What is the “glue” that connects the farm and the fork? With “direct-market” channels like farmers markets and CSAs, we have the privilege of literally shaking the hand that feeds us. In other cases, we need allied businesses in “the middle of the chain” to help make that connection possible—the meat processors, the creameries, the businesses that slice and dice locally grown fruits and vegetables for sale to colleges, hospitals and schools, and the entrepreneurs who turn local veggies into salsa and local grains into tortillas.
These businesses in the middle of the food chain add value to farmers’ products and connect them with markets that many couldn’t reach on their own. These businesses can also help take our local food system to scale, while creating jobs and revitalizing local economies along the way.
But whether you’re talking about a brand new business concept or a small business looking to grow, all local food enterprises need capital—often a combination of equity and borrowing—to get going and to thrive over time.
Unfortunately, the mainstream financial system isn’t always in sync with the financial needs of these innovators. For instance, while banks may have deep knowledge of corn and soy producers’ financing needs, few are equally familiar with small-scale meat processing or the aggregation of organic vegetables. Although venture capitalists and other financiers may be willing to bet on start-ups, the high rates of return and operating control they ask for can make any entrepreneur think twice.
Innovation in the financing sector is key to the growth of local food systems around the country. With that reality in mind, the IATP is exploring new strategies for mobilizing capital that is appropriate to the needs of food system entrepreneurs and that will help these new businesses grow, process and market foods that are made with integrity.
To learn more about these challenges and strategies for dealing with them, check out this Minnesota Public Radio interview with IATP's Local Foods Program Director, JoAnne Berkenkamp. And if you have creative ideas for financing the food businesses you care about, please let us know. The more ideas we share, the better our communities can help the food entrepreneurs of today and tomorrow flourish.