Tuesday, March 31, 2015

crowdfunding farm projects - good idea?

Two farms that I track have crowdfunded their projects; for the farmers in question I think that the funding was a good deal; for the public, if the expectation that the projects would help the local food situation -- not so much.

Would I suggest that a farm seek crowdsourced money?  In a word, yes.  The barrier to funding is very low, and you aren't actually required to produce much, or anything.

you'll find the campaign here
 Getting financing from a bank is difficult for farm ventures, or for any new business, generally.  Banks are primarily interested in making low-risk loans, as close to a sure thing as they can get, and they will typically require a business plan, proof of finances/sales, and even with both of those will usually require a lot of collateral to cover the money loaned.

A crowdfunded source is a different sort of transaction; often trading on the perception of the farm, and usually with no proof of financials and no collateral.

In the case of Tim Young at natures harmony, the promise made was to expand a cheese cave and to open a retail store, and they did both of these with great fanfare.  A few months later the store is apparently closed, and the cheese cave is up for sale.

Was that a good deal for the consumer?   It depends on what you wanted to get out of it.  With natures harmony, the contributors expected to be able to visit the store and see what they'd done; part of the satisfaction of helping someone is seeing the results.  Here's a comment:

"Corey Van Tighem on July 30, 2013
Congratulations on getting funded! If I'm ever in Georgia, I'll make sure to visit your store. "

A reasonable expectation of a crowdsourced campaign is that what they ask for will be enough to get them to where the business is viable and long-term.  I know that when I contribute to one of these campaigns my expectation is that the business after the donation will be more viable than before my contribution.  And I'm using the word donation here deliberately.  Many of these kickstarter campaigns offer not much in return for the money. 

It's a feel-good exercise, but did it really  help local food?

You'll find the campaign here
Walter Jefferies is clearly struggling to complete this project.   This project has been going on since at least 2008, and 7 years later it's not clear when it will be completed.

With software projects a common way to "meet" a deadline is to remove features until you get to the current state of the project.   With this one you have at least two inspection organizations that have to approve the building, the State of Vermont and the USDA, and things have to be pretty much in place to have this go.

For the last 7 years there's been an emphasis on the building that will house this venture; he's been building a monument out of concrete and steel.  Watching this project grind on for 7 years now with no end in sight, I really have to wonder if Walter would have been much better off with an insulated pole building.  I think that he would have been processing pigs years ago if he'd gone that route.

Project page here
There's value in having a hard-nosed lender check your figures and projections.  In having a disinterested party look over your plans, and possibly even value in NOT getting funded.  If you can't interest smart money in your venture, why would you want to invest your own money in it?
the right-most column is "99.5% confidence".   We're falling farther behind.  

Time will tell whether either one of these projects will pan out, but I have to ask:  Are the people who funded them getting what they expected?

1 comment:

Unknown said...

Good point Bruce, I would be ticked off if I had donated my money and don't hear what is going on and only get excuses and delays. Makes everyone sceptical about supporting these.