The Complete Guide to Financing a

Socially Responsible Food Business

Elizabeth
Foreword by Michael Shuman

Chelsea Green Publishing

White River Junction, Vermont

Introduction

This book is written for the entrepreneurs across the United States who
are using food ventures to build healthier economies, ecosystems, people,
and communities. If youre a passionate and experienced food person who
has yet to take the business plunge but are headed in that direction, this
book is for you, too. The new enterprise models you are pioneering plus
the traditional models you have reenvisioned to better serve people and the
planetoffer a dizzying range of solutions to the well-documented cycles
of environmental damage, food deserts, depressed urban and rural communities, and diet-related disease.
As a group you offer social, environmental, and economic solutions at all
levels of the food chain: from seed companies that aim to preserve heritage
varieties well suited to specific regions; to farms and ranches that employ
ecologically benign or restorative production methods and land stewardship practices; to food hubs that make it more efficient for these producers
to bring their products to market; from on-farm, value-added processing to
larger-scale food manufacturing facilities that create jobs and return higher
value to producers while providing healthier food to people and a reduced
impact on the environment. Your food distribution businesses boast more
efficient routes and delivery vehicles. Many of you in food retail, including
grocery stores and restaurants, offer healthier choices and forge more direct
relationships with local farmers in addition to using less energy in your
buildings. Completing the cycle from farm to fork and back to the farm
again are those of you whose businesses collect food waste and turn it into
valuable compost, and still others who take used cooking oil and turn it
back into fuel for cars or commercial vehicles. Then there are the businesses
that offer people- and planet-friendly fertilizers, pest management systems,
or production management software. The solutions are endless.
This book is also for people who want to better support socially responsible entrepreneurs in their efforts to raise capital, as a nonprofit service
provider, a civil servant, or an engaged citizen. And finally, it is for people
who already do, or want to, invest in sustainable food businesses, whether

Raising Dough

2|

you have a little of your own money, a lot of your institutions money, or
any amount in between to give, lend, or otherwise bring to the table. I hope
the following pages will help you understand the experience of the people
whose businesses you may encounter in your journeys.
Are you a social entrepreneur, a green businessperson, or an ecological
problem solver in a field that has nothing to do with food whatsoever?
Most of this books content is relevant to people raising money for socially
responsible businesses in any fieldor any business at all, for that matter.
The case studies all have to do with food companies that are addressing
social or environmental issues in some way, but I have tried to choose a
variety of business models that will mirror the experiences of a wide range
of entrepreneurs.
uvW

Why I Wrote This Book

WVU

I have spent the last decade closely examining the challenges that people face
when trying to raise money for socially responsible food ventures. Almost
all of the food entrepreneurs I meet report that lack of access to capital pre
sents a major barrier to planning, launching, maintaining, or growing their
businesses, limiting their ability to foster positive social change. How can
this be, at a time of increasing demand for food that is produced, delivered,
prepared, and sold in ways that are better for the environment and for the
people involved at all points in the process? And at a time when more and
more financial institutions, not to mention everyday people, are interested
in investing their money closer to home, and in ways that support the very
outcomes that sustainable food businesses bring about?
Over the past ten years I have also done my best to create new ways to
connect food entrepreneurs with the people and institutions that want to
invest in them. As an employee of Slow Money (see chapter 1), I examined
survey results and interviewed dozens of people in an attempt to tease out
the needs of food entrepreneurs and mission-minded investors. Could we
design an investment fund that would work better than existing venture
capital funds to foster a more sustainable food system? The unique equity
fund I designed was never actually launched, but it helped further the discussion of what might be possible. While on staff at RSF Social Finance, a
pioneering nonprofit financial services organization dedicated to transforming the way the world works with money (see chapter 14), I helped design

Introduction

|3

and launch a new loan fund for the highest-impact food companies. As a
member of the advisory committee of the Community Capital Initiative of
the Business Alliance for Local Living Economies (BALLE), I help craft a series of workshops and webinars that show both investors and entrepreneurs
how to take advantage of the most promising new models to connect local
businesses with local lenders; we envision that literally trillions of dollars
could move from Wall Street to Main Street, creating millions of new jobs
and helping to build vibrant local economies.
Even as I worked to create and share new food-financing solutions, one
major conundrum continued to trouble me. I was spending the majority of
my working hours trying to find and make sense of all the different capital
options available for food businesses, and I could barely keep track of them
all. How could anyone possibly expect a social entrepreneursomeone
who was already spending 120 percent of her time building a venture that
would make the world a better place and make a profitto understand all
the financing options? Even if someone miraculously managed to identify
every single potential source of funds, how would entrepreneurs be able to
quickly determine which would be the best fit for their unique business,
with their particular values and priorities? There came a time when I could
ignore these nagging questions no longer. I needed to write this book!
My friend Brahm Ahmadi is CEO of Peoples Community Market,
envisioned as a small-format, full-service neighborhood food store, health
resource center, and community hub that supports West Oakland families to attain healthier and more socially connected lives. I have watched
Brahm struggle for years to raise money to finance construction of this
project in this inner-city California community of twenty-six thousand
residents who are predominantly African-American and Latino. Although
residents collectively spend over $58 million a year on groceries, there
are no full-service grocery stores in West Oakland. Many people who live
there dont own a vehicle and rely on public transportation. Yet they must
travel great distances to get to far-off supermarkets. The inconvenience,
time, and cost of these shopping trips leads many residents to regularly
shop at nearby corner stores that carry mostly processed, poor-quality
foods sold at high prices. Meanwhile, 70 percent of the grocery spending
occurs outside of West Oakland, meaning there is an unrealized potential
for local jobs and local profits. One might think that banks, foundations,
and wealthy individual investors would jump at the chance to financially

Raising Dough

4|

support Peoples Community Market, as it would resolve so many issues

that West Oakland residents face.
Brahm has an MBA. Hes an excellent public speaker with a decade of
experience working as a community leader within the local food system,
making him a media darling. Peoples Community Market has a top-notch
team, with industry expertise in spades. They have conducted ample
research to show that Peoples Community Market should succeed according to plan. Despite all of this, Brahm failed to raise the necessary capital
from the usual suspects (i.e., the traditional sources of capital), and I believe
his experience is a textbook illustration of the barriers that stand between
socially responsible food entrepreneurs and the capital they need.
The experience of lack of access to capital can stem from any number of
challenges, each of which can hinder the flow of money from those who
would like to invest it to those who are trying to raise it. Many of these are,
unfortunately, beyond an entrepreneurs immediate control.
uvW

How to Use This Book

WVU

The good news is that the variety of capital sources available to sustainable
food entrepreneurs is increasing, and there are many things that you can do
to increase the likelihood of raising capital for your business. This book focuses on actions you can take and financing options that are available right
now. It is not meant to be an exhaustive directory of grant makers, lenders,
institutional investors, and the like. Nor is it meant to define exactly what a
sustainable food business should be, though you may find inspiration in
the entrepreneur profiles that I use throughout this book to illustrate the
concepts covered.
I have organized the book into four parts. Part 1 pertains to things that
you canand in my opinion, shoulddo before you ask a single person
for money, whether its a gift, a loan, or an equity investment. It includes
chapters on meeting the right people, making sure you know what values
are most important to you, and setting up your business so that its ready
to attract new capital. The next three parts cover the many different forms
of capital that are available to support socially responsible food businesses,
including information about when a particular source of financing might
be appropriate, how each tends to work, what financiers will likely expect
from you as they assess whether or not to invest in your business, things to

Introduction

|5

watch out for, what the relationship might look like over time, and where
to look for more information, including places to find the actual financiers
themselves. Part 2 focuses on financing methods that you would use primarily with people you know quite well, including friends, family, and existing
or future customers. (I refuse to use the expression friends, family, and
fools because I have a lot more respect for people who choose to take a risk
by investing in an early-stage company with a mission they believe in.) This
second part also covers online crowdfunding. Dont miss chapter 10, which
covers important laws that all fundraising entrepreneurs need to know lest
they end up inadvertently breaking one. Part 3 covers all manner of debt
(also known as credit), wherein you borrow money and pay it back over
time, usually plus interest. This part covers all the different sources of debt
that might work for your company, from personal debt options to direct
loans from individuals to lines of credit from a commercial lender, and
more. Part 4 covers equity financing (in which you raise money by selling
shares of your company), from individual and angel investors to venture
capital and other institutional equity options. I put the chapter on working
with foundations in this section, not to imply that foundations only do
equity financing (this is hardly the case), but because foundations can do so
many types of investments that it didnt make sense to include them earlier
in the book. Part 4 ends with a chapter on strategies for entrepreneurs who
are ready to transition out of the business but want the values to remain
after they are gone.
Each of the chapters in parts 2, 3, and 4 is organized roughly in order
of which sources of capital I would recommend first to new businesses,
with later chapters covering financing options that are more appropriate
for later-stage companies. Dont take this as a prescription, however; youll
have to use your best judgment and the information provided to determine
which options to pursue and when, if they are appropriate for you at all.
While you could start with the chapters that interest you the most, I highly
recommend at least skimming through the whole book before jumping to
conclusions about which financing methods might be the right fit for your
needs. There are also aspects of earlier chapters that I refer back to in later
chapters; as an example, chapter 7 describes the process of building a list
of people who might be willing to give you a gift to launch or grow your
business, but this is the same list that will help you identify people who
might be able to make a loan or equity investment.

6|

Raising Dough
It is my sincere hope that this book will
increase your awareness of the full range of capital options available
to support sustainable food businesses;
help you identify which of these are most appropriate given your
unique values and goals;
give you a sense of what it will take to successfully access the appropriate types of capital;
increase your confidence in speaking about money and finance with
different types of investors; and
reveal additional resources that will help you in your quest to raise
money for your venture.

Raising capital is rarely easy or straightforward, and the field of finance is

changing so rapidly that even seasoned entrepreneurs can find it difficult to
know just where to focus their efforts. For Brahm, the Peoples Community
Market, and the residents they serve, the answer came in the form of a direct
public offering that allows anyone in California to invest as little as $1,000.
West Oakland residents can now become founders and shareholders of the
company that exists solely to make their lives better. (See chapter 10 for
more information about this financing option.)
May the insights in this book help demystify the fundraising process
so that you can get back to the work you set out to do, as soon as possible,
with the resources you need to do it. Thank you for your contribution to
building a more sustainable food system that nourishes us all.

Praise for Raising Dough

Elizabeth has created a formidable one-stop guide to the brass tacks of

building a successful sustainable food business. For everyone whos ever
wanted to turn their passion for sustainable food into a thriving business,
this book is for you.
Anna Lapp, founder, Real Food Media Project and
author, Diet for a Hot Planet
Elizabeth has written an absolutely critical book for social entrepreneurs.
She provides a unique perspective on how different kinds of capital can be
blended and sequenced. If you are not familiar with how to attract grants,
low-interest loans, equity, loan guarantees, etc., to grow your business, youll
find this to be a hugely valuable investment in yourself. Read it, use it!
Don Shaffer, president and CEO,
RSF Social Finance
The foundation of a new economy is an equitable society that values
everyone. Localists know this requires working on multiple fronts, and
community capital is one of the most important. Elizabeths book covers
the many ways to connect any local businessesnot only those related to
foodwith local lenders, investors, and donors.
Michelle Long, executive director,
Business Alliance for Local Living Economies (BALLE)
Successfully financing food enterprises is paramount to building a just,
fair, and healthy food system. Elizabeths book shows us how to get it done.
Raising Dough is an excellent addition to the literature of the sustainable
food movement.
LaDonna Redmond, executive director,
The Campaign for Food Justice Now

As a food entrepreneur, I learned how challenging it is not only to find

money but to find the right money. Elizabeths book is an important tool to
help food entrepreneurs start and grow their businesses in a way that supports
their visionso that their food start-ups can thrive and change the world.
Sheryl OLoughlin, executive director, Center for Entrepreneurial
Studies at the Stanford University Graduate School of Business,
cofounder and former CEO, Nest Collective (now Plum, Inc.), and
former CEO, Clif Bar & Company
Great business ideas need money behind them, and Elizabeth shows us
how to attract and steward investors who are looking beyond profit and
toward the benefits that a mission-driven business brings to the community
it serves. I wish this book had been around when we were looking for equity
investors in Cowgirl Creamery.
Sue Conley, cofounder, Cowgirl Creamery
Raising Dough is an invaluable resource for socially minded farmers and
food entrepreneurs. Elizabeth s clear-eyed, nuts-and-bolts advice demonstrates that, like food, finance can be sustainable, too.
Amy Cortese, author, Locavesting: The Revolution
in Local Investing and How to Profit from It
Where has this book been all my life? This step-by-step guidebook to
financing food businesses is vitally needed today. In this rapidly evolving
field, Raising Dough is a key contribution.
Marjorie Kelly, Tellus Institute fellow and
author, Owning Our Future: The Emerging Ownership Revolution
Starting a food business? Raising Dough provides an extremely useful
roadmap through the financial landscape. This is a wonderful overview of
the tools and techniques for capitalizing your small food enterprise.
Woody Tasch, chairman, Slow Money, and
author,Inquiries into the Nature of Slow Money