustained for almost 100 years and it was really the driver for westernization and colonization here in Hawaii. You know the sugar plantation owners, most of them American and white, came in and started, you know, deforesting our lowlands and you know turning it into into sugar plantations. And it was that exporting of sugar, that and the taxes that these businesses, these sugar businesses, faced of sending their product to the United States, that really drove the annexation movement here in Hawaii, for Hawaii to be annexed by the United States so that they didn't have to pay the tariffs, all right, and because they wanted to be a part of the United States and then therefore they wouldn't have to pay these import tariffs on their product. So it was really profit driven how we became part of the United States tax.

Speaker 1: 15:30

And you know which goes straight to profit, but it's even more, I would say meaner, but even more yeah quote, unquote more than that.

Speaker 2: 15:38

You know, Hawaii is one of the most biodiverse places on the planet. We host 10 of the 14 climate zones here on these islands and so sugar culture is not a really good fit.

Speaker 2: 15:51

Right. And so we go to this monoculture and you know this extractive kind of practices and you know it completely deforested our native forests. Right, they cleared a lot of land. They, you know they started doing these harmful practices and you know that persisted through the mid 1900s. And it wasn't until competition from the global south that the big ag industry here in Hawaii, which was the primary economic driver for nearly 100 years, started to fade away and tourism was selected as a diversification strategy. And we've seen what that has done in the last seven years. It went from a small diversification strategy to now being the primary economic driver.

Speaker 2: 16:41

But that's kind of how things work in this economy, right, specialization is the is the strategy. Right, how do you get monocultures? You know economies of scale and so you know that's how the market works and you know so tourism became. We started to specialize into tourism and you know so what it did was. Now, you know we've seen tourism grow, grow, grow, grow, grow over the last 50, 50 plus years to where now we have 10 million visitors a year coming to Hawaii. And you know, at any given time we have somewhere around 200, 250,000 tourists here. So you know 15% of the people, that 15 to 20% of the people that are in Hawaii at any given time are tourists. So it adds pressure to our already our carrying capacities and our needs and, like I mentioned, the importing of our food right. So 90% of our food is imported Because it's cheaper to import. But yet that creates a dilemma, especially in times of crisis, and it was highlighted very painfully in the COVID crisis where we saw global supply chains kind of come to a halt. For the first time in my life I saw empty shelves in the markets and it really highlighted an uplift in the market. It highlighted and uplifted the need for Hawaii to be more food secure. The community has been ringing this alarm bell for 20 years and there's been a lot of effort into diversifying our food systems to be able to produce more local food for local consumption.

Speaker 2: 18:35

But it's always been this like fringe subset of the ag industry Because that history of plantation agriculture big agriculture was driven by large landowners leasing their land to these plantations and when the plantations winded down over the second half of the 1900s, the practices and land use for these large landowners didn't really shift. They wanted to still maintain this. Well, I just want to lease big chunks of my land to one entity and collect my rents, because that's easier and less work for me as a landowner. And so what we saw after the demise of big ag being sugar and pineapple, what we saw happen in Hawaii was the influx of the biochemical Chemical, like GMO seed industry in Hawaii, and for a while, for 30 years, we were the epicenter of seed corn GMO seed corn production here in Hawaii, and it took community pushing back against those bad agricultural practices where the GMO companies are starting to leave Hawaii because of the rules and regulations that are now being imposed on that industry. And so what we're seeing now is those lands going fallow again and a recognition that you know that COVID very much highlighted and accelerated is we have to get back to being able to sustain ourselves, because the threat of our supply chains, our food supply chain to Hawaii, is real.

Speaker 2: 20:29

Right, as climate change accelerates. You know, I'm sure this is this will likely not be the last pandemic, right? You know. So these crises are going to happen and we need to be prepared for them when they do, and so for us here at Hawaii, there is very much in elevated and growing consciousness around being able to be more food secure and grow more of our own food, and it's not impossible, right?

Speaker 2: 21:02

We have a history of being able to fully sustain ourselves if we look back to my ancestors in pre-Western contact time. So how do we repurpose those ways of thinking and doing to create systems of abundance, of regenerative abundance, so that we can feed ourselves in times of crises, should the supply chain shut down? And so it's going to take time for us to build up our own capacity here, locally to be able to feed ourselves more. I don't think we'll ever get to 100% food secure, where we're growing 100% of our food, but if we can get to 50 or 60, I think that's a huge win because we'll be able to at least, you know, make it for a few weeks.

Speaker 1: 21:51

And more probably because if the pandemic hits, let's say, the 10 million tourists won't come for a while, so you have some extra breathing space. There might be 250,000 that are already there that cannot leave, but at least you have building capacity and not have 10% of what you're growing. So, with the investment ready program, what are you? We're now in july, end of july, so actually we're not in july, we're in august 2023, so the summer in the northern hemisphere. What are you working on? You're specifically now focus on food, you mentioned in the pre-interview, but let's also unpack what investment ready actually is and what it's doing in terms of. It's not a fund, it's not a financial advisor, it's not necessarily a partly accelerator, but let's unpack why investment ready is so important and in in the context of hawaii sure.

Speaker 2: 23:18

So hawai investment ready is a, is a non-profit impact intermediary. It started as a social enterprise accelerator program in 2013 and I was actually in that very first cohort. I co-founded the first hawaii language and cultural television station and was selected to be a part of that first social enterprise accelerator program here in hawaii. And the hawai investment ready accelerator program was founded by two native hawaiians and you know in our early days of of our accelerator program, there was an, a focus on social enterprises that were integrating culture and ancestral wisdom and practices into into their business models, and that's still very much part of our dna as a, as an intermediary and as a accelerator program to support kind of native led, native serving social enterprises that are integrating culture into their business models. So the, the accelerator program is has completed five cohorts over the last 10 years. I took over as the ceo. I took on the ceo role in 2019 after I exited my my company in 2018, and I wanted to do that because hawai investment ready was sitting at the forefront of impact investing in hawaii.

Speaker 2: 24:52

Hawaii is a little behind the game when it comes to impact investing. Still very much the dominant practices here are very traditional, conventional types of investing very siloed across philanthropy, government and the private sector. But in 2017, hawai investment ready started doing like quarterly workshop series with the funding ecosystem here to talk about impact investing, to talk about blended capital strategies, and for me, I felt like it was a opportunity to lead an organization at the forefront of this growing and emerging field, to help shift it and guide it in a way that was rooted in my value set as a native Hawaiian and my perspectives as somebody who worked in media for over a decade. You know I had the unique opportunity to cover stories, meet people, learn about the issues, build relationships in community across the myriad of issues that we're facing here in hawaii. So I had a unique perspective on what was happening on the ground and then couple that with my formal education in business and finance.

Speaker 2: 26:13

Hawai investment ready was just a unique opportunity for me to be able to apply my value set, my perspectives, in a space that I felt had the ability to address a root problem, which is our financial systems. Our financial systems underlie a lot of the other issues that we're experiencing here in hawai and, you know, I felt that if we could change the way that money moves and we could move capital and investment in more strategic ways towards these innovative, innovative solutions that were emerging from community that I knew a lot about from my time in media, that we could really start to move the needle on transformative economic change here in hawaii. And so you know, 2019, I'm trying to just get the feel for this organization and the work and the landscape. But now, four years in, I feel really confident about the future of investment, about what we are doing and how it has the potential to catalyze economic change, and we've done so by taking a systems view and a systems change intentionality with our work.

Speaker 2: 27:30

So the first four cohorts of the hawai investment ready accelerator program were kind of thematically agnostic. It was, you know, if you're a social enterprise, whether for profit or non-profit, addressing a social or environmental issue in hawaii, apply, come, come be a part of this program. That's help you get to scale, it's help you get investment. But what we saw after those first four cohorts was it was kind of an incomplete theory of change. You know it was. It was kind of a spray and pray strategy, was a good host of any very understandable.

Speaker 1: 28:09

You, I remember being partly involved in the first one in in hamsterdam and we just hope somebody would show up and it would come. And then the second one you're thinking maybe we we had them all already and other qualities is going to go down. And that was absolutely not the case. Qualities kept going up. But it's also, yeah, you don't know who's out there and who wants to join, things like this and etc. It's all right, it's understandable, but enough to four years. There's a very deliberate choice to say, okay, we're going to go all in on one sector and then again, maybe again there's the fear like, do we have enough people that want to join an accelerator, only focus on a vertical, etc. But in this case it turned out to be to be the case.

Speaker 2: 28:50

Yeah, it absolutely did. You know the first four cohorts of our program we were running the cohort every other year because we were we wanted to make sure that there was quality enterprises going through the program and you know, over the last 10 years we've seen a proliferation of new social enterprises come to market and you know I think we're seeing that trend globally right that this is the consciousness that business is shifting towards. And you know, for us why we went into food, why we decided to focus our accelerator on food for our fifth and our upcoming sixth and seventh cohorts was because we wanted to employ the systems, change intentionality into our work. And you know, at the around the time that the pandemic hit, hoya Investment Ready was starting a new research project here in Hawaii called the Hoya Capital Scan. It was something that came out of our impact investing workshops as a desire from the funding ecosystem to know to see kind of the mapping of of capital flows in Hawaii across philanthropy, government and the private sector into impact. And we were getting that research project started and we were looking very high level right, not with a thematic lens at all. That's how we started the research project.

Speaker 2: 30:18

But then the pandemic hits right and it became very real and tangible for us about our food vulnerabilities. And so we decided to make a shift with the Hoya Capital Scan research project and focus in on the vertical food systems. Because again the consciousness was raised, the heat was raised, there was a lot of attention on growing more food for local consumption, for food security purposes, and so we decided to focus in on food for the research project and we mapped out over a two year period the capital flows from philanthropy, government and private sector into the food system here in Hawaii and we mapped out about 800 transactions over that time. It wasn't an exhaustive list, but it was enough of a sample size for us to glean insights from that. We were able to then say look, here's where the gaps are, here's where the positives and the highlights are, here's where some of the challenges are, and being able to make this research project actionable. We didn't want this research project to be something that goes to the ecosystem here.

Speaker 2: 31:27

Yeah, we didn't want it to go on a shelf, we wanted it to be read and go. Oh, we can actually do something about it. Here's a recommendation. And so in that research project we got to meet and learn about what funders were doing across the three sectors and found innovators in the system, found challenges and pain points, we found gaps, we found innovations that were happening or desires that were wanted by the funding ecosystem, and so we're trying now to then activate and put action to what we learned from that capital scan. So in order for us, so what we could do as a social enterprise accelerator program was okay.

Speaker 2: 32:11

If we want to focus in on food now, because the conditions are ripe for this kind of work, how might we retool our accelerator to drive this intentionality? And for me, I'm a practitioner and student of system change and so I started to really rethink and reimagine our interventions as an intermediary to drive this systems change intentionality. And so what we've seen in Hawaii over the last 20 years, like I said, was a desire from community to grow more food and do more regenerative and organic practices and shift us away from that monolithic big ag industrial model to one where it's more smaller farms, it's better practices and it's really driven around local food production for local consumption. And what we saw in the community over the last 20 years is this emergence of networks and initiatives around this intentionality. And in 2019, 2020, there was a group transforming Hawaii food systems that was doing a food systems mapping project, and they engaged 300 stakeholders across the food system to map out what the food systems look like here in Hawaii, what were their interconnectivity of the different nodes and places in the system.

Speaker 2: 33:42

But what came out of that food systems mapping work was the identification of three leverage areas in the food system where small scale investments could yield outsized impact for food systems change.

Speaker 2: 33:55

So we took those three leverage areas and made that the focus of our recruiting for our accelerator program and we went out into community. We solicited nominations for businesses that fit these three priority areas, and those three priority areas were value chain innovation, access to capital and resources and informing policy change, and so that's how we recruited for the cohort we just finished and that's how we will be recruiting for the next two cohorts that we're going to be doing over the next few years, and our goal here is that, if we help businesses that are working in these leverage areas to scale that the systems change kind of theory that identified these areas. That by changing the way that these areas work in the food system, that it's going to unlock and cause the system to behave differently. And so we're really trying to, instead of just saying, well, let's just support any food business that is successful, that has a viable pathway to scale.

Speaker 2: 35:13

What are the best businesses for us to invest in food? That's not the approach, right? That's a traditional, conventional mindset Like where can I invest and have a successful business? Right, it's actually more than that. Let's look at these priority leverage areas and let's scale them, because we know that if the research is right and the food systems mapping work is right in that if we cause these nodes of the system to behave differently, that the system is going to start to behave differently and it takes a different kind of leadership and mindset to do systems work. And that's kind of where we are exploring and learning and cultivating with our partners in the ecosystem to think in a system through a systems lens and act through a systems lens more collaboratively to really drive and move the needle for food systems change here in Huy.

Speaker 1: 36:12

And would it be your, of course, without giving investment advice, but your main message to, let's say, investors listening, either managing their own money or I mean we could argue if it's their own money but let's say, currently stewarding capital or in charge of other people's money, other, the bigger institutions, etc. To embark on that systems change, mapping in their context, before running after I'm giving you sort of the answer but running after the next shiny thing, like is that? Like after your experience now and the first cohort in that way and, of course, the second and the third coming, would it be a main message to you would like to give, to, let's say, the listeners here and the financial world as a whole?

Speaker 2: 38:20

Yeah, and something I didn't mention, but that is a was a key part of the redesign of our accelerator program was not only are we targeting the enterprises that are part of our accelerator and being very strategic from a system change perspective of who we're selecting for the accelerator cohort, we actually have a second parallel cohort that's running alongside these three enterprise cohorts. That's made up of funders. So we actually have a funder cohort that we are now six months into facilitating and this is 28 active food systems investors in Hawaii, across philanthropy, government and the private sector. And we brought these folks together. We identified them in our capital scan. We saw that they were wanting to do things differently, that they had a propensity for collaboration, and we brought them together to really talk about our idea and our intentionality here of moving money differently and more strategically to drive, to move the needle on system change. And what we found in bringing them together was that there was this desire that we, that they do see the benefit of collaborating across these capital silos, that they can share risk, be better amongst them, that their different types of capital can work together in ways that unlock new possibilities that couldn't have been done before when they were working in their silos. So what we've been doing in facilitating this funder cohort is getting them to step outside of and look outside of their silo and see what other funders and active investors and in food are doing Like, like.

Speaker 2: 40:12

What is philanthropy doing? How are they moving money into food system change, right. What is the government doing with its programs? What are private investors doing? So now, they're learning about each other, right. Philanthropy is learning about private investing. Private investors are learning about government and philanthropy and what are the unique opportunities that these different types of capital can bring and what are the challenges and limitations that they have. What are the pain points that they have that others might be able to help solve for Right?

Speaker 1: 40:44

So we talk about, like blended capital stacks and having philanthropy come in and be you know this de-risking capital to be able to give an example of, like the last cohort or in general, but less ideally, a food and agricultural related company, but something to make that more tangible.

Speaker 2: 41:05

Yeah, so on the island of Oahu, which is the largest populated island here we have about a million residents on island there's a new food hub that went through our last cohort, our food, our first food cohort, and there are a for-profit food hub with a B2C delivery model, right, and they also have integrated the use of SNAP-EBT, which is like our food stamps program here in Hawaii and in the US there's a they call it a double up program where you get essentially a 50% discount on food using your food stamps. So if you're buying local, fresh grown food you can get basically twice the amount that you would get for the same dollar and this food hub has integrated that into their point of sale. So essentially they are eliminating food deserts on the island of Oahu because you know folks can get fresh food delivered to their door and if you are a food stamps user that delivery is free and it's subsidized by philanthropy. So this food hub that went through our accelerator program. They needed to raise about $6 million to get them through breakeven over the first over these three years and that $6 million we helped to facilitate a mix of philanthropy, government and private sector dollars to get them to that amount.

Speaker 2: 42:40

Had they just gone out to the private market to fundraise, they probably wouldn't have gotten there, and if they had just gone purely to philanthropy they wouldn't have gotten to the $6 million either. It took that blending of capital types to make it work right, that philanthropy came in for about a million and a half of the six and that allowed the economics to work right On cash flows and debt repayment and equity investors. So you know they do have a mix of grant funding. They have a mix of and that's private or philanthropy and government grant funding. There's some concessionary debt in the capital stack and there's also equity. So it was the mix of those different types of capital that got this food hub fully capitalized to demonstrate the viability of their business model through breakeven.

Speaker 1: 43:37

And what do you see on the practices side and what is exciting. I mean, you just finished the cohort and you're starting another one in a while, but still, what's the most surprising thing? Of course, the term regenerative agriculture has been getting hot, let's say, and standing on the shoulders not always acknowledging that, but of indigenous practices for a long time. But like, look on the soil focus side, on the indigenous practice side, have you seen some? For sure you have, but some exciting things that we should really really learn about. Let's say, beyond the archipelago, which most people are, I don't think we have many. We have a few listeners in Hawaii and I will say hi to all of them, but most of us are not there.

Speaker 2: 44:23

Yeah, I mean there's a lot of innovations because, again, we live on islands, we're forced to innovate and that innovation, some of it, is actually looking back to the past and part of our cohorts over the years have had non-profit and for-profit social enterprises that are doing indigenous crop production. So whether it's taro, which is a staple here, both wetland and dryland cultivation practices, and to make poi, to make taro, to make other kind of value added products with the taro, breadfruit is very much being looked at as another indigenous crop that we can get to scale. In one of our previous cohorts we had our first co-op and it was the Hau'i Ulu producers co-op and that's Ulu is a Hawaiian word for breadfruit.

Speaker 1: 45:22

I really do agree with you with that down below what you say. Looked at, is that, are you slightly skeptical? Do I hear skepticism there? Looked at from the outside or also looked at by you, that that is a potential scalable crop or is that whole scalable into a potential monoculture?

Speaker 2: 45:39

the risky bit here no, because Ulu trees they produce fruit twice a year and they're minimal maintenance. So a lot of farmers. What the co-op is now doing is creating a marketplace for Ulu that didn't exist commercially before. You have to freeze Ulu to make it available year round, because when those harvest come in they come in, and two big flows a year and the infrastructure, the code storage, the processing necessary to make it a viable commercial product available year round requires that code storage and processing infrastructure, which the Ulu co-op is providing access to market. All of this value chain for farmers.

Speaker 2: 46:23

What the members and the producers within the co-op are doing are adding Ulu trees to their crop mix. For most of the producers that are supplying the co-op, the breadfruit is just one piece of what they're producing. There's very few that are just purely breadfruit farms. So what it's doing is just adding another revenue stream for farmers and producers to access to market. There are four or so years in now to having this co-op and over the next two to three years they're going to see their production double because the fruit trees that were planted five years ago are now starting to bear fruit.

Speaker 2: 47:09

As this co-op is scaling, they're trying to meet their scale with the increase of supply that they're projecting. It's important for them to establish these market channels to consumers through their different types of products whole breadfruit, frozen breadfruit that's available year round, value added products, hummesses and mousse, desserts and chips. They're trying all kinds of different things to use the supply of breadfruit that is exponentially growing. Breadfruit is easy because it just grows like weeds here. You just plant it and it goes because of our climate. So it's relatively easy to grow from a production standpoint. But getting it to market is the challenge, and that's what these businesses are like the Ulu Co-op are solving for is how do we get this product to market?

Speaker 1: 48:12

And how big is the I'm just saying divide? I'm not sure if that's the case, but how easy or difficult is it to get these kind of products into the markets? The local market, of course, the local food market of people living on Hawaii. But the tourism market, what's the interest? Have you seen what's the interest of the tourism market? I've never been. I have no idea how locally focused they are. What has been? Has it been a driver? Has it been interest, or has it actually not been such an important factor or stakehold until?

Speaker 2: 48:45

now it's actually a critical driver and the irony of it is, you know we're talking about increasing local food production for local consumption but what's driving that is the tourist market, because tourists come here and they want to eat local food and they're willing to pay a premium for it. So the producers and the distributors target that market because of that margin right that you know it can help to grow the, to grow the industry and grow the market for local food production because of that premium that they can charge the tourists.

Speaker 1: 49:23

So you know it's it's kind of a dilemma right.

Speaker 2: 49:27

It's a dilemma for the producers because they actually want to see their food locally consumed, but a big part of that local consumption right now is feeding people who are not from here, and so it's kind of a catch-22 in that sense.

Speaker 2: 49:41

Like you know, you have to serve that market because of the, because of the margins, but then we also need to be aware of and be strategic about okay, yes, we're going to go and serve that market because of the profits that are there, but we also want to build up our own pathways of the value chain to get this food into more local consumption and whether it's through our schools and our school lunches or through these food hubs, but getting them more into the local market. You know we are seeing kind of the major grocery stores here in Hawaii carry more local food, but it's a challenge to get them into these markets because producers are essentially having to develop these one-on-one relationships and supply them like move from being just producers to also distributing and getting their products to these wholesale outlets. Because the major food distributors businesses here in Hawaii they make more profit by importing food because it's easier, right, they can place these big orders.

Speaker 2: 51:16

They know they're going to get the quality, the consistency and the volume that they need to depend on. And it's a lot easier for them as a business to just import it, because if they were to try to aggregate that same amount, that same quantity from local sources, they have to go to many, many different suppliers and that's just logistically more time consuming, which then is less profitable for these distributors. So that's why we are focused in on these food hubs as a strategy for growing our local food production and consumption. Because the food hubs are willing, because they are impact-minded first businesses, they are willing to do the work to aggregate from many different sources, you know, to take less of a cut as a middleman to get them to market. And so a lot of the food hubs that we have here in Hawaii that are coming to market a vast majority of them are nonprofit models and are subsidized by philanthropy in order to do what they're aiming to do to play that role in the value chain to aggregate on the supply side to then get it to market.

Speaker 1: 52:35

And so flipping the question a bit on not what would you do, what would you tell investors? Sorry, but what would you do if you would be on the investing side, but actually with quite a lot of money? I usually ask let's say, what would you do with a billion dollars if you had to put it to work? It could be extremely long term, but you had to put it to work anywhere globally. I'm imagining you're going to do it on the islands, but that's my assumption. You could also say, no, actually I'm going to Mexico and do something else. But what would you do if you would be on the investor side and had a billion dollars to put to work? What would you focus on? What would be your main priorities? Let's say, to tackle and to get money?

Speaker 2: 53:15

Well, that's easy. I would build infrastructure, the value chain infrastructure. You know. The thing about infrastructure is, you know, once it's built, it allows others to create value where they couldn't have created value before.

Speaker 2: 53:30

And I use the food hubs as an example. Right, they are value chain infrastructure that allows access between supply and demand. Right, it flows the product through market. And so by having that infrastructure there, with these food hubs in place, it allows producers to be more confident in their ability to scale their operations because they have this consistent, reliable demand for their product to get to market. Right, you know, rather than them doing it themselves, like, producers don't necessarily want to distribute their food, they want to focus on what they do, well, which is grow food and produce food. And so, by having this value chain infrastructure of the food hubs and value added processors, right that we could take, upgrade and be be labeled product and turn it into something for the market. If we have more of this infrastructure, it allows the production side to increase and it also allows the supply, the demand side, to increase and have more access to local food, because there is a demand for local food. It's just, how do you satisfy that demand at a price point that is viable in the market.

Speaker 2: 54:46

Right, I think it's important to talk about the economics that we have here in Hawaii. Right, it's because we are so geographically remote and because our local food production industry is relatively small. Right, we don't have the economies of scale. Right, we it's 40% more expensive for inputs for agriculture here in Hawaii because we're bringing in a lot of those things and the cost of land here is really high because it's finite and it's an island and you know it's for sale and we have all of this foreign outside of Hawaii investment into our real estate that you know drives up the cost of real estate and so the dollar per acre calculation for ag right Large landowners who have ag.

Speaker 2: 55:34

They, they, yeah, they want to develop their land rather than keep it in ag. So the you know the margins on food anywhere are often really low and small. It's even more so in here in Hawaii and to the point where we really have to look at subsidies and tax credits and like philanthropy as as interventions necessary for us to scale this system. So you know, if you ask me, if you give me a billion dollars today, I would go and invest in. I would go and invest in infrastructure. You know it would be meat processing infrastructure. You know Hawaii. I think the one area of our food that we could get the closest to 100% sustainability is is protein between cattle, sheep, pig, fish, chicken. I think we could get way higher than we could with any plant crops and so processing but you need processing.

Speaker 2: 56:38

And right now a foreign investor from the continent now controls 75% of our meat processing capacity here in Hawaii, and so we need to have some diversification and ownership. We need to do more small animal processing, because cattle was very big here. You know cattle was a big industry here alongside the sugar and plantation, the sugar and pineapple. So you know there's there's processing capacity for beef, but there's very little processing capacity for small animal, and so that is one area that I would put significant resources to to build up the processing supply value chain for for, for meat, for protein.

Speaker 2: 57:22

You know I'd invest more into aquaculture. You know we have the ability to do offshore fish farms and we can do them in a way, I think, that is more environmentally friendly because we're not confined into estuaries like salmon. You know we have deep ocean, like a mile offshore of the big island of Hawaii, and they've been able to produce a lot of fish in those offshore cages. And then also, you know I'd invest more in our food hubs. I'd invest more in value added processing and do it really diversified and decentralized, outing communities where communities could have ownership of these, these value chains, where they could, you know, be producing, distributing, consuming for their own market and be able to retain the profits for them to for their own local economies and I usually follow that up with a with a question which I call the magic one question.

Speaker 1: 58:24

So we take away your fund, unfortunately, but we do give you the magic power, or the power to change one thing overnight. It could be anything from consciousness We've had many, many different answers to this question over the last 200 plus or 250 episodes but if you could change one thing overnight anything from getting animals out of confinement to ending subsidies, to global, global consciousness on food and I have to very practical things on policy We've heard it or ending private ownership of land what would be your magic wand, wish or action if you had that power?

Speaker 2: 59:03

I would.

Speaker 2: 59:03

I would change the narrative here in Hawaii.

Speaker 2: 59:06

The leading economic research body here in Hawaii put out a report a couple of years ago, essentially saying that food and egg was not a viable diversification strategy for our economy and that the only way that egg would be successful here in Hawaii is at large scale, industrial and mechanized.

Speaker 2: 59:29

And you know, when you and that is true with what's possible today Right, the way that the market is designed and way the infrastructure exists yes, that is true. What it fails to recognize is, if we change the behavior of the system, that what becomes possible also changes, right, and that if we want to see more local food production for local consumption and that is something that is important to us as a society for our survival and for our well being Then we need to make the investments to be able to see that happen. And if we can get the system to behave differently by investing in infrastructure, we change the conditions of what becomes possible and the viability of small and medium farms producing at scale for local consumption becomes possible with this infrastructure. Right, and if we can demonstrate success around that and start to shift that narrative, I think we can get more money and more interest flowing into this sector, because what becomes possible is now much different than where it has been historically.

Speaker 1: 1:00:54

And do you see that shifting with like cohort four and five? You mentioned the three areas you're focusing on specifically In cohort four. I'm opening a whole different rabbit hole now. But in cohort four, like where they equally, because I can imagine maybe one of the three is more difficult, or two where they equally balance, and are you selecting differently for five? Or what was the composition of, let's say, cohort four? You just finished and how are you doing things differently on five?

Speaker 2: 1:01:20

Well, I finished. I just finished five, so five was our first cohort.

Speaker 1: 1:01:23

Six seven, yeah, sorry, six seven.

Speaker 2: 1:01:25

Yeah. So what we saw with this, with this food focused cohort, was a high level of collaboration, a higher level of collaboration amongst the enterprises that we brought together. Because they all work in the same area and they're all food focused, they were able to the peer to peer learning amongst them was accelerated and at a higher level than we saw in previous cohorts, where there wasn't that alignment. There was always a high level of collaboration in our cohort members, but when we focused it on food, we saw that shoot up and that's great because that's how ecosystems work. Ecosystems thrive and systems thrive when there's a high degree of interconnectivity Right, and there's relationships, there's networks of networks, and that's really what we're cultivating with our focus on food is strengthening the interconnectivity amongst players within the ecosystem. And so, because we had a number of food hubs in this, in this first food cohort, they are conduits in the market and so they are focal points for collaboration. So we saw high levels of collaboration and partner building from folks that are supplying, processing, aggregating, and so we just hope to cultivate more of these. And, again, because we have the funder cohort in the mix now, where there's capital that can flow to these businesses, now we're seeing collaborations from funders into the ecosystem as well. And so, because we now have the enterprises and the entrepreneurs and the innovators with a high potential for impacting system change, and now we have the money coming into play in relationship with these enterprises, we are finding and we're looking for more ways to strengthen the interconnectivity amongst the players within the ecosystem.

Speaker 2: 1:03:28

So, as we're recruiting for cohort the next two cohorts one of the questions we're asking our existing stakeholders is who are first degree relationships to you? That if they are more successful, you'll be more successful? And that again is going back to how do we look at the work? And from a systems lens, right, instead of just optimizing our investments for single deals, how do we look at optimizing our investments at a systems level? And I think that's really exciting. And I think this is where we are kind of venturing into territory that is not well defined or there's no blueprint for us as we do this work. We are figuring it out as we go, and so it's slow. You have to go slow in order to go fast down the line, because we have to build trust, we have to build shared understanding, we have to build these relationships that are going to allow for higher levels of collaboration and more strategic deployment of our capital into investment opportunities that have the most potential for system change.

Speaker 1: 1:04:47

I think it's a perfect end to this conversation. I want to thank you so much for the work you do and, obviously, very early morning to come on this podcast and share about it. So thank you so much and, of course, good luck with the next cohort and next few, and then let's see what happens after that.

Speaker 2: 1:05:04

Yeah, thank you for the opportunity to share what we are doing here in Hawaii and I really appreciate your content. So glad to be a part of this podcast. Thank you so much. Thank you so much for listening all the way to the end, for the show notes and links we discussed in this episode.

Speaker 1: 1:05:26

Check out our website investing in RegenderWagerculturecom. Forward slash posts. If you liked this episode, why not share it with a friend? Or give us a rating on Apple Podcasts? That really helps. Thanks again and see you next time.