After a decade of building a career in real estate finance, from a pre-college stint as an analyst for an established D.C. development firm all the way to co-founding (with his brother, Ben) the first real estate crowdfunding platform, Fundrise, Dan Miller changed lanes.
In 2016, he founded Steward, a private commercial lender which enables people to help fund the growth of sustainable farms. In a way, it wasn’t such a shift from Fundrise, which used an online funding platform to connect developers and investors. Think farmers instead of real estate developers.
When Dan’s real estate work led him to cross paths with a local D.C. chef, and as he learned of the financial difficulties facing independent farmers that supplied his restaurant, Dan connected the dots. “This generation of regenerative farmers has more opportunities than they’ve ever had. The demand is exploding. They really have a chance to grow sales and revenue but they can’t get funding.” So he set out to solve that problem.
Steward is a B Corp, which allows individual lenders to pick specific farm-based agricultural projects to back. The loans vary in interest, often 5 – 8%, a reasonable rate for business owners who cannot find financing anywhere else. “I always saw finance as a way to open up access to new groups of people,” says Dan, and true to his word, one can join in for as little as $100.
Read the podcast transcript here
Eve Picker: [00:00:08] Hi there, thanks for joining me on Rethink Real Estate. I’m on a mission to make real estate work for everyone. Real estate can help to solve climate change, can house people affordably, can create beautiful streetscapes, unify neighborhoods and enliven cities. So I’m on a journey to find the most creative thinkers and doers out there. I’m not the only one who wants to rethink real estate. You can learn more about me at evepicker.com or you can find me at smallchange.co, a real estate crowdfunding platform with impact real estate investment opportunities open for investment right now. And if you want to support this podcast, please join me at Patreon.com/rethinkrealestate where there are special opportunities for my friends and followers.
Eve: [00:01:08] Today, I’m talking with Dan Miller, who co-founded Fundrise, the first real estate crowdfunding platform to emerge in the U.S. and which has now raised over 500 million dollars. Those early years Fundrise were a slog, but that hasn’t stopped Dan from starting over. He’s changed lanes. Sort of. In 2016, he founded Steward, an online platform which raises loan funds for sustainable farms from the crowd. In a way, it wasn’t such a shift from Fundrise, which used an online funding platform to connect developers to investors. Think farmers instead of real estate developers and loans instead of equity. How did this happen? When Dan’s real estate work led him to cross paths with a local Washington, D.C. chef, and as he learned of the financial difficulties facing independent farmers that supplied his restaurant, Dan connected the dots. This generation of regenerative farmers has more opportunities than they’ve ever had, says Dan. The demand is exploding. They really have a chance to grow sales and revenue, but they can’t get funding. So he set out to solve that problem. You’ll want to listen in to learn more.
Eve: [00:02:33] If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast or go to Patreon.com/rethinkrealestate to learn about special opportunities for my friends and followers and subscribe if you can.
Eve: [00:02:56] Hello, Dan, I’m so happy to talk to you today.
Dan Miller: [00:02:58] Happy to be here, thanks Eve
Eve: [00:03:01] So I have followed you since the early Fundrise days and now you have GoSteward, a very different type of enterprise. So I wanted to start by just understanding what is GoSteward?
Dan: [00:03:16] Steward is a funding platform for regenerative agriculture, and I began meeting regenerative farmers in my real estate days in the past through chefs I knew, and these types of farmers, diversified, direct sale, smaller scale, generally have very little access to capital. So it’s meant to be a platform that lets farmers raise money and lets individuals provide capital to them that they can’t fund otherwise.
Eve: [00:03:43] So, but why did you start it?
Dan: [00:03:45] I started in 2016. There was a well-known chef in the D.C. area that I had been working with from real estate projects there. And through him, I started to meet all these farmers growing amazing products with great stories, selling them at well-known restaurants and farmer’s markets. And then in those conversations, it was clear that that none of them had access to capital, which was surprising because they’re selling products that everyone wants, you think they’d be able to get access to funds. And this was in the early days of when I was working on Fundrise, so 2010. When Fundrise was launched was when I started to meet some of these farmers. So I shoved the idea for a bunch of years and then it kind of kept coming back to me and then I eventually read the Wendell Berry ‘The Unsettling of America’, one of the kind of iconic foundational texts around agriculture and the challenges and issues of modern agriculture. And that just put me on, I would say, the path and obsession of this type of agriculture and then the positive impacts that it has through land use and ecology and health and wellness. And you, kind of, once you get into it, I find that people, they tend to not be able to stop.
Eve: [00:04:54] So how does it actually work? How does the platform work?
Dan: [00:04:58] So farmers come to our platform through insurance, through referrals, through direct relationships. They apply for funding through the traditional application process, telling their background and their experience, what products they’re growing, so we can learn more about their farm. We do due diligence, we vet them. We have a farmer on our team who does the agricultural diligence, understanding their operation, their bottlenecks or challenges, their farming practices too to make sure they align with the principles of regenerative agriculture. Then we do the credit underwriting the classic financial stuff that’s not as sexy, but it is critical for any viability of any platform. And then the loans are put on the platform so that people are buying loan participations, and they’re buying slice of the loans that were making, and then they earn the interest and return on that loan. So it’s essentially a way to connect farmers who need capital, they need credit with individuals, whether high worth family offices or small retail funders, and give them the chance to lend money to these farmers.
Eve: [00:06:04] There’s always an issue with finding loans for anything that is really standard, right? And I feel like that’s partly why we’re in the predicament we’re in. Like, banks are really focused on lending to, sort of, tried and true things that they know will guarantee a return for them.
Dan: [00:06:25] And that’s, I think, the broader theme of the work I’ve done through Fundrise or now Steward, that most funding is looking for safe and traditional and corporate and reliable. And so, when you see that, what businesses are able to access capital, it’s the larger ones that have a lot of assets and are more predictable. But money needs to go to small businesses and entrepreneurs across the spectrum, whether that’s in agriculture or real estate or small business. And the way that the funding system is set up is, it’s just not built for that. So, creating these decentralized models where smaller dollar contributors can participate and entrepreneurs can tell their story and raise funding, I think is fundamental to really unlocking more capital, which gives more opportunity to people. So I see parallels in the, kind of, the different sectors, but in the need to bring different types of funding to the end result.
Eve: [00:07:20] Well, you know, I wholeheartedly agree so, you know, in real estate, it’s exactly the same problem as in business. So it’s always the same old, same old that gets funded and that’s, that doesn’t really encourage innovation and moving forward, does it? It just staying where you are?
Dan: [00:07:40] Not at all. And I think I found a lot of similarities in agriculture to real estate. The focus on credit tenants, the focus on the users of the space being well-capitalized corporate users, forces a certain type of development with chain stores and large corporations. And similarly, in agriculture, they’re focusing on large commodity producers, huge operators with just tried and true grain, corn, soy, whereas anyone that’s doing anything a little different is just not worth the effort. They’re just left out, completely left out. Part by design, I think, but part just because it takes more time, which is basically harder to assess.
Eve: [00:08:20] It takes more time. Yeah, but damn, it’s so much more exciting!
Dan: [00:08:26] I can’t, I can’t do it because I just have no motivation. So there’s no option for me.
Eve: [00:08:33] No, I’m not wired that way either. Like, you know, I’m just not. So where did you start your operations? What were the first farms?
Dan: [00:08:41] Yeah, I began in 2016-17 working on Steward. The first farms that we funded were two urban farms in Detroit. You know, I had left Fundrise, I had started speaking to farmers through many different connections and actually found a lot of real estate people I had met around the country. I asked them if they knew agriculture and was connected to a lot of local farmers. So, there were two urban farms in Detroit. One is called Fisheye Farms, one is called Acre Detroit. They were farming on small lots, a tenth of an acre lot and they were hoping to buy land from the city. The city owns ten thousand acres of vacant land but was hesitant to sell them to farmers because, I don’t know what they’re waiting for. So we stepped in, provided funding for these farmers to buy two acres of land each. The original loans I personally provided as I was building the platform and figuring out the regulatory infrastructure. And just as an example of the kind of growth and opportunity of these overlooked farms, Fisheye farms went from ten thousand of revenue to one-hundred-twenty-thousand revenue in the three years since they were able to buy that land, so…
Eve: [00:09:49] So how much was the loan? Like, how much was it?
Dan: [00:09:54] That was a hundred-thousand-dollar loan, so, I mean, relatively small,
Eve: [00:09:56] Relatively small.
Dan: [00:09:59] And it shows the demand for those products. You know, people really want to buy wholesome food and they want to connect with where their food’s coming from. And so, in a city like Detroit, they’re in a food desert, they have fresh food that they can sell locally, and people are thrilled to do so. So, I think there’s a lot of misnomers around the viability of these types of farms. The reality is they are viable, but they’ve been under-capitalized. It’s hard to get to viability when they can’t access funding but when they are able to access funding, we see the same story of really rapid revenue growth. So, we started with urban farms in Detroit. I thought we would be a niche business. I thought most regenerative farms were funded well and maybe urban farms and other niche farms struggled. And I soon realized that it’s a global problem. Any non-traditional farm struggles with capital and so that kind of broadened from urban farms to really all types of farms now.
Eve: [00:10:54] How many farms if you help to date with loans?
Dan: [00:10:58] Over 70 now. That’s about one or two new farms a week so it’s really picked up. Just some recent farms as an example, we’ve a livestock branch in Western Oregon, right near Astoria, Oregon. We have a urban farm in Detroit with a Black farmer who’s about to raise funding. And we had an Amish dairy farmer in Pennsylvania raise funding to do value added processing for fluid milk. We had a fisheries project with just line-caught tuna and line-caught local fisheries that are then processed and sold direct. So, I think the narrative that’s similar is farmers are people that are obsessed with the quality of the product. They’re obsessed with the traceability of it. They’re obsessed with taking care of the natural resource, whether that’s land or the watershed. And they have customers that are along for the journey that want to support them. And they need money for equipment, infrastructure, land, you know, operating capital. So it’s a fairly simple business plan. They have demand and they need more production to meet the demand. But because they’re non-traditional, they’re just ignored.
Eve: [00:12:05] So you say they have customers who want to support them. Do those customers also invest?
Dan: [00:12:09] Yes, those customers do fund the loans. We actually have the first 20 percent of every loan gets funded through the network of that farmer. So, they share it at the farm stand they share it through social media. And that gives a chance for their community to be engaged and connected to the farm. And it also provides social validation of, if those people are engaged in supporting the farm, then I think it provides us confidence, too, that there’s really a community to support them. If you have customers that love your product, you’re in good shape as a farm and those are the types of farms we support. They’ve established their markets, have established their products. They know what they can produce. They know where they can sell it, and now they need to grow. And whether they’re a small farm or a larger farm, they have that same kind of demand, they’re unfulfilled.
Eve: [00:12:55] So, I think you’ve said this is not a crowdfunding platform, but this sure sounds like crowdfunding. So what’s the regulatory structure that you’re using?
Dan: [00:13:04] Yes. So, you know, crowdfunding and the general term of raising money online from many people, but ever since regulation crowdfunding came out, then that’s kind of narrowly defined crowdfunding.
Eve: [00:13:15] Really? I don’t think of it that way.
Dan: [00:13:16] In terms of fundraising, introspective. So, yeah. So, I think in broad brushstrokes it meets the premise of crowdfunding, of raising it online in smaller, larger amounts and people telling their story. We’re providing loans so we work under a framework of syndicated or participated loans. So, Steward is a private commercial lender. We provide the loan for the lender record and then we sell the participations to qualified basically members of our platform. There was a recent legal ruling over the summer, last summer, in 2020 around commercial syndicated loans not being considered securities. So there’s always been a discussion around the determination of when is a loan a security or not a security?
Eve: [00:14:02] Oh interesting.
Dan: [00:14:03] And so under that premise, we’ve kind of designed our business. So basically, we’re just providing credit, providing loans and giving the people the chance to participate in those loans.
Eve: [00:14:13] That’s really fascinating. What’s the typical loan size and what’s the rate?
Dan: [00:14:19] So most of the loans, I would say, as small as ten thousand. Average loan, probably fifty to one hundred thousand. The largest we’ve done is seven hundred thousand. Larger loans tend to be for mortgage, for property purchase. The midsize tends to be for equipment and isome nfrastructure. And then smaller ones are often quick bursts of operating capital.
Eve: [00:14:41] I mean, it’s really sad that a farm can’t get a ten-thousand-dollar loan from a bank, like…
Dan: [00:14:46] Well, the sad thing is it’s easier to get a ten-million-dollar loan as a big soy farm than a fifty- or ten-thousand-dollar loan from a bank. So, it’s kind of this strange circumstance you probably see in real estate that the bigger, formulaic deals can raise money and smaller deals that can’t get it.
Eve: [00:15:01] Exactly what we see on Small Change, and yet, I mean, I really think that if you’re really going to support that change in real estate and growing experience with people who’ve never had the opportunity before, that’s exactly what has to happen. Smaller loan sizes, smaller equity needs. Like, smaller.
Dan: [00:15:18] Yeah, you need a pathway to viability. Right now, the system’s set up that only if you’re inheriting large amounts of farmland can you get credit because you need big assets and big dollars. But a lot of the farmers we support didn’t grow up farming. I mean, it’s, I think the real sea change that’s happening in this type of regenerative agriculture. People of non-farm background, often college educated, going into farming, which certainly never happened in the past, at least not consistently. How are they going to get on the ladder? How are they going to be vetted and able to support? So a ten, twenty-five fifty K loan helps them get started. And then eventually they buy land and grow as a business. In terms of rates, most of the loans are between five to eight percent. So, I think very fair rates.
Eve: [00:15:59] That’s really reasonable.
Dan: [00:16:01] Very reasonable rates. We found that the funders are comfortable with those. Five is secured mortgage, solid cash flow. Eight is equipment with an earlier stage business. The highest we’ve done is 10, which is kind of a scrappy year one, year two farm where they’re early in their days and they just need funding to help grow. And so that’s what we’re really trying to do, create a capital market for regenerative agriculture. At what rates are people willing to lend the money? At what rates can farmers afford to borrow the money? And connect the two. Which is surprisingly uncommon in agriculture because the entirety market, most of the market is government funding. And so, there’s very little private capital market in agriculture, pretty much all USDA and government loans. And so what we’re trying to do is create an alternative of private capital that’s a different option for these farms.
Eve: [00:16:55] What about vertical farms? Have you helped any vertical farms ’cause that’s all the rage, right?
Dan: [00:16:59] It’s all the rage. I’m sceptical of vertical farms. We’ve helped urban farms, we’ve done greenhouses, hoop houses. The thing I struggle with, with vertical farms as the concept is, they are only needed in certain places. Generally, land is not that expensive in most places that you would need to produce vertically. And I struggle with the capital costs. A million dollars into some infrastructure to grow greens, you know, when you can go not too far outside the city and buy a piece of land for ten thousand dollars and grow greens there. And so, the economics of overhead of a million, or overhead of twenty-five-thousand,
Eve: [00:17:35] It doesn’t make sense to you. That’s really interesting.
Dan: [00:17:36] I just, I struggle with that as a credit provider. That you basically have, you know, the thing I’ve learned in agriculture is you want to keep your overhead low. You want it to have as little debt to service as possible. And so loading huge infrastructure costs for the vertical ag just kind of breaks that mold. Farmers, I think, do find it frustrating that a startup in Silicon Valley that’s doing vertical farming can raise one-hundred-million dollars, but they’re doing livestock in Missouri, and they can’t raise 50 K. And it’s just like, why do we keep throwing money into the non-sensical billion-dollar thing when there’s just good people out there who are doing farming the right way and just need a little bit of money to get to take the next step.
Eve: [00:18:19] Dan, you really like to support the underdog,
Dan: [00:18:22] Always, always. I don’t know how that…
Eve: [00:18:26] You’re a man after my own heart.
Dan: [00:18:29] And with these farmers, I mean, they’re persevering. They’re sacrificing, they’re doing whatever they can, most of them have off-farm jobs. One of the farms we funded in Detroit was washing dishes at the restaurant he was selling to, I mean, whatever it takes. And so, the ability to get them more resources and help them grow, it does, it is meaningful. I find it more meaningful than my work in real estate. But not all real estate developers, I would say, have the best ethic. But these farmers are really values-oriented people.
Eve: [00:19:01] Interesting. So, but you have to keep the doors open. How to Go Steward make money?
Dan: [00:19:06] Yes, you do have to. And that’s part of our proposition, that it’s a commercial platform. You’re paying rates of return that are reasonable but fair to lenders. We charge a loan origination fee. So, we charge roughly between two to three percent of the loan amount. And that’s a success paid at closing of the loan. So, when they go through the lending process that fee is added to the loan balance. And we’re also working on some other revenue streams. We’re providing services, support to some farmers, such as bookkeeping or helping with branding a website. So, I think over time a lot of the kind of business functions of these farms we could help and streamline. And then we’re also providing our technology infrastructure. And one of the farms now is using our software to raise a round of equity capital for their business in a private syndication. So they’re using our software to do that, and we have other firms. So, I think over time, this kind of value of this system we’re building, the kind of decentralized financial platform and then its application is to agriculture. And I think over time there’s ways to monetize both of those. But we’re in our early days and I mean we’re, we obviously have a long way to go. There’s a lot of growth and demand and interest from both sides of the market. So I definitely see the viability. I’ve seen it before from before with Fundraise from the beginning. How will this business ever work? But if the right market forces and trends are behind you, you can surprisingly get to scale. And I see the same thing here where just the interest in regenerative agriculture is exploding. The kind of viability and demand for these products is exploding and the need for alternative capital credit is becoming more aware. So, those kind of all weave together, that there’s more farmers that need funding, more people that want to fund them, and that the winds of ESG and climate and kind of the policy support is going is going in the right direction.
Eve: [00:20:59] Right, right.. Interesting. So how do you hope to scale?
Dan: [00:21:05] For us, it’s just more farms, I mean, we started making loans originally smaller, 50 K, 100 K. Recently we funded a project that was seven-hundred-thousand. So we’re now starting to work with more mid-sized farms that our hundreds of thousands revenue, really solid operations starting to grow. So, by being able to provide more capital, we can support operations that have more capacity to grow. So, I think, just expanding both sides of the market. The more farms we have, the more capital, the stronger the platform. The more capital on a platform, the more interest there is from farms. So we’re seeing that symbiotic kind of viral effect of each side of the market strengthening the overall platform, which is what you always hear about, but it’s nice to see it in action, that, kind of, the more the business grows, the more it can offer.
Eve: [00:21:56] Yeah. Yeah. So, you know, you said you started in Detroit. Where are you lending now?
Dan: [00:22:02] We’re lending all around the country. Right now, we’re US focused. We’ve had a lot of interest from non-US farms, that’s definitely on the horizon. But in terms of the US, Oregon has been our biggest market. Our HQ is in Portland, though our team’s remote. So just amazing farmers and farmland in Oregon, really knowledgable and thoughtful consumers, a lot of them hoping to also put their money to work in local food systems. And we just made a loan to a farmer in Hudson Valley. We funded a bunch of farms in Louisiana. So, I think we’re now at probably around 30 of the 50 states in the US. So it’s by no means limited to big coastal cities. We’ve got farmers in all parts of the country. And the business model depends, you know, you’re closer to a city you often have produce, if you have livestock that tend to be farther from a city because you need more space. And it all varies. But we’ll support any type of farmer anywhere in the country and hopefully soon the world, as long as they’re following the right practices and can have the knowledge and experience they need.
Eve: [00:23:06] So do you have investors who invest across all farms?
Dan: [00:23:11] That’s what we found. That’s one of the most promising aspects. We have over half of the people that have funded a farm fund, fund another farm, and I think we found that there we’re building a category of, well, I’ve funded this one farm and now here is another farm. It’s a similar story and a similar profile, maybe in a different location and a different product. But I, I see their challenges. I believe in them, and their kind of values focus. So, I think we’re finding that people who want to support regenerative farms have very few options. And if they’ve come to support one farm, maybe they’re a CSA member of a farm and they heard about the opportunity to help fund it and they have. Now they see another farm, and they fund it. We have people who funded 10 or 15 farms, even. Some are putting ten, twenty-five thousand dollars into every farm. So, I think that kind of stickiness of the customer on the funding side has been very positive because that’s not always the case with platforms. Sometimes people come in and do one deal and that’s the end of it and if you can cultivate a community, it goes a long way.
Eve: [00:24:09] Yeah, we’re actually finding the same thing. We definitely have a community of investors who come back again and again and again for particular themes. I think those people are truly impact investors. They really, they really care about an issue like a farm. It’s great. It’s really great to see. So just shifting gears a little bit, the common theme in your life has been crowdfunding, at least for the last 10 years, right? You launched Fundrise, which looks more like a mutual fund now than a crowdfunding platform. And now back to sort of a very organic crowdfunding platform, helping farms. What else do you think crowdfunding might be applied to that could be really successful besides real estate and farms?
Dan: [00:24:55] Yeah, I’ve always felt there’s so many broader applications and I think people haven’t been creative enough, you know by developing Fundrise, I just again saw so many people go into real estate and it like, there are other verticals to be done.
Eve: [00:25:08] There are other things, right?
Dan: [00:25:09] And so I, I felt it was a lot of like, kind of, me too. Well, what’s the narrative? Why does it matter? And I think in reality, that type of passion shows the purpose behind the platform, not just sector, but the purpose behind it. So I think real estate still presents opportunities. I think a lot of, you know, you talk about green building and other aspects, I think there’s still a ways to go to push the envelope in real estate in terms of how the built environment is done. You know, agriculture obviously, now is my big focus. Parallel to agriculture where I think there’s an opportunity is also in forestry. And I think that’s a great way to build as a good asset, but also as a natural resource to be preserved. I’m seeing more interest in alternative energy. It’s something that we’ve even worked with farms who are planning to do solar on their farm. So I think ultimately more decentralized local funding for alternative energy can go a long way. In small business, I feel like there’s still a lot of gaps for small businesses that are looking for funding. I look at so many funding platforms and it feels like there’s a lot that are real estate, there’s a lot that are tech startups, you know, and that’s pretty much it. And the reality is there’s so many other enterprises that need the support.
Dan: [00:26:26] But where I tend to think the interest and ,demand is, is if you can back it with some sort of fixed asset, I think it always helps the viability of the business and the ability to take capital where you can be more confident that people can earn a return. And I think having a forward-facing business where they’re engaged with their customers goes a long way. So, I think if you have an audience of people that want to support you, I think it’s good to bring them in. So, yeah, I’ve always been interested in crowdfunding from the perspective of a different type of capital that thinks differently and is more aligned with the end project that Fundrise was originally developed around. Me and my brother doing real estate development projects that were non-traditional and finding that traditional funding didn’t fit it. So, I’ve been on the entrepreneur side. I began on the entrepreneur side of, the frustrations of trying to find funding that meets, that is really aligned with you and so all these platforms have been, had that as the theme of how do you have more of an alignment among the entrepreneur and the capital?
Eve: [00:27:30] Yeah. So, what is your background before Fundrise?
Dan: [00:27:35] So, I started a real estate development business with my brother right out of university and my father was in real estate development in Washington, DC, so that’s where I learned real estate. Just being around it. I have tons of experience in it, but actually for years not necessarily, just you just grow up and then see around it. So commercial real estate, I would say, applies across everything. It applies to Fundrise, with the ability to build that. It applies with Steward because at the end of the day we’re funding a lot of commercial real estate and use of land that is commercial real estate. For some reason, agriculture is not thought of as commercial real estate, but it certainly is, I would say, commercial real estate. And then my kind of interest and experience in raising money through alternative channels was built around that, of being a real estate entrepreneur, trying to figure out different types of funding and then just creating a platform to do it. Just, well, if there’s nothing out there that can serve what I need, let me help build the platform that does it. So I’ve, my whole career has almost been in being an entrepreneur and finding alternative funding and building it up. And a lot of my work with these farmers is just helping them think through funding options. Not always just saying, you know, use our funding or just, well, what’s out there that we can weave together? We now even help some of the farmers apply for grants. We help them figure out what’s out there, and what can we weave together. And I think, I think that’s what a lot of entrepreneurs struggle with. An advocate for them, helping them think about what’s there from a kind of agnostic perspective. And then obviously finding that I think I can help them through our platform but understanding that there are options out there that they just may not be familiar with.
Eve: [00:29:25] Interesting. So, I mean it’s a nascent industry, crowdfunding, if you think about crowdfunding – all of it, not just regulation crowdfunding. How could it be made easier and more acceptable? It’s definitely not mainstream.
Dan: [00:29:41] It’s, yeah, it’s still early. And that’s why I think people have a short-term perspective. I mean, most of the regulations that define the world of securities and investment were written in 1933, 1934, and that quieted down requirements for fundraising and for basically eighty years provided very few options. So, we’re really only in the first decade of loosening of those types of rules, broadening opportunities and access to capital. And a lot of the rules and regulations are still challenging and problematic to utilize and maybe probably generally over the garden some. So, I think as these rules are streamlined and improved, it will become easier for platforms and entrepreneurs to use them, which will then expand the size of the market. I also find, I think the way to really drive growth in crowdfunding and drive adoption is through narrative storytelling. And so, I find a lot of crowdfunding is pitching return and that’s fine. But I think if you’re just pitching return, there’s a lot of places that are pitching return and it doesn’t stand out. And so, I find if you’re bringing people in on an emotional narrative level, you know, that takes someone who’s not classifying themselves as someone who funds things to now funding a project. And I think to bring people mainstream, it has to go beyond the investment world. And I find that few platforms to speak people beyond return.
Eve: [00:31:06] Interesting. So, what’s the biggest challenge you’ve had in building this Go Steward?
Dan: [00:31:12] I mean, the biggest challenge was really developing the market. I mean, I started in 2016 / 17. The idea of regenerative agriculture was very kind of unknown. I didn’t grow up farming. My mother’s family has been farming since the late 1800s so I was one generation away from that, but it wasn’t my personal background. And so, understanding who are these farmer customers? Where are they? How do I find them? What can they afford to pay? How can I structure a deal? Are they viable enterprises? And just validating that there is a customer who actually is a real business that can afford and raise capital, that took a few years. And then was just very pleasantly surprised at not only by the viability of these businesses, but the growth in this sector of just all types of people entering this world and wanting to become farmers and really focused on ecology and taking care of the land. And then the second challenge was, well, who are the people who want to fund these farms? I mean, I personally funded the first portfolio because you don’t want to try to build two sides of the market at once. It’s easier just to focus on one side. And then we took these farms to market over the past year as we launched the platform publicly. And I’ve been amazed by the breadth of people who are interested in funding these types of funds.
[00:32:26] I mean, most people have never funded a farm. I mean, I’ve almost never spoken to anyone who’s funded a farm that wasn’t their own family’s farm. And so you’re having to educate them about farm, farming as an asset class, regenerative agriculture as a subset of that of a different type of agriculture, and then, you know, the stories of these farms. And so, I think people, when I was saying the kind of narrative emotional level, they connect with these people. They’ve all bought food, they’ve all have that experience of being at a farmers-market of hearing a farmer and understanding their passion and their interest. So, if you can connect with who that person is and their challenges and their struggles and the importance of the funding, the other aspects of collateral security sector, I think, they can get comfort on the fact that that’s what we’re focused on and that’s our goal to make that simple and easy. So now we have both sides of the market working. Farms raising funding, funding happening very quickly. And now it’s growing the business. That part’s easier to me. It’s still a challenge but you at least know that there’s viability on both sides, whereas the first few years was kind of a lot of questions around who even is the market going to be?
Eve: [00:33:38] And are these real collateralized loans? I mean, what happens if someone defaults?
Dan: [00:33:43] Yes, so they’re all secured loans. Some are secured by real properties, some by mortgages or deed of trust, some real estate and some are secured by personal property which basically means equipment, infrastructure. So, they’re all secured. Some farms have better collateral than others. So that the interest rate depends on that. The five percent loans are the more secure lower risk loans, the higher rates are businesses with less assets or collateral. But that’s our sole business of vetting farms, helping farmers figure out what type of funding is needed and what amounts, helping them drive growth their business through other means. And then we service all the loans ourselves. So if there is a challenge, we’ll work with the farmer. Most of time if there’s a challenge, it’s a timing challenge. That there is an issue with the market or a customer or a job. So it’s not a fundamental problem. It’s OK, I just need a little more time or this customer drops so I’m now launching this, or I’m waiting on an inspection for my grade A milk, which happened when Covid hit and now it’s six months later, you know, just the reality. So rescheduling the payments is the most important. But if a farmer really can’t do it anymore, they just need to give up and move on, then we would step in. And our first scenario would be to bring in another farmer because we have a huge network of farmers who would love nothing more than to take over a operation that exists and is properly capitalized. And it’s ready to go.
Eve: [00:35:06] Interesting.
Dan: [00:35:07] So that’s our view. It’s not a type of business where you can just passively just auction off the assets and expect to get recovery. You have to be engaged in it. All we do is fund small-and mid-sized generative farmers all day, every day. And so that expertise gives us confidence that if situations do arise where there are challenges, that we can step in and resolve them. And I mention that team member who’s a farmer himself. I mean, he can literally show up at the farm if he has to and help them figure out the bottlenecks and the challenges that they’re facing.
Eve: [00:35:37] Oh wow! So then, what’s your big, hairy, audacious goal?
Dan: [00:35:41] I’ve, you know, I came into this with the view that there is a need for a fundamental transformation in our agricultural system. The reason why I support regenerative agriculture is because of the importance of taking care of the land and people and helping them all. All of those positive benefits are needed in part of our agricultural system. Instead, the system we have now has huge negative externalities with run-off, with low wages, with low quality food, with difficult access to food. So I think what we’re trying to prove is there’s a viable alternative of how you can do agriculture that is in alignment with ecosystems that provides health and wellness and opportunity for people. And I think if that can be shown to be viable and it doesn’t need to be subsidized and it can operate on its own, you can show that there is a different way and a different path forward. So many, I think, of the current modern challenges we face around societal economic, health challenges, find a root in agriculture, at least are impacted by agriculture in terms of climate or obesity or exploitation, labor exploitation. And so, it is one of those sectors that touches upon everything and each story, each farm has their own impact, which is direct and tangible, which then becomes part of a broader movement. So I think we’re in a historical kind of sea change of doing one hundred years of industrial agriculture with really negative results, misguided maybe by design or not, but the end result is not serving the interests of most people. And so, our goal is to really lead the transition to an agricultural system that is for the benefit of many and does provide opportunity for people.
Eve: [00:37:29] Well, Dan, it’s really interesting and I’m so glad you could talk to me and I wish you all the best success. It sounds like you’re well on the way.
Dan: [00:37:38] Well, thank you. Really nice to chat. And I appreciate all the work that you’ve done, also in building impact and focusing on storytelling and engaging people around funding things that are different. And I think more of that is always needed.
Eve: [00:37:52] Thank you. That was Dan Miller, founder of Steward, an online investment platform raising funds for sustainable farmers. Everything about Steward and Dan checks a box for me. With Steward Dan is serving an under-represented group of people, farmers who can’t get loans elsewhere. He’s non-discriminating in accepting investors. You can invest for as little as one hundred dollars. And he’s keenly focused on making a difference in everything that he does. I’m looking forward to seeing how Steward grows.
Eve: [00:38:45] You can find out more about this episode on the show notes page at evepicker.com or you can find other episodes you might have missed. Or you can show your support at patreon.com/rethinkrealestate where you can learn about special opportunities for my friends and followers. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change.
Images courtesy of Steward