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Crowdfunding: Growing Fresh Food Entrepreneurs

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By Catherine Austin Fitts

One of the most important opportunities in America today is the creation of new enterprises to provide fresh, local food.

The national debate over healthcare has made clear one of the most important lessons I have learned as an investment advisor: eating the highest quality food and nutritional supplements will save money by contributing to mental clarity, energy and health. Without the benefits of a healthy diet, a family is far more likely to experience higher healthcare costs.

For a long time, Americans believed that if we wanted fresh, healthy food we could depend on large grocery chain stores to provide it. In a market economy, free-enterprise will provide what people want, right? Alas, this is no longer the case.

Today, in any major grocery store, we are faced with the mind-bending experience of trying to guess what is real food and what is genetically modified food…or some other unhealthy concoction designed to look like food.

Let’s face it: the creation of a healthy local food ecosystem first depends on the creation of farmers, grocers, restaurateurs, chefs and a variety of other business people to create it. To access healthy food on a regular basis, we first need to “grow” the entrepreneurs who will make this happen.

The wonderful publishers of Going Organic Magazine have shared with me stories of young entrepreneurs in the Palm Springs area who have started organic food businesses. These start-ups represent an extraordinary opportunity for their community.

A new phenomenon is now making it much easier for communities to build the entrepreneurial infrastructure we need to nurture our local food ecosystem. And it’s called crowdfunding.

Crowdfunding is derived from crowdsourcing, where individuals achieve goals by receiving small contributions from other people. In one sense, crowdfunding is a long-standing American tradition.  In 1884, the American Committee for the Statue of Liberty ran out of funds for the statue’s pedestal.  Newspaper publisher Joseph Pulitzer urged people to donate money toward the pedestal in his newspapers and he was able to raise over $100,000 in six months.  More than 125,000 people contributed to this cause with most donating one dollar or less.

Today, the development of the Internet and social media has made organizing a crowdfunding campaign much easier.

Kickstarter.com is one of several crowdfunding platforms which gathers money from the public in a “gifting” model. Project creators choose a minimum funding goal and a deadline. If the goal is not met by the deadline, no funds are collected. The platform is open to contributors from anywhere in the world and to project creators in the US, the UK and Canada.

As of July, 2013, Kickstarter had launched 107,645 projects and these projects had achieved a success rate of nearly 44%. Since its inception, the total number of dollars pledged on Kickstarter has been $717 million.  While Kickstarter projects have been most successful in software development, movies and artistic projects, they have also provided funds to food and agriculture.

Success Stories

Fans of Veronica Mars (a short-lived TV series) were thrilled to see the show’s creator, Rob Thomas, working to develop a Veronica Mars movie. Thomas asked fans to help crowdfund the film. He put out an ambitious request: $2 million in the space of 30 days. The crowdfunded campaign was a big success: it raised over $3.3 million in funding.

The most successful crowdfunded project to date is Star Citizen, a multiplayer online videogame. As of September 3, 2013 Star Citizen’s developers claim to have raised $17,624,134.

It is estimated that crowdfunding web sites have helped companies and individuals worldwide to raise:
– $890 million in 2010
– $1.47 billion in 2011
– $2.66 billion in 2012 ($1.6 billion was raised in North America)

I believe the real opportunity for crowdfunding in food and agriculture will happen when we focus on our own local areas and regions.

Inspired by the success of crowdfunding, the credibles.org web site makes it possible to support small, sustainable, local food-related businesses through a form of crowdfunding. The web site enables customers (or supporters) to prepay for their favorite foods. In exchange, customers receive a balance of edible credits or “Credibles”. One Credible equals $1 and can be used over time.

This is not unlike the practice of community-supported agriculture (CSAs) where members pay for their entire season of fruits and vegetables prior to the growing season, pre-funding the costs of planting and growing a farmer’s crops.

As a result of the success of the crowdfunding movement, the America JOBS Act (Jumpstart Our Business Startups) was signed into law in 2012. The Securities and Exchange Commission is now drafting regulations to implement this law. Essentially, this will allow web sites called portals to raise equity capital from many small investors. And this process will not be confined to the United States. Crowdfunding efforts are underway to permit small investors to participate in financing small business and start-up companies in countries around the world.

The possibilities for communities such as Palm Springs to amass support for its food entrepreneurs is significant. A crowdfunding effort can begin with donations and pre-orders. If successful, it can grow into the investment area, as well. For example, I recently created a term-sheet for a young entepreneur who is funding a food business with securities that will be convertible into store credits when the business becomes operational.

This approach can also address one of our greatest economic challenges: our communities invest a great deal of money in raising and educating our children.  Those children then leave the community to work for large enterprises whose stocks and bonds we buy.  Perhaps, if we can shift a portion of our capital to main street, our children will find it possible to return and to build businesses that serve us well.

If we want fresh food grown by people we trust, we need to find a practical way to finance the creation of that capacity. I applaud Going Organic Magazine for leading this conversation. So, what should we do and how should we do it?

Just as we water seeds so that they will grow, we need to create financially sound mechanisms to nurture food entrepreneurs so that our communities may enjoy the food we, our children, and their children so richly deserve.

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Catherine Austin Fitts is the president of Solari, Inc., publisher of the Solari Report. Catherine served as managing director and member of the board of directors of the Wall Street investment bank, Dillon, Read & Co., Inc. She also served as Assistant Secretary of Housing/Federal Housing Commissioner inthe first Bush Administration and was president of the Hamilton Securities Group, Inc.