In his article in USA Today, Dan D’Ambrosio talks about the concept of “slow money.” He ties it to an emerging movement centered on slowing things down.
The Slow Movement now includes Slow Cities and Slow Travel among other attempts to slow things down, each run independently, said Beth Meredith of Create the Good Life!, a Petaluma, Calif. company that helps people organize their lives and businesses around Slow concepts. “If you think of Slow the same way you think of ‘green,’ you can use it to modify a lot of things,” Meredith said. “It’s an approach.”
With respect to Slow Money, D’Ambrosio features High Mowing Organic Seeds:
High Mowing Organic Seeds of Wolcott, Vt., was growing fast in 2005 and needed capital to plan an orderly 10-year expansion. The company, founded in 1996 by Tom Stearns, devised a strategy to raise more than $1 million for growth by bringing together investors who put social and environmental concerns ahead of quick financial returns. That concept was a precursor of a larger movement that has become known as Slow Money, addressed in a 2009 book by its founder and chairman, Woody Tasch, titled Nature of Slow Money: Investing As If Food, Farms and Fertility Mattered. The idea is to promote so-called “patient capital,” with investors who are more focused on ensuring the health of their local food systems than on getting a quick return on their investments, Tasch explains. Slow Money actually followed the 1989 founding of the Slow Food movement in Italy, which formed to protest the opening of a McDonald’s in Rome by encouraging people to cook at home and take their time doing it. Tasch visited Slow Food’s international headquarters in Bra, Italy, in 2000 and was inspired by the success of the movement. He counts its organizers among his friends. Slow Food Founder Carlos Petrini spoke at the Slow Money’s 4th national conference in Boulder, Colo., in April. High Mowing Organic Seeds, and Vermont in general, Tasch said, were practicing the principles of Slow Money before it had a name.”Vermont and Tom Stearns were so far ahead of everybody that in a way they didn’t really need me or my ideas to come around,” Tasch said.
At High Mowing, sales of organic seeds had grown from about $18,000 in 2001, when Stearns still ran the company at home, to $350,000 in 2005. Stearns was looking for space to lease, and had taken on a co-owner, business consultant Meredith Martin Davis.
An infusion of about $800,000 in capital was needed to get on a serious growth trajectory, he said. Attending a forum of angel investors in Vermont, Stearns and Davis quickly realized they were in the wrong place. Every other business presenting at the forum had a last slide that was an exit strategy — the sale of the company resulting in big returns for all involved. High Mowing had no exit strategy because Stearns and Davis never wanted to sell.
“Tom and I left there thinking this is not the right path,” Davis said. “We don’t want that slide. We don’t want to do that.”
As an alternative, Davis and Stearns came up with a convertible debt offering, meaning investors would accrue interest at 6% over five years, then have the option of converting their investment into equity in the company, or be paid out over the next five years.
“The people who came on board wanted us to be in the position to pay them back,” Davis said. “They wanted High Mowing to achieve its goal of not having to sell. The equity was a fall-back plan. If we weren’t in a position to pay them back, they would get a piece of the business.”
As it turned out, High Mowing was in a position to pay back its investors, with sales reaching $4.2 million in 2012. Some asked that their money be reinvested, or agreed to be paid back in 10 years rather than five.
“What makes that Slow Money was there was no pressure to achieve a certain result in a certain time frame and have an exponential return,” Davis said. “There was no expectation from those folks to grow big fast, sell and make them a bunch of money.”
Instead, Davis said, the investors were willing to trust High Mowing to run the business in a way that was financially viable but kept the values of the company “front and center.” There are no shortcuts to growing organic seeds, and the process is complicated and time-consuming.
Cairn Cross, co-founder of Fresh Tracks Capital, a venture capital firm in Shelburne, Vt., that focuses primarily on Vermont companies, has his doubts about Slow Money. Cross and his partners manage a capital pool of about $25 million, with 75% of it invested.
“Sometimes the problem with Slow Money is it’s so slow it never arrives,” Cross said. “There’s a lot of talk about Slow Money, but how many companies have been financed by it?”
Since mid-2010, more than $30 million of Slow Money has been invested in 221 small food enterprises around the country, according to the Slow Money website.
That’s a “miniscule amount” of the overall investment capital in the country, said Cross, who puts the annual amount of money invested between the venture capital industry and angel investors alone at $40 billion.
“As a movement I’m not trying to knock what they’re doing, but it’s pretty small,” Cross said.
Nevertheless, Tom Stearns calls Slow Money a “powerful concept” that’s proving its success.
“It’s life changing for both the businesses that receive the investments and honestly for the investors themselves, people getting a chance to put their money in a place where they believe in it,” he said.