Dan Miller on crowdfunding and its key role in regenerative agriculture

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Dan Miller is the founder of crowd investing platform Steward.

LISTEN TO THE CONVERSATION ON:

Is investing in regenerative agriculture and food only for large investors?

Dan and Koen unravel the role of the crowd in the financing, the growth of regenerative agriculture, and how the current crisis is speeding up everything. They also talk about how Dan started financing the first deals on the platform.

Witnessing Economic Collapse

This episode is one for the books as the guest, Dan Miller, comes from crowdfunding/ crowd investing/ crowd lending movement. He is one of the pioneers who took part in the regenerative agriculture industry. 

Dan narrates his connection to farming started when he was young. His relatives from his mother side own farmlands in the Chesapeake Bay area. Unfortunately, over one generation, the land was destroyed with overfishing and industrial pollutant runoff and industrial agriculture. 

We spent a lot of time out there and we saw a region collapse economically, no value goes into the local farms, a lot of the farms getting squeezed out by larger producers, and the net benefit of the society and community being destroyed, but also the ecological consequences.” – Dan Miller 

Focus on Regenerative Practices

After seeing the outcome of economic collapse in their estates, Dan committed himself to agriculture under the lens of regenerative, sustainable practices that were focused on ecology first. 

“For me, it’s been connecting all of my background, family history, my experience prior to Steward, and then now using all of those skills to help accelerate the growth through regenerative agriculture, focusing on capital, which is generally the first constraint for any farmer doing this type of work.” – Dan Miller 

Economics and Access to Capital

Dan shares the reason why regen ag as it is today is because of policy decisions and incentives put in place, not just circumstances. Koen agrees, stating that the biggest bottleneck in farming is not necessarily the lack of good entrepreneurs or good farmers or entrepreneurial farmers, but having access to capital.

“That’s when I started to realize these farmers are growing heirloom varieties, taking care of the soil doing very unique products. They have no access to financing. They can’t get funding anywhere. I don’t think I’ve ever connected economics. But then, as I really started to work on Steward, I realized the economics have to be aligned with the agricultural practices.”  – Dan Miller 

Government Policies

With research and early discovery, Dan shares that government policy drives most funding in agriculture — from government direct lending or through banks. This is unfortunate news for 90% of farmers in the US, who are small and medium farmers.

“If you’re not a large commodity producer in the US and generally around the world, they’ve kind of followed this practice. If you’re not a large commodity producer, you’re ignored. You don’t get finance, whether that’s by design or not, that’s a different conversation, but they are left out.” – Dan Miller 

Persevering in the Face of Challenges

Many of the farmers who worked with Dan are sustainable and are interested in regenerative ag. However, without the capital to grow, they can’t get there. They all are persevering in the face of challenges and a little bit of funding goes such a long way for them to grow their businesses.

“We learn about their business, we make recommendations on what fundings out there between either us or other sources grants as well. Then what do they need to move forward? So it has become very comprehensive because as you can imagine, these generally regenerative farmers are not focused on financing. It’s not an interest for them. But it’s important.” – Dan Miller 

To hear more about Dan Miller, Founder of Steward and how they make it possible for farmers to gain access to capital, download, and listen to this episode!

Guest Bio:

Steward’s story begins with its founder and CEO, Dan Miller. Ask Dan what inspired him to create Steward, and he’ll tell you about early mornings spent crabbing with his dad on the Chesapeake Bay.

This was the experience that rooted him to the land, but it was a meeting with a well-known chef in Dan’s hometown, Washington D.C, that would plant the idea of Steward in his mind. He talked about the difficulties facing the independent farmers that supplied his restaurant. The more specialised the farms were, the harder it was to get a loan.

Dan felt that instead of forcing farmers to fit within a box, it should be the other way around. So he committed himself to creating a system that empowers farmers to steward their land sustainably, with consumers—the people with the most to gain from sustainable farming—investing in their success.

Since graduating from the Wharton School with a B.S. and M.B.A in 2010, Dan has seen firsthand the potential of an investment crowdfunding model. From 2010 to 2015, he was Co-Founder, President and a Director of Fundrise, the first and largest US real estate crowdfunding platform, which has raised more than $500 million to date. It’s this experience, combined with a passion for agriculture and ecology, that led Dan to Steward.

Links:

Steward

Linkedin: Dan Miller

We also discussed about Jonathan Lundgren and his interview about profitability in regenerative agriculture.

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TRANSCRIPT OF THE INTERVIEW

SUMMARY KEYWORDS

farms, farmers, steward, investors, people, capital, invest, funding, regenerative agriculture, regenerative, support, financing, investment, ag, land, agriculture, products, business, grow, bookkeeping

SPEAKERS

Koen van Seijen, Dan Miller

Koen van Seijen 00:00

Is investing in regenerative agriculture and food only for large investors? In this interview, we discovere the role of the crowd in financing the growth of regenerative agriculture, and how the current crisis is speeding up everything and why the founder of this credit investing platform has been personally financing the first deals on the platform.

Koen van Seijen 00:20

Welcome to another episode of "Investing in Regenerative Agriculture: Investing as if the Planet Mattered", a podcast show where I talk to the pioneers in the 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 am I focused on soil and regeneration? Because so many of the pressing issues we face today have their roots in how we treat our land, grow our food and what we eat, and it's time that we as investors, big and small, and consumers, start paying much more attention to the dirt / soil underneath our feet.

Koen van Seijen 00:58

In March last year, we launched our membership community to make it easy for fans to support our work and so many of you have joined as a member. We've launched different types of benefits, exclusive content Q&A webinars with former guests asked me anything sessions plus so much more to come in the future. For more information on the different tiers, benefits and how to become a member, check gumroad.com/investing_regen_ag or find the link below. Thank you.

Koen van Seijen 01:24

Welcome to another episode today with Dan Miller, founder of Steward empowering people to invest in sustainable farms and farmers who steward them. Welcome Dan.

Dan Miller 01:32

Thanks for having me.

Koen van Seijen 01:33

So I'm very, very excited about today, as I think I've been telling a lot of people in the past I would love for the crowd investing, crowdfunding, crowd lending movement to also come to regenerative agriculture. And I think with Steward, you're one of the first in that space, or maybe even two first. So I'm very much looking forward to explore the role of the crowds in this regenerative transition and revolution. But to start with a personal question, what made you look into soil because you have a background in crowdfunding but not in soil? So what was the trigger? What was the step? How did you end up working on regenerative farms and the funding of them?

Dan Miller 02:10

So the agricultural connection came from my mother's side of the family. They've been farming in the Chesapeake Bay since the late 1800s, in the eastern shore of Maryland. So they're, you know, the largest estuary in the United States and over one generation, it was destroyed with overfishing and industrial pollutant runoff and industrial agriculture. So she grew up on the farm, I grew up in Washington DC. One generation off the farm like many but not directly connected to it, but we spent a lot of time out there and you saw a regon kind of collapse economically, no value go into the local farms, a lot of the farms getting squeezed out by larger producers, and the net benefit of the society and community being destroyed but also the ecological consequences. So when I decided to commit myself to agriculture in this project, it was only going to be under the lens of regenerative, sustainable practices that were focused on ecology first. And I've since learned that ecology first is actually the best investment too but that in our society is not always I would say known. And so for me, it's been connecting all of my background, family history, my experience prior to Steward, and then now using all of those skills to help accelerate the growth of regenerative agriculture, focusing on capital, which is generally the first constraint for any farmer doing this type of work.

Koen van Seijen 03:25

There's a lot to unpack there. But let's start with one piece. Do you remember when you saw your first regenerative farm? Or when you saw that potential? Because coming or visiting or having been in a region that's actually not regenerating but degrading, that doesn't mean you also see the potential and the opportunity? So do you remember if there was a moment or a journey or a number of pieces, which got to you like: wow, agriculture could be different.

Dan Miller 03:50

There were two pieces. So Polyface Farms was in the region I grew up in, there Joel Salatin obviously is famous. Reading him was the first introduction to the ideas, and we would buy products from him, I pushed my family once I read about him. So that was my first introduction. Wendell Berry, obviously laid the intellectual foundation I think he does for many people. I read the Unsettling of America, then that gave me the confidence to believe that there is an alternative way to do agriculture. It actually was the norm throughout most of history, except for the past 100 years. And the reason why ag as it is, as it is today is because of policy decisions and incentives put in place, not just kind of circumstance. So that gave me the confidence to then look and find who are the farmer is doing it differently. And there was a farmer in the Baltimore area who I was connected to through a well known chef and he was growing an heirloom variety of peppers called fish peppers. And that's when I started to realize these farmers growing really heirloom varieties, really taking care of the soil, doing very unique products, they have no access to financing, they can't get funding anywhere, and that started that, the Genesis. So it was definitely an interest in the farm. I don't think I've ever connect to the economics, but then as I really started to work on Steward and read Wendell Berry I realized the economics have to be aligned with the agricultural practices. And it's a much more symbiotic relationship.

Koen van Seijen 05:11

Yeah because you mentioned, the probably the biggest bottleneck, or one of the biggest bottlenecks is capital. It's not necessarily the not having enough good entrepreneurs or good farmers or entrepreneurial farmers but its capital. What made you see that? What made you discover basically, that it's a lack of appropriate capital?

Dan Miller 05:29

So that came from my business background before Steward. So after school, I started real estate development business with my brother. My father's family's in real estate, we spun out to do our own projects in Washington DC. We were investing in some emerging parts of the city doing historic restorations, leasing to local tenants, those were outside of the traditional private equity type deals. So we built a platform to raise money from local investors to invest with us in these projects. That was called fundrise, it was the first real estate crowdfunding platform and has since grown to raising over a billion dollars online, but was initially used as a vehicle for us to connect with a different type of investor. So around that same time, the buildings that we were leasing to younger chefs, I started to meet the farmers that they were buying from. And any of those farmers I spoke to, even though they're selling to well known chefs, and they're selling at the farmers market, everyone loves what they have, none of them had access to capital and it just seemed like a huge gap where demand for their products is exploding, but they can't get the funding to get production up to meet the demand. It's kind of classic economics that they should be able to get that financing, but it's not available. So the idea with Steward was taking individuals that are supporting this movement, giving them the chance to invest directly in those regenerative farms and farmers. Capital is much needed, but also rebuilding links in a food system. So that's where that connection began. And then in my research and early discovery of the business, it was clear that most funding in agriculture is driven by government policy, from government direct lending or through banks that are effectively just lending through government programs. And if you're not a large commodity producer in the US, and generally around the world - they've kind of followed this practice - if you're not a large commodity producer, you're ignored. And you don't get finance, whether that's by design or not, that's a different conversation, but they're left out. So 90% of the farms in the US are small to medium farms. Most of the market is this mid size to small size farmer, many of them are sustainable, would like to do regenerative ag, but without the capital to grow, they can't get there. So there's a whole network, whole different types of farms, all around the country and world that we support. But they all are persevering in the face of challenges, and a little bit of funding goes such a long way for them to grow their businesses.

Koen van Seijen 07:39

Yeah, just to emphasize basically the first response of many people that are not an ag would be "Okay, you have a thriving business, a lot of room to grow, chefs that were buying probably before the crisis hopefully will be buying after, or a lot of customers on your markets, reco rings, etc. why don't you go to a local bank and just get a loan to grow?" But local banks are either ignoring ag or are focusing on the type of ag that is not this, that's basically what you're saying.

Dan Miller 08:05

And that's where it gets structural. The economic systems we build are focused on larger companies and more standardized practices so for a smaller scale farm that has a product that's not a classic commodity, so the market value is kind of unknown, they're a little unique in how they run their business and the location and the risk.

Koen van Seijen 08:22

A bit weird. Yeah.

Dan Miller 08:23

Yeah they're strange, they are kind of artists a lot of the times, they're different. So they would have trouble getting financing anyway through traditional channels, but the fact that they're not in the bucket that the bank can lend to at low risk, they don't do it, and in the US, most community banks have closed, credit unions have closed, so there's been a consolidation of money to the large financial institutions and this is just not something they're going to touch. So the the point of Steward is to bring the capital back, locally or regionally, some international but at the end of the day, if you can fund farms from capital, within the region, they're getting the benefit of the farm, the lands being helped, they're buying products, they're getting a return, and that's the framework of Steward. Not us as the investment decision maker, but us providing the tools for these networks to raise capital and finance farms. And us having a balance sheet to do deals as needed to fill the gaps but ideally we're just providing tool sets that people can use as well, for these farms in their communities to raise capital.

Koen van Seijen 09:13

And I mean we've mentioned Steward a few times now, can you walk us through an example of how that works in practice? What kind of farm? What type of farm? Why would they raise capital? What kind of capital etc. What is a good example that gives a bit of color to what we discussed.

Dan Miller 09:14

I'll give you a few examples. I'll start with one of the first that was one of the smallest. You know, when I was starting this I was connected to a few urban farms in Detroit. I find them fascinating. The city has 10,000 acres of excess land that's unused, and they have a burgeoning urban farming scene, it seems like a perfect mix. Well, these farmers were struggling to be able to buy land from the city for a host of reasons. So we stepped in. There was a farmer farming on a 16th an acre of land in Detroit.

Koen van Seijen 09:54

One 16th.

Dan Miller 09:55

One 16th, basically a lot. You know a side lot, what would have been a house lot that is vacant land. It was next door to his uncle's dry cleaner. Fisheye farms is the name of the farm and they just started. They had gotten into urban farming in Chicago University. They didn't come from poor backgrounds. They farmed locally, they had a lot of success. And now they needed to expand production. So we came in, we provided funding as a mortgage loan, $120,000 loan that helped them buy a few acres, make investments in fencing, wash and pack, refrigeration, have a farm stand, the kind of basic elements needed for that type of urban fruit vegetable farm. They've since grown their revenue to 200k estimated this coming year, in two years. And by unlocking their potential to grow more products and sell more direct, they're able to have a bigger impact on the land, but also serve a bigger market. So they've, now particularly since Covid, has hit had tons of direct sales. They have people come to the farmstand, they're doing pre pack pickup, they're just perfectly positioned to meet the needs of the local community. And then a recent farm, to show the other side of it, was a 1700 acre livestock farm, a bison ranch in Montana. Bison for me just like, what's more exciting than bringing American bison back to restore the grasslands. So this farmer is similarly passionate and 1700 acres, and we helped him find out a USDA certified mobile slaughter unit so you could feel to harvest and sell all around the country. This was prior to the kind of processing issues that are happening in the US and elsewhere.

Koen van Seijen 11:22

But they were already there.

Dan Miller 11:24

They were already there, now they're just falling apart, but they always existed. So a lot of what Steward has become is financing the farmers but financing also the infrastructure needed to get the product to market because they're all connected to where we were saying with banking is everything's now at a national global level. So if you're looking for smaller scale pools of funding, or infrastructure, or farms of those size, there's really nothing.

Koen van Seijen 11:44

I can imagine that, I mean, that's slaughter facility, how much was that? Just a rough number? If that's public.

Dan Miller 11:50

That was $85,000, and he got a grant for 75% of it as match content. So in reality, we helped him with the grant helped him with the financing. It's not that it was that complicated, a huge amount of money, it's just these farmers don't have they can't just write a check out of their pocket for these types of expenses. So we're generally providing loans to the farmers on average, 8-10% interest rate. So high yield loans, high leverage, generally secured as mortgages, but sometimes we'll do shorter term operating loans. So our view is investors need to be compensated for the risk they're taking, there's always inherently risk in agriculture and regenerative ag. I think regenerative ag has less risk because they control more of the variables for their farm, but that's a separate argument. But high single digits is what we found for investors who are writing checks, and initially I personally funded the network of these farms. So what feels reasonable, what feels like a return, and I think that's where investing regenerative ag needs to go. The past generation had no return focus and it was 1 or 2% could be fine. To really bring the global market in of individuals to support this, there has to be better return. But at the end of the day, the farms can generate those returns, so that's what we've learned at Steward is with the right mix of funding they're accelerating their business incredibly fast, and they can easily afford to pay these rates. And then we also offer at Steward help accessing traditional funding if it's there, and so we can help them refinance into traditional longer term loans. So what began as us writing the checks is now much broader of sustainable farms, regenerative farms come to us. We learn about their business, we make recommendations on what funding is out there between either us or other sources, grants as well, and then what do they need to move forward. So it's become very comprehensive, because as you can imagine, generally regenerative farmers are not focused on financing. It's not an interest for them. But it's important.

Koen van Seijen 13:43

It's key and I think, can you elaborate a bit on the interest rates? Because I think, for some people, that sounds pretty high. But you say they are, you find customers, in this case, their farms as customers, and they agree on that which means there is space to do it and you say there's enough space and margins in their business to easily afford it. What do you say to people to say: wow, that's seems quite expensive in terms of capital.

Dan Miller 14:07

So in the market of general financing, it would still be relatively cheap. I mean, private real estate loans are done at those rates or higher often, and particularly ones where the collateral here is still land in the business, but it's less traditional. So it's what can the business afford? So for us, it's figuring out where can they get to an investment in value added processing can double the revenue, that investment of 85 K can triple or quadruple revenue to now sell direct. So it's unlocking the investments that really drive value on their end. And then we want to bring them as cheap capital as possible. So we have a platform where people can invest as more capital comes online, and people accept lower rates that can be provided. We also help the farmers find grants which effectively subsidizes the rates, which helps a lot. And then we can work alongside traditional funding as it's available. We just did a deal in Oregon, where the Farm Service Agency did the first mortgage for 600,000, a 40 year mortgage at 3.12%, which just shows how subsidized the American system is once you access it, you know, a small farm borrowing at the cost of treasuries, basically. But the local government lender can only lend up to 600k as a cap in the state. The land costs 800,000 so now the farm is nowhere, you know. And we've stepped in as a second mortgage, to fill the gap for 150k, and that was at 10%. So the blended rate is low. And without that money, the deal wasn't happening. And now they're on the land, and they're growing, and we're funding irrigation and processing. So I see the returns being there in the underlying business. But definitely the traditional market for ag investing is thinking about lower returns. But I think at the end of the day, they should be shared among the farmers and the investors, I think traditional ag struggles with returns. I see for these sustainable farms, there's a lot of opportunity.

Koen van Seijen 15:55

And in terms of because the two things that come back in the transition finance for farmers series, but actually many conversations, are both flexibility and time, meaning built in flexibility in investment products is something very interesting. Would love to hear your thoughts on that. And time, like a lot of these businesses take a bit of time. It's not a one or two year, maybe the processing plant yes, but obviously, if you're going to irrigation, going to perennial crops, etc. time is key and investors need to understand that. But let's start with the flexibility. How do you tackle the weather risk? The, I mean, 'one bad year' risk, etc. etc. in terms of the loans that sound quite static.

Dan Miller 16:36

So that's our biggest strength, that they're private loans, and so they can be structured, however it's appropriate for the farm. For that first loan, I mentioned for the urban farm in Detroit, the first year interest was accrued and then the interest slowly phases in so they have time to make these investments and start to generate cash flow. Those loans were five years, and we're now refinancing them into traditional longer term loans from credit unions, because now they own the land and have historical financials to meet those requirements. So I think structuring is the most important thing that's missing. Right now the ag financing system is like "here's the product, take it or leave it, it's a bank style product, and it's not going to meet your specific needs". And what we found is cost of capital is not actually the problem, it needs to be reasonable but that's not the problem, it's access to funding and then funding structure in the right way. That's really the primary problem. And then if they can get it structured the right way, where they have time to grow the business, where it's enough term to have the payback, and where it gets them a bridge to traditional funding a few years down the road, then it works perfectly. So that's the big differentiator, there's very little private lending capital in agriculture. And I think, in general, private investment capital offers the flexibility to meet these farmers where they are.

Koen van Seijen 17:49

And in terms of flexibility, have you looked at or experimented with? I don't know with any of the, let's say, not fixed interest rates but connected to free cash flow, connected profit sharing? Is that something you have been thinking, either thinking of and using or is it something that is not a fit yet?

Dan Miller 18:06

That is something that we're implementing. So there's two ways people can invest on Steward. They can come to the platform and invest in the farms or the fund that we have set up, the Steward Farm Trust, and that's us, underwriting the deals, writing the check ourselves, doing all the due diligence.

Koen van Seijen 18:21

When you say "us" it's you underwriting?

Dan Miller 18:23

Us as Steward, well I mean, our team, but yes. So they're reliant on us and our underwriting and securing a mortgage and making sure everything works. We're also now rolled out our software to farmers where they can use the fundraising tool we have built, which allows them to distribute an offering in a compliant way, raise funding, and we're setting up some of those offerings as revenue shares, particularly the ones that allow anybody to invest. So we're working say in Oregon, we have a license now where any Oregon resident can invest in the Oregon farms in our platform, as little as you know $100 or any amount. There where you have a lot of smaller investors and you want to align their interests with the farm to promote the farm, to buy from the farm, to really engage. That's where I think rev share works. So I view the kind of accredited style investors that are investing 10 to 25 k and up, they want classic, you know, collateral, mortgages, we have some tax free products, everyone loves that, of course, whereas the local investor that just loves that farm, they buy from them, they see them at the farmers market, they want to put in 1000 bucks, they're more suited to a project where they're going to get some products and they'll get a share of revenue. So what we're adapting the structure to the need of the farmer and to where it sits in the capital stack.

Koen van Seijen 19:34

Yeah, because for now, most of what you've described is accessible for accredited investors and up because of legislation, right? Except for the Oregon piece you you just mentioned. Like that the two farms you mentioned, the processing unit, etc. isn't yet accessible for somebody to put in 100 bucks.

Dan Miller 19:52

So we do have a product that's available to any U.S. resident non accredited as well as little as 100, that's called the Steward Farm Trust. So that vehicle makes loans to all the farms in a steward platform, and then as it earns interest pays out dividends, so that was set up to channel, small dollar individual investors. Alongside that, accredited high net worth have more flexibility to invest either in that fund or an individual deals or in portfolios of deals. What we've been trying to do from the start, and this goes to my background at Fundrise, too, of how do we get individuals at a local level investing in these farms. The regulatory costs to do that in the US is $100,000 or so, you know, it doesn't work for a farmer tried to get 100,000. But we're now innovating on state based crowdfunding rules, where as long as all the residents are from the state the farm is from, they're exempt from federal law. Under state law, we have certain states that allow local investors. So now we have a platform license, let's say in Oregon, and for me that's just exciting of local capital with local farms at the actual local level of who buys from this farm, who's connected to them. I think that's the real power. So it's been years of us wading through regulations and trying different methods. And using, now we're using rules that are you know, 200 years old on the books, but no one ever really thinks about them, and that's what we tried to do. What are all the ways that we can bring in more investment for regenerative ag because we need everything, everything that's out there. It's a huge amount of capital needed to not only transition conventional to regenerative but but fund the regenerative farms already out there today.

Koen van Seijen 21:25

And that's an interesting point, how many of the projects, either you've done or looked at etc. are conventional to regenerative and how many have been, let's say regenerative from the start, or regenerative like that's a relatively new farms that want to grow? Has there been something on the transition side of things? Which I think is a huge opportunity, but also very difficult?

Dan Miller 21:46

The transition is picked up recently. So the beginning of steward was purely regenerative focus, we're getting applications from farms who are already regenerative. The first 16 we funded, all regenerative. And we had over 2000 applications in the first year, so it's just kind of huge inflow of applicants. So the first focus was who's already farming today doing important work, established products, established markets. And now they need growth capital to take the next step. That's where we started.

Koen van Seijen 22:12

And these could be the market gardens, the urban farms you mentioned, the processing units, the examples you mentioned.

Dan Miller 22:18

Yep. And so they already have their market built in, and now they need to expand production. For me, that's a very simple economic proposition, the sales are there, they just need more production. And those are a lot of the farms are going to a few 100 acres and less. We've now had outreach from a lot more conventional farms, one that recently spoke to us in Minnesota, they inherited, three brothers, the land from their father, recently. They've started the conversion to regenerative from conventional but they need funding to fill that gap. And I think that's going to be a financial product that's very important to Steward. What's the transitional funding from conventional regenerative? It has to accrue, it has to be flexible while the yields switch, also helping those farmers plan out, instead of just doing traditional soil on a conversion maybe let's look at some heritage grains, let's see what's out there to really do a diverse mix instead of just a monoculture of organic, which I think happens too often. So I think that will be a big market for us. And when people look at regenerative ag, they think of it as a niche market, but it's really the other way around. That's how agriculture has been done forever, always in history of the world, except for the past 100 years when we had fossil fuels and, you know, that kind of expansion of energy beyond the normal sources of it.

Koen van Seijen 23:27

Input heavy.

Dan Miller 23:28

Yes. So it's where most farming will be just based on resources and costs and use, let alone the kind of ecological impacts that are important to more and more people.

Koen van Seijen 23:38

And how much of your work then will be basically consulting or advising if you start advising on grain mixes, etc. It's very different from running a platform. Is that a risk? I mean, it's very interesting, obviously. But is that a risk from helping these three brothers and many others also making the farm transition, not just a financial transition?

Dan Miller 24:00

So we have a broad team, you know, with different skill sets. We have a team called farm stewards that are experienced farmers who help advise and support the farmers in our network. The head of that team lives in North Carolina, he's run a farm incubator for over 10 years, he spent many years supporting farmers in planning and that's a service that we offer alongside so people come to us in those conversations of what financing do you need is also "well, where is your farm? What are the bottlenecks? What can we help? And can we make some connections to local advisors?"

Dan Miller 24:30

So that's kind of built in the sewer platform: what's the network and infrastructure and expertise needed? So what started out as just a lending investment platform has very much brought into all types of services for farmers. We help farmers with direct to consumer sales for e commerce, we help with bookkeeping, so we provide these services to take off their plate, a lot of the work that they're supposed to do. And particularly for these smaller scale farms, they don't have different divisions and departments. They're very lean operations and they don't have time to do bookkeeping and grant writing and set up websites. And so we've realized, probably the primary value long term is going to be in the network, and tech tools and infrastructure to help them support their businesses and then the funding is fundamental to their growth. But the need for the regenerative farmers, it's broader than funding, although access to capital definitely is first on the list for most.

Koen van Seijen 25:23

And that turns into another business, basically, because you're not just providing the funding or the platform for funding and maybe access to funding, but you're also providing all of this potentially websites, bookkeeping, etc. That is a separate business, right? The Steward farm services if I'm correct.

Dan Miller 25:39

Yup. Separate business, recurring revenue, kind of less risk. I personally, for me, the funding is core to both. A lot of businesses, once they build their platform, they add funding. You know, I know, square, for example, does that right? They're supporting small merchants, they have funding...

Koen van Seijen 25:53

I mean, if you can have a look, I mean, there are privacy laws obviously, but if you can see in the bookkeeping who's doing well - just like banks do - very easy to monitor who's able to take on some funding.

Dan Miller 26:03

So that's what we found.

Koen van Seijen 26:04

And help the bookkeeping helps you as an investor as well.

Dan Miller 26:07

Then it all mixes. The kind of core products we offer is access to capital, either the tool to raise it themselves or committed funding from us. Then bookkeeping to manage the books and keep everything organized, and then e-commerce support to help with direct consumer sales, particularly since Covid obviously, that's of critical importance to farmers.

Koen van Seijen 26:25

Let's talk about Covid. What have you seen? I saw you out there in a few interviews, saying this is something along the lines, but correct me if I'm wrong, this is the moment for food systems. But what have you seen in the fields actually? The farmers you work with? How has it been? It's now may 2020, maybe people listen to this years now, but we're still many parts in lockdown and it seems to be that local food systems are taking off. But what have you seen with the people you talk to, the investors, the farmers? What has it been like in the last few months?

Dan Miller 26:55

We built Steward from the ground up to support small to mid sized regenerative farmers. That used to be considered a niche market, now it's the only profitable sector of all of agriculture. It's like, those are the ones that have exploding demand, customers who bought from them five years ago have been calling. They're all selling everything they have, you know, and even having to manage to limit sales, because there's so much demand. So that the farmer that we generally support growing on the land, selling direct to consumer, their sales have just exploded. The challenge a lot of them have is the operational infrastructure to now manage a flood of retail orders. So that's where an e-commerce system, even if it's just for on farm pickup is very helpful in the tools to manage that. And then the funding is the key thing that people forget where we just had a farm last week, they're shipping livestock and poultry to New York City from upstate New York. Their sales have just gone crazy. But now they need more freezer capacity. So now they need a few thousand dollar investment to expand their freezer capacity, which they would share with other farms. So the sales growth that's taken off now, which is where all the attention is, is everyone's buying from these farms. It's fantastic. It's great. But then nobody's realizing well, where's all the money going to be them to get that infrastructure to actually meet the demand, that surge, and that I think Steward is uniquely positioned for and in general, that's where access to capital continues to cripple the movement. But for us, investors are more engaged than ever. There's more capital that wants to invest in this than ever. In the farms, and now we're actually working on some processing infrastructure like that shared freezer capacity and value added processes. So I see it being a whole network needs that support and needs to be integrated.

Koen van Seijen 28:33

And when the dust settles a bit - I mean, nobody knows how long and what the new normal looks like - what is your idea there? Is everybody going to go back to buying chickens from the supermarket? Or absolutely not? Is this the watershed moment for the movement? What do you think?

Dan Miller 28:48

I think it is a fundamental shift. Obviously, the demand will drop back somewhat because you never keep 100% of new growth but I think it's going to be on a new trend line. What happened in this moment was the farms had to streamline their enterprises. So the ones that really had a good direct to consumer system, built a really efficient machine that was very easy for customers. And now, for a customer that experience of buying from a farm is as easy as any other shopping experience that they have.

Koen van Seijen 29:15

With a very different quality.

Dan Miller 29:16

Yes, much better quality. And that's the reality is if the best quality product doesn't ever make it to the grocery store, because there's not that much of it and the margins the grocers and distributors take doesn't make any sense. So if you want the best product, you have to go right to the farm. And then for the farmer direct sale is the best that they can get. So it's so aligned, and now with technology making it so easy, it's growing. But many farms that were just wholesale to restaurants now have to shift, that's a challenge. A lot of farms that are conventional and even large scale commodity, they're selling through tons of intermediary. So one of the key things we advise on all farms is just like we're trying to get your capital direct, get the investors right to your farm. Try to make all sales direct as much as possible, remove the intermediary, take the margin yourself, and that's now what Covid created, that direct to consumer channel has exploded. So not all farms are grabbing it, but it's there and I do think it's going to continue to grow. So our interest has skyrocketed. I think anybody who's farming on the ground, they're interest has skyrocketed. They're nervous about when it ends. So they're waiting to invest until them. You know, this farm with the freezer capacity, they want to see six more months of this before they make that investment. But I believe that it's going to continue, and we've had farms say even if they had 10% of the demand, they would have full sales of everything. So it's far beyond the capacity for any of these producers to me.

Koen van Seijen 30:38

And what is your biggest challenge now, but let's say I also post-Covid, or after the dust settles, what's the biggest challenge for Steward at the moment?

Dan Miller 30:47

So the hardest part with Steard is the operational regulatory infrastructure around compliant securities offerings, making sure deals are vetted and underwritten, the whole framework around that. I mean, at Fundrise we pioneered the idea of crowdfunding online and used regulations that were, you know, had not been used in a long time to try to make that possible. Similarly, with Steward we're trying to push forward: how do you bring more and more investors in at the right level, in the right structure to the farms? And that's been years in the making. And we now have that infrastructure set up. And so now, it's really about bringing the capital online to support the farms and expanding it. So we're in growth mode, where if somebody comes to us ready to invest, they can pick among this whole network of farms, and as farms come to us, we can deliver value to them. But at the end of the day, the systems we've built are very niche and very complicated to do something simple. Like, how hard is it to have a local resident in Oregon invest in a farm in Oregon? It seems like it should be very simple, but that's not the norm and in order to facilitate that requires really nuanced technology and regulatory understanding. But that's my contribution to regenerative agriculture. Really in depth knowledge on financing and regulations and raising money online and everything that's needed to bring capital in because everybody's known for a long time access to capital is the problem, that's well understood., it's how do you then get the money to where it needs to go efficiently?

Koen van Seijen 32:14

How to build the machine?

Dan Miller 32:15

Yeah. And without just start funding 100,000 acre farms, which is all that exists historically, and regenerative ag have big pension funds, family offices owning 1000 acre tracts of land plus, but the reality is most of the market is, let's say, 5000 acres and below. So most of the market is not where the first wave of large scale money is. So we need to kind of back to the crowdfunding, get many people involved, even people writing 50 k checks, 100 paychecks, that's still crowdfunding. It doesn't have to be small, it's are they able to access it easily and is it broadly available at ease? And that system mixed with actually understanding the farms is a lot to get streamlined.

Koen van Seijen 32:56

Yeah, I know. There are some examples in the renewable energy space, which I know it's, I wouldn't say equally challenging, it's very tricky, obviously, to do but at least there you're not dealing with a live system. You're dealing with solar panels, wind turbines, and that's pretty much it. That's already very, very complicated. Imagine if you bring that whole crowd piece and all the regulation to the agriculture space where everything is moving, and everything is alive. And yeah, I can imagine. So can you give us a lay of the land? We're now in May 2020. How long has Steward been around? How many people are you? How many farms did you fund? And how much money has gone through the pipes basically, of the system, just to have a bit of an understanding where you're at?

Dan Miller 33:38

I started working on Steward in 2016. Just researching, learning and meeting with farmers.

Koen van Seijen 33:42

When we go into the podcast. Yeah.

Dan Miller 33:43

Yeah, right around that. You know, that was early days. I started to meet these farmers, but the idea of what can these farmers, what do they need? What can they afford to pay? How are their businesses run? Can they be successful? You hear all the time small farms are struggling? Are they viable enterprises? So that was a long discovery phase for me. The first farms we funded were two in 2017 in the summer. That was us really doing our test case of getting the structure in place getting the investment vehicle up. Those were loans that I personally funded to really understand how they can perform, how is it going to work? In 2018 we brought in the pilot and we funded 10 farms across the country, Oregon, Louisiana, Pennsylvania, livestock, fruit, vegetable, winemaker, everything. One in Europe, which was a winemaker in Switzerland, natural wines up in the Alps. So really saw the reach of this isn't limited to certain parts of the world. This is an issue everywhere. These farmers are working all over the country in the US and all over the world. But access to capital is an issue for all of them.

Dan Miller 34:43

Then last year, we launched the first investment products so that people can come to the website, invest in the projects on the website. We have over $3 million invested through that product. And then each day we're adding new farms. So we have over 20 farms that have been funded, we have over 2000 that have applied that we're now bringing through our services platform. We have another 50 plus that are using different services, from bookkeeping, e-commerce to all the different back end services. So what the past year has been of discovering regenerative agriculture, doing a few transactions to really figure things out, just getting a flood of demand from applicants and realizing that there's huge scale and opportunity here. And then building the systems to bring those in, broaden our offering from just funding to support across the entire enterprise, and then weaving through the regulations now to open up more types of investments. So we're, you know, feels like all of that groundwork and preparation was done now, for this moment of the attention now being on the sector and people wanting to easily figure out, if I want to invest in regenerative agriculture, how do I do it? And we've spent years and time and capital and effort of putting the systems in place to make that seamless.

Koen van Seijen 35:53

And it's a question I don't always ask I think, but how involved are farmers in Stewart? I had a discussion with an ag tech, or somebody looking at a lot of ag tech companies recently and she mentioned very often the last time they talked to a farmer was a very long time ago, meaning they built something for a lot of money and probably doesn't connect to the farm. Like there should be a farmer on board of any company, honestly, or somewhere very much involved part of the company, we had a discussion with with a soy sauce brewer that actually have their farmer that makes the soy for the soy sauce is part of the company, etc. etc. So how involved - I'm setting up the question very badly - but how involved are farmers in Steward? In terms of the team? In terms of the advisory board, etc.?

Dan Miller 36:36

Yeah, we're very connected with the farmers. We're always communicating with them regularly, even through text message and, you know, very close relationships. We have a farmer on our team, his name's Aaron Newton, he's the one I mentioned who leads the farm Steward team. So he personally has 20 years experience farming, running a farm incubator for over 10, and he works with the farmers as they come through and has a phone call and helps advise them. And he has a network of experienced farmers that have worked at other farming communities that he's met around the world that support these farms. So we're very agricultural focused. I don't even like thinking of us as ag tech, because I find so much of ag tech is let's do really advanced technology solutions for the mega farms. You know, spectral imaging and drones and automated everything.

Koen van Seijen 37:20

Digitalize everything, yeah.

Dan Miller 37:21

Digitize and get rid of the people for sure. That's always the focus.

Koen van Seijen 37:25

Of course, the robots would be the solution.

Dan Miller 37:28

Whereas why don't we just have simple tools for the farmers, like just get them with the basic elements that they need. And so for us, it's providing those tools, software they can use to help with bookkeeping, but it's more: how can we take this out of your hands, so you can just focus on the farming, and some of these back end elements are saved. So we try to be very easy to interface with the farm, we have farmers on our team, we care deeply about them. And we're in discussions with them regularly, I'm actually speaking to a farmer tomorrow, who's a cheese maker in Southern Oregon who we're helping get financing to buy their land. And you know, we talk every few months, and there's definitely a close relationship, and I visited them a few times. So my passion comes from that of meeting the farmer where they are, and supporting them in the way that fits them, as opposed to, here's some advanced solution we want and we just want to scale it and every farm has a number and let's just get 100,000 farms. It's really unique to that farm, and that's regenerative agriculture that each farmer is different and how they approach it and their background and what they want to do.

Koen van Seijen 38:30

And in terms of, let's switch a bit to the investor side, you mentioned it's accessible and obviously this is not investment advice, but it's accessible for anybody living in the US. Did it also mean for the Swiss farm, the winemaker you mentioned? Was that finance from the US? How is this in terms of accessibility at the moment, which can obviously change? But just to give people an idea, who can access the platform from the investor side.

Dan Miller 38:57

We try to be as broad as possible, and that's our experience in these rules and regulations. So we can have investors from anywhere in the world, as long as they're accredited. And we have a process where they can submit those materials. So that allows investors from all around the world to invest in these farms, we then also try to allow as much local investment as possible. So for US based investors, any of them can invest in the main project. And then you mentioned the Swiss winemaker, the Oregon farm, then at the regional level, that kind of state level, we try to figure out what are rules there to allow local investment. But that's at a you know, those are the hardest ones to comply with, because it's a country by country, and farm by farm. So we have a broad layer of the family office, high net worth investor who's really anchoring a lot of these investments, and then try to open that up to individuals at a few thousand dollars and in lesser amounts. So it's the pairing of all types of funding that's really needed. And the way that the general framework for securities laws written around the world is if you're high net worth you're exempt from most of the rules and you can invest in any deal and if you're not that's when things that complicated. So we're built to open it up to anybody and we adapt and figure out how to use all those rules as possible. There's always some gaps. But at the end of the day, it's bringing and opening it up to as many people as possible.

Koen van Seijen 40:13

And in terms of, you've done the Swiss farm, I don't want to keep coming back to that one. But what are your plans internationally beyond the US?

Dan Miller 40:20

So we had a huge amount of outreach from farms all across the world. Canada, New Zealand, and Australia have been particularly big. Those we have farms that are already in our queue, I actually just spoke with a oyster farm in New South Wales about four hours south of Sydney, he already has raised money for his oyster farm, through his local network. So now he can use our software tool to explore broaden that, and have that offering online where he can share it to his email list and those people can invest. So he's now able to use our technology without us writing the check, but use the system for his network in Australia and that's really where I'm seeing the growth now of Steward of here's the tool that allows you to tap into these investors easily, and here's how you can use it compliantly. And we have such a broader reach at that point. Because I may, personally, underwriting that deal in Australia is going to be tough, and we're going to build local resources over time to do deals from our balance sheet in those markets and others. But if there's a great farmer on the ground, who has a network and access to potential investors, why not give them a tool to facilitate it and build them into the network. So as we've gone from direct lending and direct investment to tools, whether that's a bookkeeping or e commerce or fundraising tool that's really allowed us to support the international market. For me there is no geographic boundary to this work. There's demand for, and a need for it everywhere. So it's just a matter of balancing what can you support and then what's the operational infrastructure to do that. And that means that let's say, in Australia, there wasn't or isn't a platform that is able to do it and for this farmer, it makes more sense to licensed basically to take the Steward platform than to find a local, some kind of local solution to handle the investors he has already. So he creates a profile on the Steward platform, and he sets up his offering and he shares it with his investor, we don't take a percent of fee, we just charge a monthly SAS fee. So, effectively the software is a service. So the reality is, the work we're doing around fundraising is very advanced, like, I've done this for 10 years in two companies of how do you really open up investment, but make it simple compliant? So...

Koen van Seijen 42:28

And that compliant part is the same in Australia, would be the same in Italy or...?

Dan Miller 42:32

Depends on the country.

Koen van Seijen 42:33

So that's something that could be limiting country by country.

Dan Miller 42:37

That is part of a limiting factor. And you find out, you know, what are the rules generally, there's a similar carve out where the higher level investors can easily invest in if you want small, local, you have to do some more filings, and we can assist with that. But I think the other focus is we're just committed to sustainable agriculture. And so there's an alignment with these farmers. They come to us. We care about the work they're doing.

Koen van Seijen 43:00

Your not doing any other type of farmers, yeah.

Dan Miller 43:01

We understand their business. No other type of farmer. We know about, okay, you need this for working capital, how about this? How about that? Or if you're looking to buy land, this is an option, that's an option. So the fact that that's all we do, only regenerative agriculture, which you know...

Koen van Seijen 43:18

You probably have a nice network of alumni farmers or farmers that are still being still financed, etc. that connection between them globally is very interesting.

Dan Miller 43:28

And that's already been building and I just connected that urban farm in Detroit with an urban farm in Washington, DC that applied to us. So we're already seeing that network effects. And that's been the shift from us as kind of investor lender to us as platform. Because the scale of the market is so huge. There's so many of these farmers out there that need resources and support. So let's bring all of them on.

Koen van Seijen 43:50

Do you have any idea about the size? Even just the US, because for sure you have better numbers, like to give us an idea of how many could even be eligible or interesting from an investor perspective, let's give it, any have any idea of the market?

Dan Miller 44:04

It's completely underestimated. And it bothers me in the classic way where the USDA has so many studies on conventional ag, on everything, the exact amount of bushels of corn per acre in this county, everything. And then the second you talked about we'll focus on sustainable ag and these smaller farms, nothing. They're like that's the other category. So there really is not reliable data. I think the data is way under estimating. We see farmers all around the country, all different backgrounds, in regions that you would definitely not consider. Rural Louisiana, places that aren't where you envision this type of agriculture. And then we started marketing around the world, Mexico, for example, and got hundreds of applicants overnight. In the US, we estimate there's 2 million, that's a fact, there's 2 million small to midsize farms, we put 25% as who today meets those parameters, so that's half a million. But the market of smaller farms is growing for the first time in 100 years, so that's an increase, and the share of farmers that are being sustainable, regenerative. Conventional over is growing. So it's like you're in the part of the market with the base number growing and the ratio growing. So I'm a huge believer, but part of my discovery experience with Steward was that of like, well, what really is the scale of this market? And how do you reach them easily? And we found through digital ads, and through network effects, and through referrals, they're all out there. And they all have similar problems. And they're looking for support. And it's generally pretty hard to come by.

Koen van Seijen 45:31

Very, very interesting. And just to shift gears a bit. I always like to ask obviously, again, I'm not giving investment advice, but if you would imagine there's a theater full of smart investors, smart impact investors, they are convinced about soil, they read the books, they visited some farms, what would you give them as guidance? What kind of questions should they ask before they make their first investment? In the regenerative food and ag space? What should they look out for? What are things to definitely put in a backpack as they go out and explore that investment side?

Dan Miller 46:03

I always think they should start with what means the most to them. So is it a certain region that matters, maybe where they grew up or they have a connection to? They want to support farmers there? Or is there a product type where they are obsessed, let's say with cheese, and they want to support a cheese maker?

Koen van Seijen 46:16

I hear something about that? Yeah, the second time you bring up cheese, that's interesting.

Dan Miller 46:20

I mean, definitely, for sure. It's, you know, enjoy the products is one of the best part. So I think of it as you're building a close relationship with a farmer. By investing in them, you can invest in a fund, but you can also invest directly in the farmer, I think the more engaged you are or, let me speak to the farmer, let me understand them, and how I'm helping them and what is important to them. I always think that's a good place to start. We have all types of investors, we have individuals that are obsessed with the farms, they want to visit them and want to talk to them and want to volunteer and help with harvest and do everything. And then we have the more classic family office where they have a mandate, and they want to do more sustainable investing. And they're kind of allocating, and they want to put 5 million spread across this many deals. And those can be done to you know, here's the portfolio, these are the different transactions, they're all secured mortgages between eight and 10%. You know, if you want tax free, you can do this. So they're very different conversations. But the first group where they are passionate about this work, and they want to see it happen, I think, the more they can be connected to the things they're investing in and feel that connection and understand it, the easier it is for them to take that first step because it's a very non traditional investment. And if they're just wanting it to look like a classic commercial real estate investment, it is a little bit different. It still is real estate, it still fits those characteristics, but you have an operating business that's dealing with nature and land on top of it. So I think that that personal connection is a driver. And we find that all the time that one of the larger investors in the deal may have grown up nearby that farm, or they used to farm at one point and they want to support it. So a lot of successful entrepreneurs who've made their money, and now want to reinvest and have that have a positive impact. So I'm hearing from those investors all the time. But I think to get over the hump, the more they can feel a personal connection with that farmer, that project, the more likely they are to do it.

Koen van Seijen 48:08

Especially the first ones. It's probably the advice I give the most, go and talk to farmers, go and spend time on farms.

Dan Miller 48:17

Actually go visit them know.

Koen van Seijen 48:19

Go visit! You will learn a lot. And it's not so easy. And it's actually not so complicated. It's very complex. But go and talk, spend time, listen, especially if you didn't grow up on a farm, especially if you haven't been on regenerative farms recently, you'll be in for a few surprises, which is good. Good surprises, not bad ones. But go and talk, go and learn, go and ask questions because there's a lot to discover there. And you will find ways to put money to work.

Dan Miller 48:44

I completely agree. So visit the farm. And that's what we really try to do at Steward of how do we engage those customers who care about the farm, they may see the farm the farmers market, how do they get further putting capital at the farms? A lot of them are building homes to stay out on the farms for rental? Like how do we engage people in the world of agriculture because that's been the big problem in the US in 1890s half the population was in agriculture, now it's 2%. So we've just pushed everybody off the farm and 2% doesn't work very well. Obviously, removing all the farmers and scaling the farms has a lot of external consequences. So now we need to think about how are we going to get those millions or hundreds of millions across the world back into this. They're not all going to be farmers but rather they can use their capital, they can use their purchasing power, they can use their expertise. Whatever it takes they need to put their resources, even if it's not just capital, but any resource they have towards these farmers because they're facing a lot of challenges and the work they do is very important. And without that support, they they have trouble.

Koen van Seijen 49:44

And very lonely. I think that's something we yes in the city underestimate and I think we're being pushed to acknowledge that we're in this crisis and in many other crises are extremely disconnected from nature. And one of the best ways probably to get back into that is not only go out in nature, which on regenerative farms is everywhere, but I experienced that. And the best way I think to reconnect is through food, through agriculture and discover that connection. And it can be through your purchasing, can be through your visiting in terms of tourism, it can be through your investment dollars, or euros or yens, or whatever you're investing.

Dan Miller 50:21

Yep. And that's where my connection began to from the restaurant side of seeing chefs and working with chefs who had huge demand for their products, were very passionate about what they were buying. So I think that's how the movement really translates from purchasing dollars to investment dollars is people who are connected through food, chefs are the ones with the pedestal to actually draw attention. And converting those customers is the first step. And that's often the conversation with investors, you talk about food a lot, because that's what matters to them, or that's the experience. In wine, the Swiss winemaker too that, he sells natural wines, hand harvested up in the Alps, you know, 1000 meters. That's just a product that people are connected to. It's not difficult to have people feel like it's a good portfolio.

Koen van Seijen 51:09

No, no, I did. I mean, it is, it's more sexy than then a wind turbine, which I'm actually staring at, honestly, outside this window. But it's definitely something people connect much more to than, than the electricity coming out of their grid, which is fundamental, and we definitely have to decarbonize. It's one of the reasons I'm recording the podcast I saw with investors, the interest, if you ask them on surveys, the interest, we asked them at Tonic, in food and ag was always very high but if you look at their portfolios, they invested mostly in renewable energy and other sectors and food and ag was always very, very small. And I didn't understand because I saw these people building very interesting things, and like, how come that it's not part of more portfolios, because it's not that easy. I mean, there are structures and infrastructure needed to do it. And finally, now, years later, we're seeing more of those structures being built to ask I mean, this is a question you might have thought about, actually, not many people do in this space, which is the reason I'm asking it, and what if tomorrow morning, you would have, or tonight, you'll be in charge of $1 billion portfolio. You can invest it any way you want. What would be, let's say a few carve outs, what would be more or less the pie chart you would put that money to work. Could be any duration you want, but it has to be invested not granted.

Dan Miller 52:22

That's the infrastructure we've built at Steward to handle that capacity. My previous venture Fundrises is at a billion of AUM from all online retail investors. So my vision with Steward from the beginning of let's do it from the grassroots. Let's start with one acre farm, then 20 acre, then 100, and 1000. But let's build the infrastructure needed to support these farms all across the country and the world, to deploy the capital, but also to actually ensure those businesses are successful. So for us, it's just expanding our remit. We have 1000s of farms already in our network, and deals underwritten all around the country. But what I wouldn't do is start to do huge deals, I think the problem in agriculture is that the money is chasing the kind of very large 10,000 plus acre type transactions they're perennial row crops. The small medium enterprise, the few hundred acres, few thousand acres, even the one acre farm, that's where the funding is needed. So I would have it still be invested in chunks of hundred thousand, few million. I would say that's kind of our sweet spot for financing, like, most of the farms are looking for a few hundred thousand to a million, and then some of them are a million to 5 million. And that is the broad based support that is needed. So you know, the point of Steward is to build the infrastructure that can deploy that money in an organized way, but also provide feedback and information and investors and build those connections. So I'm hoping that's where we are in a few years.

Koen van Seijen 53:43

And if you could wave so you're no longer, or not yet in charge of one $1 billion fund. If you could wave a magic wand and tomorrow morning we wake up and one thing in the food and ag space, or industry has changed, what would that be? What would be your magic power and one thing you could change.

Dan Miller 54:00

My discovery for sustainable ag came, you know, through the farmer and then from the farmers eyes being confused as to their lack of access to capital, and at the end of the day, the lack of access to capital related to government regulations and government policy that over the years had kind of created the wrong incentives. So I'd go back to the roots of if we just removed any of the national federal global ag policy and subsidies and incentives and just said: Well, what farms can support themselves and how does it work in practice? Sustainable ag would have such more growth because they're not reliant on third parties, not relying on price supports, not reliant on subsidize external costs. So I look at the kind of gold incentivize large commodity production is having such huge negative effects. Yes, it has created calories for people to eat, and there's lots of arguments around those benefits. Maybe, maybe not.

Koen van Seijen 54:52

They're feeding the world.

Dan Miller 54:53

Yes, that's what you always hear from and, you know, yes, they're creating calories, but let's instead of shipping to people around the world, let's create local capacity in these regions to produce for themselves to sell directly and to provide ecosystems just like I began with the Chesapeake Bay, to restore and maintain the actual environmental and social quality of life. So I would hope and it's kind of in the US 2% of the Farm Bill, like goes to sustainable ag. They're like, yeah, we've got more, but it's like, well, it's still all going in the wrong direction.

Koen van Seijen 55:25

98%.

Dan Miller 55:26

Yeah, so I, that's where I am at is, I wish it was a level playing field because then these types of practices...

Koen van Seijen 55:33

They wouldn't stand a chance against the regen farmers we know.

Dan Miller 55:37

They wouldn't be able to do it.

Koen van Seijen 55:39

Yeah, the EU is launching a huge Farm to Fork plan, which we'll have to see how, but at least it talks a lot of the talk. Let's see. I mean, let me know in the comments below what you think about that.

Dan Miller 55:50

You're farther ahead, though, I would say the policy in Europe, they're trying to be more focused on land management

Koen van Seijen 55:55

They're pushing for organic, there's a strong push for organic, I don't know if they know the potential, let's say to go beyond or to potential destruction of destructive practices that can be part of industrial organic. But at least it's a push, it's a discussion on chemical use, it's a discussion on obesity, which actually is part of the same program, it's a discussion of land use, it's discussion on fertilizer use, etc. That discussion we haven't had in the last years, at least not at this level, so.

Dan Miller 56:23

Yeah, I agree. And we do a lot of work at steward at local and state level. And so the kind of state rules we use to raise that funding.

Koen van Seijen 56:30

Yeah it's the countries here, and the regions that are. There's a region up here in the north of Italy that did a referendum and cut out all chemical use in farming. And they gave the farmers an ultimatum like either move, after a lot of research and they saw there was a lot of pesticide actually floating off the non-regenrative farms to a number of organic farms, although the non-regenerative farm said that it was impossible. It stayed within their apple orchard, obviously it wasn't true. And they found a lot of the residue in milk and in cheese production, etc. So they did a referendum and they gave the farms an ultimatum. Either you switch to organic, or you have to move from the state because we're no longer going to support, it's going to be illegal here to not farm organically.

Dan Miller 57:12

And that's what we're finding in certain markets. Oregon is one where they've been very progressive on policies to enable local farmers, support local farmers, incentivize it. So we're trying to design at the local regional level. What are policies and frameworks that work in terms of access to capital and incentivizing the right type of ag, and then those can be broadened. And I like that work, because you have to push against the system that's been built, you know, the reason we're farming as we are today is because of the government and social structures around it. And so if you're going to try to improve regenerative agriculture, you have to look at the base impacts to it. Another thing connected to that is I think too many people focus on labels in this work. You've mentioned organic, industrial organic, organic in and of itself doesn't mean that much anymore. It's definitely been co-opted a bit as an industry term, a lot of the farms we work with, they don't even go through the certification because they have customers who visit them and buy on farm and believe in the products. And by seeing it and visiting it, you're going to get more than you would ever with a certification. So as people focus on investing regenerative agriculture, I hope it doesn't just become another commodity system where you need you need justice certification, people aren't looking at the underlying practices, which at the end of the day are what matters, not the label that's posted and stamped on the food.

Koen van Seijen 58:27

No, absolutely. I think it's, yeah, it's the underlying practices and being able to show what you have done and the transparency and the fact that you can visit many of these farms I think already says something compared to a lot of other farms that you'd be chased off with dogs probably, if you even show up at the gate. Which says something.

Dan Miller 58:46

Strange idea.

Koen van Seijen 58:48

Very weird, like, what would they be hiding? Potentially, possibly? Final question, which is something that I took definitely inspired by John Kempf, what do you believe to be true about regenerative agriculture? He asked me about general agriculture, but let's say regenerative agriculture, that others don't believe to be true. We had a few already in it. But what would be one you if you had to pick one?

Dan Miller 59:10

For me, it's about understanding the business model and that there is viability in the business model. There's been studies that have shown that the organic matter in the soil actually is the closest correlation to return because your soil is actually producing the product.

Koen van Seijen 59:26

I read those, yeah. I had John Lundgren on the podcast, t's not released yet, maybe when you're listening to this it is, which was fascinating. Profitability and region ag, and they're coming out not just with the study they did in 2018, but with many more hopefully this year, which are going to be very interesting and scary for a few industries, particularly almonds, rangelands, etc. But it's surprising how few there are, like how many studies are there on profitability and region ag? I found one, which is very scary.

Dan Miller 59:56

Very little. Everyone's referencing the same study and what I see what these farms, and I had to learn it by doing, is they keep their expenses very low. They're not buying big purchased inputs, they're not buying chemicals. They buy seeds and maybe some other basic inputs, they have very low overhead because they're lean operations, they use small tools or mid sized equipment, and they have moderate sizes of land, and then they sell direct to the end user where they can get high margin, you know, 40, 50, 60 percent, and then they recycle that. So it's a very simple and straightforward business. There's going to be variability in production, and there are many elements, but at the end of the day, you're growing from the sun, improving the soil, selling direct, and that boost of funding, and people say, "Well, what can they afford to pay? What are returns reasonable?". If that system's set up and then you can fund a few hundred thousand dollars to get control of land and fencing and equipment, irrigation, evaluative processing, and some transport and some labor, you can accelerate that business so much, it's such a huge opportunity. And I think when people think of regenerative agriculture, they assume it's not competitive on that it can produce a reasonable return. And I think it is both. I don't expect to produce hedge fund returns, no one should look at 20%.

Koen van Seijen 1:01:05

Which havn't been amazing lately.

Dan Miller 1:01:08

No, they have, well, it's it's a radical return, right? It's like your pitch. But I think people should be very happy with 8%, 10%, 6%, you know, high single digits are solid or reliable. I go back off into forestry. The wood for forestry project grows 6% per year in mass. So at the end of the day, your growth of your return is somewhat connected to actual the growth of the biomass of these products. And so I think returns around that fit what can be produced from the land instability indefinitely. Whereas when you get to really higher numbers, you have to have aggressive leverage, or really kind of hard market risk, or it just gets complicated.

Koen van Seijen 1:01:48

Lets not make that also complicated. Keep that part, at least, simple.

Dan Miller 1:01:52

Just keep it simple. That's what we're hoping to do. Fund the farm directly, get your return, get some products to, get connected to them, see the impact, see what they are able to achieve with that capital, get paid back and do it again.

Koen van Seijen 1:02:04

I'm there's so much more to discuss, but let's keep that for another time. I want to thank you so much Dan for your time today, and for diving deeper into the crowdfunding side of regenerative agriculture.

Dan Miller 1:02:15

Thank you, I really enjoyed it. And if anyone wants to go to the website, they can go to gosteward.com, g-o-s-t-e-w-a-r-d dot com. Thank you.

Koen van Seijen 1:02:23

I will definitely link everything we discussed below in the show notes. Thank you so much.

Koen van Seijen 1:02:29

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