Greenfield Recorder article: Valley Malt & PVGrows
Small business start-ups need small investors
Local group aims to bring two together; Wednesday conference to set up fund
April 7, 2012
By RICHIE DAVIS
Andrea Stanley, a former social worker, and her mechanical engineer husband, Christian, looked around at the renewed interest in growing local grains and using it to make local bread. And they wondered, why not use it to make local beer?
“We thought, ‘Wouldn’t it be cool to have beer made out of local grain?’” she said. “We had this ‘aha!’ moment.”
So with a loan from the Western Massachusetts Enterprise Fund and Christian Stanley’s mechanical skill, the Hadley couple started up the only malt house in the United States in 2010.
With microbreweries and distilleries beating a path to their door for locally grown, locally malted rye, wheat and barley, Valley Malt has received a second loan to quadruple its operation. This loan is from the PV Grows Loan Fund, a consortium of organizations trying to strategically invest in the local food system.
The latest investment will allow Valley Malt to go from processing one ton of locally grown grain a week to four tons, said Andrea Stanley.
“Our business will grow as fast as the local farmers can grow the local grains needed for malt,” she said. “The demand is certainly there.”
But although the Stanleys have seen interest from as far away as Chicago for their products, and are planning to grow more than 35 acres of their own grain this season in Northampton and Hadley, she said, “We’re just trying to work with our local customers right now.”
“Local” means mostly Gloucester, Worcester, Cambridge and Ipswich, but how to better market to Pioneer Valley brewers is one of the questions Valley Malt — along with six other local food entrepreneurs — bring to next week’s PVGrows Spring Forum at Smith College Conference Center in Northampton.
Wednesday’s event will also look at creating a new Community Capital Fund so that much smaller investors can stoke the fires of local food businesses. And the forum will be followed at 1:30 p.m. by the formation of Slow Money Pioneer Valley — part of a national network of groups that try to bring together local investors and local food entrepreneurs.
Registration is required to attend Wednesday’s events.
The $750,000 PV Grows Loan Fund, which provided its initial loan in November 2010 to Boston-based “Organic Renaissance LLC” food exchange to set up a warehouse leased in the 365,000square-foot LP Athol building, comes from the PV Grows Infrastructure Working Group, a consortium of seven lending institutions, including Franklin County Community Development Corp.
But the effort, based on the Slow Money model, has been trying to come up with a way for more local people to get involved to make more capital available for projects. A new Community Capital Fund is seen as a way of aggregating those small-scale investments, “If someone called and said they want to invest, there was nowhere to send them in terms of specifically investing in local food,” said PVGrows spokesman Sam Stegeman. “We keep telling them to wait. There are people ready to meet entrepreneurs and start investing now.”
The planned Community Capital Fund will allow that, said Jeff Rosen, one of the creators of PVGrows and its Infrastructure Working Group.
“The PVGrows loan pool would get calls from individuals all the time saying, ‘How do I participate?’ This has really been the goal all along, with people who live in the Pioneer Valley saying, ‘I love shopping at farmers markets; I just wish I had way to invest in the local food system.”
Working out a system like that is more complicated than it sounds, said Rosen, who expects the new grassroots fund to get started in a matter of months.
Slow Money, which already has 15 chapters around the country, will work collaboratively with PVGrows, specifically bringing accredited, socially responsible investors from around the Pioneer Valley together with food system entrepreneurs who are looking for capital.
“We’re just opening the doors a little bit on the work PVGrows is doing,” said Stegeman. “Slow Money is good at hosting events with people who have money and people who need money, so they can talk and make connections.”
Until now, Stegeman said, PVGrows has been focused on start-up local food businesses that need capital. But now it’s interested in expanding to include any farm or food business, because there have been farms that are interested in bringing expensive infrastructure projects to the farm, to share among multiple farms.
“We found ourselves saying ‘no’ to great projects, which wound up getting funded elsewhere, but we felt we weren’t deploying our capital quickly enough.”
Although Organic Renaissance has been “an excellent business in start-up phase” over the past couple of years, Stegeman said, it’s taken the distribution business longer than expected to get its planned Athol warehouse up and running. The business, which has warehouses in Boston and New Bedford and distributes produce from Pioneer Valley growers, “are still planning to redevelop the Athol warehouse as a hub for western New England,” he said.
Meanwhile, back at Valley Malt, which will use its new loan in conjunction with a state agricultural grant to install a fuel-efficient heating system for malting vessels, Stanley said this kind of financial help is key to starting up local food enterprises as part of a growing agricultural economy.
Nobody makes equipment for small-scale malt houses, so that had to be custom-built by her husband. It’s hard to find commercial banks that will take the financial risk to invest in starting such ventures.
“There aren’t any small malt houses to look at to compare,” she said. So the couple had to turn to alternative financing.
Rosen, chief financial officer of Northampton-based Solidago Foundation — another member of the PVGrows loan pool — said the category of $50,000 to $250,000 commercial lenders that start-up entrepreneurs are looking at is seen as too small for many big banks to bother with, so that’s been a focus of the PVGrows lending collaborative.
“If you have a sustainable business model where you’re not generating a lot of profit but there’s community value, that’s seen as not providing attractive returns to (conventional) investors,” Rosen said. Other investors in the PVGrows Loan Fund include Common Capital (formerly Western Massachusetts Enterprise Fund), Lydia B. Stokes Foundation, Cooperative Fund of New England and Equity Trust, Inc.
On the Web: www.pvgrows.net www.valleymalt.com You can reach Richie Davis at: firstname.lastname@example.org or 413-772-0261, ext. 269