Episode 120: Bridging Finance and Farming with Dan Miller

Hi friends. Welcome back to the Regenerative Agriculture podcast. This is John and today we're going to have a fun conversation that isn't agronomy oriented. So frequently here we talk about the sciences and the cultural management practices that need to be brought to bear to regenerate ecosystems, to regenerate plant health, to regenerate our human health collectively as a society. But in order for any of those to function, the foundational underpinnings are that we need to have strong financial health and economic health within our farming communities, because that foundational piece is required in order to regenerate the capacity for stewardship. One of the companies that I've been observing with a great deal of interest in the agricultural finance space is Steward Capital. And today I have with me Dan Miller, who founded that organization to tell us a bit about the pieces that they are working on and the impact that they hope to have in agriculture. So Dan, thank you for being here. Tell us a little bit about your journey and background and what gave you the inspiration for Steward Capital and what exactly is Steward Capital?

Well, thanks for having me. Always great to talk, John. So Steward is a platform to provide alternative financing to alternative agriculture. So we provide credit and loans to farmers, food systems, infrastructure, anything from production through to end product. And what's unique about our model is we raise the loan capital online directly from a network of now over 3,000 funders, from individuals to family offices. And so we have a values line network of funders that we aggregate the capital for and provide as credit. And the backstory, it goes very far. It's kind of personal story, but also family story. And it feels like I have the right skill set to end up here. But I would have never thought I would have ended up here if I had looked forward. So my mother's family has been farming on the eastern shore of Maryland since the late 1800s. 500 person farm town, that's still 500 people saw the commoditization of ag. That region is a corn, soy, winter wheat, broiler, chicken. 99% of everything is pretty much just that. So she left the farm. I grew up in Washington D.C. but we kept those ties. And so I always witnessed the kind of bot emptying out of where she grew up, up, the lack of opportunity. But I saw that every square inch was planted. And so I was trying to square that. Like there's an ecological issue happening in the watershed, which was Chesapeake Bay. There's a lack of opportunity in the rural communities, there's a lack of nutritious Food, but ultimately the, the value is not staying in the places that need it. And then I grew up in Washington D.C. where you see enormous amount of growth, enormous amount of money and lots of opportunity. And they were just 90 minutes away and there was really no connection between the two. And so the, the AG part story really came later. And so I grew up in Washington D.C. in commercial real estate. My father was in commercial real estate development. A lot of mixed use development, really pioneering type of projects. And so I always learned that you, you can create something from scratch, you can find ways to creatively pull capital together to do projects that are non traditional. And that if you really believe in something, you can make it happen, even if nobody thinks it's going to work. So.

That'S a powerful mindset that many of us don't, we don't get to observe or experience very frequently.

It's a perspective. It's a perspective and it's whether it's passed generationally or passed through experience. I, I had saw pieces of land that were developed into projects. I saw meetings that then became really impactful deals. And, and what he really specialized in, real estate, was economic development oriented projects. So it wasn't just like a property, it was how do we create something that can lead to growth and lead to changing the trajectory of a place. And so I grew up around that. After college I went into real estate, not for my family's firm, but my brother and I spun out to do our own firm and we were interested instead of bigger, mixed use kind of big development deals. Wanted to start from the basics. And we were doing neighborhood scale development projects in Washington D.C. so historic buildings, restoring them, tenant on the ground floor, focusing on local tenants. A lot of them were chefs, you know, sourcing locally. And so it's the exact type of project that everybody wants in their community, but it's the exact type of project that investors have no interest in funding because it's too small, there's not a credit tenant to finance. You know, when you focus on design, the construction costs can be higher. And they want to put anything into anything that could add value outside of traditional construction. And so we were stuck in a world where the capital was forcing us to do the types of projects we didn't want to do. And so we try to flip it on our head and say, well, we believe in this project, we're putting our own money into this project. Let's find people that also want to invest and support in this type of project. And so that led to fundrise the Creation of Fundrise, which was the first real estate crowdfunding platform. But initially it was actually we created the technology and went through the regulatory hoops to raise money for our own real estate project. So it's really a way of we want a new source of capital for non traditional real estate and we're just blown away by the interest and demand for people who could invest in something tangible, could invest online in private real estate. And so we spun out fundrise from our real estate business, scaled that. Now FundRise raises about $100 million a month, billions of dollars raised, all online, all direct to consumer, all through these types of direct relationships. So that's where I learned the technology, the regulatory, the product development, the marketing. Like all those aspects of how do you create an alternative platform and really market those products. So that, that was where I cut my teeth on that aspect. But the, the agricultural link was actually with me from the beginning. And so in those days of those real estate projects I'm mentioning, I was trying to lease a lot of those buildings to chefs who were sourcing from local farmers. That was just, that's type of food. I liked that story I was interested in. I could see the impact. One in particular is named Spike Jeude. Out of Baltimore, Woodbury Kitchens. His restaurant really the pioneer in the mid Atlantic and the Chesapeake Bay watershed. Around regional sourcing, direct sourcing, buying from over 100 producers for a single restaurant. Really just an economic engine of driving products through the supply chain and introducing them to new people. And so I saw that kind of beautiful supply chain expecting that he was matching consumer demand and helping these producers scale up. But, but as I spoke to producers he was working with, they all complained about lack of access to capital. And at first I was very confused because they're selling to a well known chef who's guaranteeing to buy their product, who's being featured in press, who's telling the story of these great heirloom varieties. But there's no financing. And normally you're taught demand equals access to capital. But you quickly learn in ag that supply demand have really nothing to do with anything. And the market is created by policy. And so these producers of these niche heirloom varieties of products bucks. So the USDA doesn't know what you know, fish, peppers are, which was an heirloom pepper that was being grown. Banks don't know what they are. They zero it out. It's not worth anything, can't lend on it, not going to work. And so I immediately saw that you had this consumer interest in regional food, in sustainable food systems, in farm to table. That was buying. But what. What needed to be the capital to actually fund those producers. Like we needed to connect to that kind of interested consumer market with the producer market and get the two of them connected. That was just as fundrise was being launched. That idea of aggregating online networks was in my head. And so I was confident that if it worked in real estate, it would work really well also in regenerative agriculture. But I didn't have the time to focus on it at that point. So that was like 2011, five years of building Fundrise. And then I read the Unsettling of America. I read Wendell Berry's Unsettling of America, which I think for many people is a transformational book. For me, what it really did was, you know, I didn't grow up on a farm. I was, you know, six generations, or probably even more than that of farmers before me. But I didn't have that direct context. And so it really validated a lot of the thoughts I had, which is there's some sort of policy design that is forcing all these decisions around the consolidation, around the bottoming out of these rural communities and service providers. And that it's not. Doesn't have to be this way. This is just the corporate and governmental system that has created this type of commoditize agriculture. But there are different ways to do it. And that set me on the path of, okay, let me find those other types of producers. Who are they and how can they be supported? And in the first chapter of the book, he talks about the idea of having more people invested in agriculture and connected to it and having family ties and a personal link. And that really resonated with me because the model for Steward wasn't just about finding a new source of capital and plugging the market demand. It was about linking people back to these agricultural projects and building connections that are needed to sustain a regional food system. So that really was the genesis of the idea. It's grown a lot since then, but the core element was how do we take that interest in supporting regional food systems and get it actually as capital in the hands of the producers to produce more to meet demand and create that virtuous cycle.

That's an incredible story.

Dan.

How has. From the early days of the idea of Steward, how has Stuart developed. You had this idea originally back in 2011. When did you actually first begin working on it? Were first able to start developing it?

So 2011 was when those first conversations with farmers and Spike and those Kind of regional value chains developed. 2015 I read the unsettling of America. 2016 Left fundraise, began working on steward. First year was a lot of learning. Who are these mythical regenerative to farmers? How do I get in touch with them, what type of capital they need, how do we need to structure deals? And 2017 was the first loan. So the first loan was actually to a urban farmer in Detroit. Move going from a tenth of an acre of land, a side lot to two acres of land. And that wasn't even considered a farm. I think the USTA doesn't even classify that as a farm. So we definitely started in the fringes. We started with small urban farms in Detroit who were growing, but obviously a non traditional variety. We actually funded an Amish dairy and grain farmer in Lancaster county was one of the first loans. We funded a sun grown regenerative hemp farmer in southern Oregon. So we definitely started out more broadly on the fringes. And what we were providing was credit, you know, money to buy land, money to buy infrastructure, working capital. And so that made sense to me that those types of niche alternative producers, you know, may not be supported. But what's amazed me is every year as the business has grown, we get more towards the core, you know, more towards the center of agriculture, bigger operations, more established operations. And even the ones with tens of millions of dollars of cash flow that are practicing regenerative ag still struggle with capital. So what I thought was maybe like a niche business, or at least there's a place for it, but it was going to solve a 5% issue in agriculture. It turns out the entire all of agriculture has this issue which is there's almost unlimited amount of commodity finance through the normal channels. But the second you go out of that market, no matter how large you are, how long you've been operating, multi generational or not, you're not supported. And that's really what I see with the opportunity of steward is, is rebuilding systematically that access to capital in that market.

So I want to come back to, to that point of being unsupported and when you step outside the domain of what is common. But before we go there, can you give us some sense of what's the scope of lending and capital deployment that you're working with today?

So now at Steward We've funded 95 projects around the country, over $30 million of financing from loans as small as 10,000 to now as large as six and a half million. We began with producers, so funding producers, land, equipment, infrastructure, we're now doing A lot of regional infrastructure. So we're working with flour mill, oatmeal, livestock processing. And so our scope and scale is definitely growing. We're now looking at a loan that's $25 million total, which is our entire volume for last year and half of the year before that. So we're seeing really rapid growth in demand and need for capital. And then same on the funding side. We just raised $500,000 for a 40 acre mixed vegetable farm in Virginia and that was raised in under an hour. And it's. We just send an email, no marketing, no nothing. You're. You're in that deal I think, right?

Yeah, I've actually, I've been watching, I've been paying attention to your platform and to, to deal flow and how deals get funded for a while. I've been, I've been interested, an interested observer, if you will, and a participant in a small way. And yeah, you close that deal in under an hour. But the reality is that half of it came in in the first three minutes and that was as you said, with just an email to your list of funders, no other marketing, no support.

And we actually found that over 200,000 of that in the first two minutes was actually before the email was delivered. So it means people were logged onto the website at the time that we said the deal was going to go live and found it themselves and it funded it. But that's the engagement, that's the commitment. I think that's what people don't understand. When you build these directions platforms where the funder direct to a project, it goes beyond capital, it goes beyond just return and you get a connection and excitement. And that's what I love most about this work is like that, that network development, that participation capacity for everybody.

So how do you see things evolving? Dan, you're describing that the needs for capital are so significant. How do you see Stuart growing over the next year or two?

So there's really two sides to the market. There's the borrowers, the farmers, the regional food systems work the. They've needed capital forever. There's nothing new there. They've needed money for a long time. We're now a new source to provide it. But that's an easy match. They need capital, we provide capital. They're linked there what a lot of the effort is. How do we build the funding audience? Most people have not ever invested in a farm. Most people haven't lent money to a farm, certainly not regenerative farms. Really broadening that network of who are we going to bring in to support this growth and support this financing. Every new deal brings more capital, more capital brings new deals. So we've really got this symbiotic, you know, network effect of a two sided marketplace growing. So now we're taking on a lot of regional scale projects. You know, I mentioned our first deal, two acre urban farm. Now we're working on a flower mill that's going to be buying from 40,000 acres. We're working on oatmeal that'll be buying from about 20, 30,000 acres. So now we're having projects that are, I think going to fundamentally shift the capacity to supply the market for regenerative ag and are going to shift the economics of producer control through to end market with better margins. And so these are the projects I'm very excited about, which is how do we change the systematic nature of it? A single farm on their own is always going to struggle in the system. But if we can start to aggregate resources and integrate supply chains now we can share the economics through all of those participants. And now we can have enough margin on the farm to take care of the land, enough margin at the producer level to pay people well. So these are the projects I'm very excited about of how do we, you know, re establish at a watershed scale what's possible.

And it's those types of projects that I've also been very interested in because you're absolutely correct, it is facilitating market access is the piece that is so desperately needed in rural communities and to regenerate some of these agricultural supply chains. You know Dan, what really caught my interest about the work that you're doing is you actually funded, you extended a line of credit to one of our customers at aea. And so commonly we enter into, we're an interested third party, if you will, into these conversations where sometimes the capital environment, the lending environment is really difficult, sometimes a farm is in a difficult situation. And one of the things that I've been thinking a lot about over the years is how various enterprises come together to form truly collaborative and truly synergistic relationships. One of the stories that I've shared here on the podcast is of this group of European enterprises that have this beautiful collaborative relationship between growers all the way through to the retail supply chain where everyone has complete price transparency and they have this amazing collaborative relationship. And one of the things that really caught my attention about steward is when this farmer got into a difficult situation because of a harvest sales cycle not matching up with the cash flow cycle. You were actually able to Be exceptionally flexible and to accommodate the needs that the grower had, which is that flexibility doesn't always exist in actually in my observation, flexibility to the degree that you provided is quite rare in the agricultural lending space. And that to me was an expression of an organization that is authentic in its desire to have symbiotic and collaborative relationships with growers and throughout the entire supply chain.

And that's core to our mission, which is we've always pitched ourselves, it's about values and flexibility and being dynamic. We used to be a high cost provider, now we're actually low cost. So that's, that's a separate story. But it was about we're designed for your need, we're built for your purpose, and we can be flexible and a true partner in these aspects. On a multi year loan, every farm is going to run into an issue. And so the idea that agricultural financing is meant to be really rigid and have very structured payment schedules. Often loans have the first interest payment a month after closing. It's like, well, from what cash flow? Where's that coming from? It's, it's not being generated probably by the operation. And so we take a very flexible attitude of if it's a good operator and they're running into an issue because of markets or labor, we can structure the payments, defer payments, move things around to give them the time to do it. And because our model is direct, it's us as the platform, as lender, the borrower farmer signing the contract and us participating alone to our direct audience. We go out to them and we tell them the story and the need for modification and what we propose. And everyone pretty much just says supportive. And they mostly say, I appreciate you trying, you know, working through something to figure out a solution. And so we're not a bank that's just selling loans into the market and packaging them and securitizing them and doesn't even service our own loans. And that kind of disconnected financial relationship is actually the norm. Not just an aggressive in all of capital, which is you're not holding your own loans, you don't have that personal connection to the projects, you don't have the controls and systems to be adaptive. And in agriculture that doesn't work at all. In commercial real estate there's a little more reliability around cash flows, etc. But in agriculture, you're dealing with the world, right? You're dealing with nature and you have to adapt to it. So I find a lot of what I'm most proud of, of Stuart is our flexibility in Resolving, you know, issues that the business faces. And then when that works and they're able to get past it and get back on track, that's very fulfilling because in most circumstances they don't get that chance. It's over and they've hit the wall and that's the end of it.

So when you think back over the last several years as you've developed steward, what are some of the memorable moments and the highlights that really stand out in your memory that were particularly rewarding?

I think the growth of the projects is what I love. Like that this business is a slow business, right? You're dealing with natural cycles of nature. You're dealing with growth at a scale that is sustainable, which means you're, you're doing it in a way that can work forward. One of the projects I love most is called Old Salt Co Op. They're in Montana. It's a group of three fifth generation ranching families who've come together to create slaughter, value added processing and a shared brand and even a restaurant they just opened in Helena. And so in that project first came to us referred by actually a friend I grew up with in Washington D.C. who was buying chickpeas in Montana and got connected with these guys and they had just opened a burger shop. That's all they had. They had a burger shop trying to prove demand for Montana meat from Montanans. Shouldn't be crazy idea but most meat that Montanans are purchasing is not from it. It mostly just gets sent out the state. And so they started with a burger shop and over the next three years we've made six loans total which involve them buying a processing facility, buying a piece of land that they're now going to build slaughter and integrated processing on together. Opening up a restaurant downtown that's a butcher shop market and you know, value added product. And they're almost at the point probably in the next 12 months where they'll have that fully vertically integrated producer owned through slaughter processing to end market with direct consumer sales and direct relationship with their customers. And so to help a business go from you know, having put 30K into opening a burger joint to now having 8 to 10 million dollars of total capital between loans and equity and planning to double or triple that in the next few years. I just love seeing that, that growth and that opportunity from, from what was just an idea in a few years to what is now going to be not only a regionally dominant business, but a model that many other people are looking at and hoping it succeeds. And so the nurturing of those Deals is what I love most. And that's where I put a lot of my time on, you know, straightforward transactions, easy. I don't have to be the one to underwrite that. But helping somebody think about, okay, where are you trying to go? What are the steps there? What can we finance as a loan? What grants are out there that can we weave in? What equity capital can you raise? Let me even help you structure that potentially and help you figure out how to do it from a regulatory compliance perspective, like using all the knowledge I have and capital and finance, but applying that at a really grassroots level. That's the marriage that I love, and that's where I'm most useful as well.

And it reflects back to your beginnings in the early days with your father and commercial and real estate development, of developing deals that are only an idea and having faith that you can put those together, given time and energy and focus. That's a remarkable accomplishment.

Yeah.

And I have these memories still coming back, even with my dad, of being in a meeting with some city council members in Washington, D.C. and, you know, when I was 7 or 8 years old, and then being at the opening of that project eight or ten years later. So I have seen that arc happen a few times, and you even hear stories of those types of things. And so my perspective has always been that anything is possible if you're focused and diligent and on it. You definitely have to get creative in how you put things together, and particularly around this work. With regenerative agriculture, I think people often forget is you're serving unmet demand. Like this began with me with the demand side pulling back to the farmer. So you're in a market where there's natural opportunity to serve. You just don't have the capital to get there. So really, you're in an undersupplied market. So if you have a really good operator with a good concept, you can get them there, they can get there. We can pull the pieces together. They have to be determined. And a lot of what I'm doing is coaching people through those really challenging aspects of raising the capital. Feeling like you're running out of Runway, of just. I've done enough for myself at Steward and Fundrise. I know what it's like to be out there with that idea and not everyone quite sees it or the commitments aren't coming in like you think, and those are. It's like, it's the personal. It's. It's the mental issue that's the challenge. Right. Am I going to get through it? Am I on their own? Can I manage it myself? Like those. Those are the challenges that people face. And I only know it because I've done it and through family history. So a lot of it is how can I pass on that kind of the comfort with uncertainty, the understanding of the challenge, like the pleasure of solving these issues. How can we have that attitude knowing there will be roadblocks? You know, we will have to restructure things, we will have to change things as they go. But if you got the right mentality and you've got a really good group of people, it's all possible.

Dan, a question that I have for you is, and I'm uncertain quite how to formulate it, but it's along the lines of where is the untapped opportunity? And not so much the untapped opportunity in terms of market opportunities for selling products. Maybe a different version of the question is what are the opportunities that you wish more people knew of or were aware of and. Or just more generally, what is a way of thinking or an approach that you would like to see more of or you see more potential, untapped potential for. In. In the farming community.

There's two answers I think to have that. First is like the integration of multiple forms of capital and planning around that. Like none of the projects we work with have had the time or knowledge to really understand everything that's out there. How to weave it together, how to piece it together. And I often think of Stuart a bit like a merchant bank. 100 years ago, Finance houses had relationships with customers and they would customize the financing and they'd take them to market. And they were their capital market, right. They were their access to the market of capital and all the different sources and all the structures. But through the consolidation of the economy, consolidation of ag finances just consolidated. And so they just said, take it or leave it, here's what's available. It doesn't fit you, I don't care. That's the only option. And so just having the ability to think that you can create new avenues of capital, you can blend things together non traditionally and you can weave some of those together. So often a lot of the work I'm doing is just pointing people in the direction of programs and pieces that they can access or structures that they can fit into. So over time I think that's something where we can help broaden, we can help provide that knowledge and educational. You've done such a good job for educational work. I think around, like how can people think about this from grassroots then the Other thing I think I would comment on is every day I'm getting emails, messages from college grads who don't want to go work at a tech company and want to work in regenerative ag. Professional service people who've been five, 10 years in accounting firms and wherever, and they're trying to find out how do I get into this sector, how do I align my ethos with my work, which unfortunately is very hard to do in the global economy. The western design system of your, your work is to make money and then your pleasure is separate. And those are two aren't blended. And so what I've been thinking a lot about recently is how can we help take some of that labor and get that connected with the farmers? How can that those professional service providers provide the capacity that the producers need? Because I'm generally finding the issue is not production. Farmers can produce. There's a lot of great farmers out there. It's the business services, the back end, the accounting, the bookkeeping, the grant writing, the online marketing, the non farming stuff that tends to be the weakness for most of these enterprises. And then you have a whole labor force of non farmers who all they want to do is support these types of producers. So I keep trying to figure out how can we get these two audiences together. But it reminds me a bit of in the beginning of Steward it from a capital perspective, you know, how do we get these two audiences who want to be connected to connected. And I'm seeing the even bigger wave on that, just from a labor and personal perspective of people who are tired of the corporate system, committed to doing things differently, but they just don't know where to start.

You know, Dan, that is such an.

Important point and I love the idea that you're describing, how can we make that happen? Because obviously I also work with many farmers and many very highly creative people and usually creative people, people who are really engaged as stewards of the landscape. They're engaged with growing things. Numbers and spreadsheets are very unexciting and unfulfilling. They're necessary. It's necessary to do a good job and to really stay on top of financial management and think about them strategically. But they're often not the things that farmers prioritize or choose to think about in their daydreams. And yet conversely, the whole premise of your work at Steward is that there is this dearth of capital in the countryside and you have been able to facilitate that by thinking about the things that other people don't want to think about. So my point is simply that there is in fact a great deal of opportunity for capital. There's a great deal of opportunity to access grants and so forth. But most of us don't spend time thinking about it. So I think the question that you're asking is an incredible one. And I would love to participate somehow in turning that into a reality, because I agree with you. I see a tremendous need. You know, in a number of years ago we conducted, we conducted a multi year analysis of who were the top performing farm managers. And of course we're looking at this from a growing perspective, like who produces the superior quality crops and superior yields consistently year in and year out, in spite of whatever weather challenges and other challenges they might encounter. And it was those farmers who refused to delegate knowledge around crop production to their advisors. They would hire consultants and they would hire crop scouts, but they would ask those people to train them. They personally wanted to know the knowledge of how can I optimize this crop's performance. It was those farmers who excelled. And I'm reminded of similarly, what if we can facilitate individuals being on farmers teams where the farmer isn't delegating that knowledge but actually has it on his team in house, so to speak.

Absolutely. And that's where I see the natural meshing. Because somebody likes to do everything. I think people forget that things they don't like to do, they assume that no one else would want to do that. People love bookkeeping. Some people love administrative operational work, making things organized, making sure everyone has clarity. So instead of feeling dragged to do something you don't want to do, find someone to plug in who loves to do that. Just like the farmer wants to be out planting, they want to be on the field, they want to be touching the soil.

Why deprive them of that pleasure?

Right, Exactly. I don't mind reviewing legal documents. That's what I'm doing all the time, skimming through legal documents, offering memos. I don't mind it. So I think it's that specialization. But it's not like you said, it's not specialization where you ignore everything else. It's just bringing different capacities together. And I think that we've built a remote team at steward, so we have a really easy way of onboarding new people and bringing capacities to our team. So I've seen how our system works really efficiently with different skill sets all integrated together. And so that's something I've been thinking a lot about. How do we bring the knowledge that people not in agriculture have, but want to support ag with the other Side. And I think you've got a lot on agronomy. You know, we have a lot on finance. So there's a lot of different pieces that need to be woven together. And so we just do it ad hoc. I actually just connected a graduate who has doing a master's in accounting with the farm that needs bookkeeping help. Just, just to put two people in touch who, you know, could value from each other. We don't charge for it. It isn't us middlemanning, it's just informally what I'm doing. But I, I keep seeing it happen more and more. And so when I, in my mind, when I see something start, repeat itself, then. Then that means we need to build something structural around it.

I see a similar pattern actually, not just in agronomy, but in a number of domains also. From an entrepreneurial business perspective, people reach out all the time looking for opportunities and looking for places that they can plug in and contribute. Dan, you have the benefit of a fresh perspective on what is happening in the agricultural space generally, and particularly in the regenerative agriculture space. What is a point of view or a perspective that you hold that is very different from the mainstream view?

It's a good question. I was chatting with someone yesterday about, you know, ecosystem payments to farmers to kind of drive new practices and incentives and all the complicated ways that corporates are putting money into that and the government and it's funneling around and it's really. Nobody even really knows how it's working, but they're trying to pay farmers indirectly to do better in some form.

There's this. It looks like a cyclone. There's this giant cyclone that's moving a whole lot of water around, but very little of it is actually ending up in, in the rural landscape is the way it looks like to me.

Exactly. So so many announcements, corporate announcements support, you know, Microsoft buying credits and food companies, you know, doing it. So. And I see all of this conversations like, okay, what's the end goal? The end goal is better agricultural practices. You're going to improve agricultural practices by giving farmers markets that have good economics that they could produce for. And if you give them markets at a good price point and tell them they have to farm in certain ways and adjust certain things and plan a cover crop, then they'll do that. And so I see so much indirect work trying to drive change when it's really simpler. There's demand for product and it needs to be served. And if we can simplify the supply chains and infrastructure to get it at a good Price point for everyone. It works itself. So I see so many simple solutions around like let's create a great product and let's sell that and then let's keep the value chain where everybody's benefiting. That's so straightforward and you're not relying on all these other elements. And unfortunately I see the regenerative ag world so often pulled into the, you know, nonprofit grant, corporate contribution world where again, that's not sustainable capital, that's not reliable capital. It comes and goes, it's policy money and all of a sudden you chase it and it doesn't exist. And so I, I think a lot of the public money and corporate money that is supposedly in trying to buy better outcomes on agricultural land, I think it's very ineffective most of the time. And I'd rather see effort into, okay, for a corn soy farmer in Iowa, how can we give them five more crops to grow and give them markets for those crops and improve the fertility through that and improve their, you know, a capacity to grow through that. So I, I'm, I found myself to be really market focused in agriculture. Even though I came at it from a 100 ethical, ecological perspective, I just see that like the non market distortive effects tend to have the most harmful impacts when there are more direct ways to go about it. So that, that's something I keep seeing every day. I get, you know, impact metrics and measurements and oh my God, everybody wants so much data now. And all that kind of corporate bureaucracy is starting to show up around. It wants data, but it's not actually getting the money fundamentally where it needs to go and it doesn't have that personal connection. So I'm hopeful that particularly some of these regional infrastructure projects we're working on, flour mill, oatmeal, livestock processing, that, that can show that we can have positive economics and start to drive real change and start to rebuild some of that capacity and we can solve a lot of the issues through a straightforward business perspective and not a really complicated trickle down corporate system.

Music to my ears, Dan, and I'm sure to many of our listeners as well. So the, the types of projects that you are describing that you've been working on or continue to work on are very exciting. And of course in parallel to that, you're also supporting the farms themselves where that is requested. What is your appetite for deal flow? It is my hope that we air this podcast episode and that you get dozens of emails and phone calls and the dozens of deals that emerge from this. What is your appetite for deal flow? On the lending side, I'll talk to any of them.

I love having these conversations. So they can call me, they can email me. At the end of the show, we'll provide all my contact info. So you know what I love?

Oh, be very careful what you.

I'm okay with that. I'll get bombarded. That's all right. I. I really enjoy that. Like, nurturing. Right. Somebody comes in, let me understand your business. What are the challenges? What are you trying to achieve? What can we do together? Where can Stuart help? What other resources are out there? And then they can be set on a path. Okay. You know, apply for financing through this, or it's not ready for that and we can guide them. I think a lot of your farmers are probably the type of customer we're now starting to support more around regional grower networks with regional processing and access to end markets. And so I think we've built a really dynamic way of financing those deals with our kind of flexible private money multiplied with other rural development and incentive capital. And so we can get a lot of money at a good cost to these projects. And the more we do, the better we get and the more knowledgeable we are. So I think we'll be doing hundreds of millions of dollars of deals a year in just a few years. I mean, the scale of the business is easily in the billions. And when I first started Steward, everyone always wanted me to measure the regen ag market. Well, how many farmers is it? How big is it? It can't be very big and there's just no data. Right. It's just like an unknown market. But agriculture itself is the biggest market in the world. So my view is conventional agriculture is an aberration. Agriculture that sustains its own nutrients is. Is how it's always been and it's how it will be done. And so 100 of the agricultural market is a potential market. And so every day that's validated that any type of producer, any type of region, there is a way that they can expand what they're producing, go down the value chain, broaden their capacity, partner with other growers and find more success and ultimately have more viability at the farm level. So I would say we're looking at lots of projects, we want to look at many more. We're adding staff and more capacity to do it. Our fundraising speed is continuing and growing. And I would love for anyone who's listening to this, who thinks they could fit for Steward or is just trying to understand what financing is possible. It's not even about Us. It's about what are the options, you know, what can be done, what would be a normal type of structure. And so I'm open book. I'll spend all the time I need on farmer phone calls. It's the investor phone calls that aren't as rewarding.

Always be very careful what you wish for, Dan. You might have to reframe that statement after this episode till you'll handle all the phone calls that you can.

Not all those that come through. I'll let you know after the fact.

I started this podcast not so much for other people as for me and for the memories and the knowledge that I didn't want to get lost. And so the way that it's grown in popularity and the impact that it has is it's almost a bit intimidating at times. It feels like a significant responsibility. Also very rewarding. But I've had a number of past guests say that the phone calls that they received after an interview was an order of magnitude more than they received from getting up for being another podcast. And it's not particularly that our audience is that much bigger than some other agricultural podcasts. I don't think it is. We have the right people listening. We have the right audience, and they're engaged.

And I think that's our funding audience too. Right. They're committed, they're excited, they want more. You know, we're not forcing it upon them.

Yeah. So actually I wanted to ask you about funding as. As in your funding sources as you have an appetite for more deal flow. And you mentioned a bit ago that you hope to be funding 100 million a year in. In the next couple of years, if I recall correctly. What are the nature of the conversations that you've been having with investors and with funding sources? Is the appetite there for that level of deal flow and large like, what is the appetite like at the moment?

There's a few layers of capital in our business, so I'll just go down through them and then describe which kind of pools do what. So steward itself, you know, has a holding company which builds a technology, which has the lending arm, all of those operational elements. For that, we've raised equity capital from investors, many family offices, individual investors, and some users of our platform. So those are people funding the actual operations of the business, the, you know, startup costs to date, and us getting to break even in that. So we have over 105 investors in the holding company from $2,000 to two and a half million. I'm the largest investor and we have a handful of other family Offices on the board generally. I found the capital that's funding our platform is, you know, the holding company is very patient. Long term capital that is, understands like the systematic nature of it and has that illiquidity of, you know, 10 plus years. These tend to be people with more capital willing to be patient, willing to sit. The deals are actually funded directly through the platform, financed by these participations. So we made a loan, 500,000, we sell that on the platform. 200 users fund that loan in varying amounts from 100 to tens of thousands of dollars. That's a very broad funding pool. We have people who put $100 into every deal. We have people put tens of thousands and up to I would say hundreds of thousands of dollars. The norm for a lot of people in regenerative AG is to try to go raise institutional money. In the beginning, you know, they're just like, oh, that's where the big money is. I'll go raise a fund, I'll get all this institutional money. I don't really like the dynamic with institutional money. It's always a prove it to me. You have to figure everything out before I come in. I'm going to have terms that are very unpalatable often and I'm going to have a bit of an attitude often that like I've got the money and you need to get it. By breaking the mold with fundrise and Steward and participating and opening up access to, to people just like individual people who care about it or have a personal link to it, it's a completely different funding relationship. The storytelling matters, the impact matters, the nature of the farmer and what they've accomplished matters. And the decision is made instinctively. They see a project looks good, interesting, done, that's it. And so that type of quick decision making where they're looking at return but also other aspects and they making a personal discretionary allocation, that's our core audience. Whether somebody's allocating a hundred thousand or one hundred dollars is just in relation to how much money they have and how much money they can put at risk. But 99% of the funders on our platform that are funding the deals day to day are. It's discretionary capital. It's not managed money. It's not someone else's money that someone's managing. It's someone's personal capital that they are deciding to direct. And the only way Steward has worked is because of that. If we had started trying to get institutional money, it would have never happened. We would have just been sitting around waiting for it, waiting for it, maybe we get a little bit, but not enough. But by going to an audience who's the ignored audience, who's considered the too small to serve, not even worth it audience, we're providing them a product that they don't otherwise have access to. So you're meeting a need better and you have a personal connection that is so much deeper and so much more real than you get from those traditional investment groups. And then that creates a network effect, right? Those people tell family members, tell friends, mention about it. And so right now at Steward, we actually have no marketing budget. We don't spend any money marketing to farmers or any money marketing to funders. Very drastic. I don't believe in no marketing ever. But the growth comes through word of mouth, the growth comes through referrals, through network effect. And so it shows to me that that fast rapid funding you're seeing, that's not bought funding, that's not us spending a huge amount of money on ads to bring people in, which is a normal VC route. We spend a lot of time saying how do we build a product that's actually attractive to people from a values and return perspective, but is also attractive to the borrower and the farmer in terms of terms and structure? And then let's let that grow and let that nurture itself. And that network effect is what brings people inbound every day. And so I'm finding now people are self selecting to us. People come in us or know what they want. They're so excited to have the opportunity and it starts to take a world of its own. So I'm a huge believer in broadening access to capital not just from a good investments, but from people feeling that connection. And so for some reason the way the financial system is built is all the money is managed by a few large funds and large groups and it's pretty much big aggregated pools is what everyone's chasing. But it's the direct personal relationship otherwise that I think is actually where the real funding is aligned and it works. And so I think that's the model we're trying to prove at Steward, which is this participated loan framework we've built, which is can you have distributed capital networks at a smaller level that kind of operate independently as opposed to this more centralized system. And it's a bit like the agricultural model we're all trying to build, right? Can we have a distributed, resilient system as opposed to a commoditized centralized system? So when I look at the funding markets and I look at the ag markets, I can't tell did commodity ag create commodity finance or did commodity finance create commodity ag? It's so symbiotic that they're all together. And so we had to build for the ground up. How do we bring a new audience through new methods to create the type of capital that actually can sustain farmers?

What I love about what you just described, Dan, is the aspect of relationships where people can connect with the story of a farm. And there's again this relationship aspect that regeneration is all about regenerating relationships. And that is so absent when you have these big corporate pools of financing as you described. So we've described in a limited way some of the aspects of what makes Steward appealing from a farmer perspective. But what are the pieces that make Steward appealing to these community investors and what gives them confidence in your underwriting process that they are comfortable making a rapid decision? That I like this story or I don't like this story. And kind of the flip side of that question is what does the underwriting process look like from a farmer perspective?

So I'll start from the top. So, you know, at the end of the day, we're providing loans and credit. And so people apply for, for financing. They work through our conversations with me, with our account managers. They work through financial diligence and underwriting. And so what we're providing is a loan. But what's unique about our model is we're providing direct access to that loan for individuals. So if we make a loan to a farmer, prime right now is 8.5%, let's say at prime, we then sell that loan to our platform. We only take a half a percent servicing fee. So if it's a 8.5% loan, 8% is going directly to the funders, pass through his interest in principal. And that kind of thin model is core to our value proposition in our concept, which is you have to provide an attractive financial product to the funders. Just because it's an impactful business and it's ecologically driven doesn't mean you can just pay people 1% and 2%. And that subsidized government funding system creates that mentality which is just it's got to be cheap money, when actually a little more expensive, but more values driven and more flexible can often be valuable. And so when we began Steward, the original funding was around, let's say, 6 to 8% for most of the loans. This was 2016, 17, 18, 19. That was considered expensive. And so our pitch was we're values driven, we're relationship driven, we're a true partner in this but were more expensive than the banks and the other options. You have to make that decision. What's been amazing is since Silicon Valley bank went under last year and rates have skyrocketed, the bank rates are now higher than our rates because our funding audience isn't just the market. They're not just tripling costs because they can triple costs, or they're not just squeezing extra return because they're not. So now our rates maybe have gone up 1% on average from what they were for years ago when everyone else's rates are three times what they were. And so it's that kind of resiliency in the funding network that has let us have stable capital. We even have funded a loan. The week that, the week Silicon Valley bank went under, we funded a loan. The investment grade credit markets were totally frozen and we sold out a loan in 30 minutes. And it just showed that you can build a system totally outside of that model, not reliant on it in terms of trust, of underwriting that that's earned. There's no other way to do it than earning it. The first, first 16 loans that steward made were actually made by me and my family personally. I felt like I had to understand the return profile, the characteristics these businesses, their capacity to pay what they could afford to pay. I had to learn myself to feel like, okay, this is a fundable asset class. Like it's not just dreams, it's not just about wanting to return to the old days. It's that, okay, there's a real business opportunity here. And that was the fundamental thing. I had to get over most everything you read, you know, before I really got into ag, family farms are struggling. There's no option. You'll have to consolidate. You have to centralize. There's no other alternative. And I kept finding these great businesses that had rail to market demand at good margins, but they didn't have capital to grow production and they couldn't get to that scale to be economically viable. And so it's like, well, they're not given the resources to thrive and then they're said that they can't thrive. And so it's a bit of a reflexive system where the lack of resources create an environment where they couldn't succeed. And so I'm amazed at the capacity of us to operate like normal financing. We do the diligence, we have financing relative to market terms. The biggest difference is we care about the projects, we spend extra time to get them through. It's relationship driven. And really what's Most unique is the distribution direct to the funders. That's the fundamental difference. Banks, other institutions, they don't have that audience of people who care about the project who are going to make a decision on those variables. So thus far, our loan loss ratio is under half a percent. We've only had one default out of 95. That was a $30,000 loan like that. That's what's going to prove. Stuart out. Can people actually earn a decent return on the platform? Can the businesses thrive, not just the funders earn a return, but can the business actually succeed? Succeed. And that can't be done overnight. That's. That's going to take years. So 2017 was the first moan. 2020 is when we opened the platform to, to third parties and to others. Now we have four years of deals and we build that momentum and now we actually have a really structured underwriting process. It used to just be me doing, doing underwriting, which is, which is good and bad. It means it's very relationship and personal, personality driven. But it also means that there's not that structure around exactly what we need each time. And so over the past few years, now we've got nine staff, we've got a senior underwriter who used to work in commercial real estate and was tired of just doing deals with really no values and just chasing interest rates by the basis point. And so we're taking people who either were in ag and wanted to do it differently or were in a related expertise that now they can apply to aggressive and building that capacity to do it. And I'm always at the front end, which is I'm always the farmer advocate. Like, I'm trying to take projects through our underwriting and sometimes they'll get denied and I'll still stick with the project and come back with them and help figure out, well, how can we redesign this, what benchmarks need to meet, like, how can we make this work? And that's the role I love and that's what I'll make sure Stuart always has, which is somebody advocating on behalf of that customer who has real authority, who has real power to push and for that person, but also balanced with an underwriting team that is separate from that relationship and is looking at the nuts and bolts of collateral and cash flow and what's possible because it's not to anyone's benefit to lend too much money to someone that they can't sustain. That's not good for us, that's not good for the farmer. And I think that's our perspective. Like, what's what's going to work, what's going to succeed for everybody. And let's do those types of deals and, and there's tons of those projects out there. That's what amazes me. The returns are good for the funders. They're earning high single digits. The cost of capital and flexibility is really good for the borrowers. And we're doing economic transactions that are symbiotic, where everybody's happy with it. I grew up in commercial real estate. That's not how it works in commercial real estate. Very much zero sum game. How do you get the deal? How do you bid against this person? How do you squeeze costs here? It's not a collective perspective. And so I found a lot of meaning in going from, you know, going to finance school and growing up in real estate now to be in a world where I'm able to use that knowledge but in a way that is leading to positive outcomes. And that's very fulfilling because in finance, very, very rare to have that opportunity.

Thank you, Dan. That's incredible. I really, I really appreciate the, the values that, that you have brought to steward and that you are manifesting in the way that you are interacting with growers and with the community. I think it's, it's so refreshing and I desire to see you have a lot of success and growth in this space going forward. So what final thoughts do you have? Is there anything that is important for you to share that we missed talking about and how can people connect with you?

Well, anybody can reach out to me. My email is danosteward.com G O S T-E-W-A-R-.com please reach out. I will reply and I would love to talk with any of you all. What I love most about this is that we're operating at a national and soon to be international scope where I'm seeing projects in the Pacific Northwest and then the projects in the Midwest and then Mid Atlantic. And so we're able to build these networks and connections across projects and add new perspectives. And so what I'm really enjoying about this work is most farmers are stuck on their piece of land, they're in their community and they often feel limited in that capacity that they just are maybe on their own and it's hard to do. And I love coming into these circumstances and not only bringing value from how do we bring some capital to it, but also have you thought about doing this? Or do you want to talk to this other grower a thousand miles away who's tried something Similar and is having success where they're added this to the rotation. Why don't you look at also doing that? And so every trip I'm out there, that's really my favorite piece, which is how do I learn from each project, how do I learn from the farmer's perspective, understand that region, but then also apply the fact that Most things are 80% the same and there's structural elements to agriculture that are how it is. And so that type of pollination is what I love to do and connecting projects and groups and people. And like you said earlier, it's. It's relationship driven. The market's built on relationships. We're trying to bring a bit of the relationship aspect back to financing and going back to those grassroots levels. So I feel very fulfilled. I really love this work. I'm seeing the progress we're making, the growth that we're having, but I'm doing it because I love it. And it will be successful, but it will be successful out of doing it the right way, out of passion, out of care. Which is also what I find in the people we work with is that they're doing it because of passion, because of love, because of family history. And then that results in an opportunity, but it's grounded in that type of work. And so that's how I can meet someone for a few minutes and know that they're going to be a great fit for us because it's a perspective.

Thank you, Dan. Thank you for the work that you're doing. I think you're bringing something of service that has been desperately needed. Thank you for being here and for sharing your wisdom and your experiences. And I wish you a lot of success in the future.

Same to you, John. Thanks for having me.

The team at AEA and I are dedicated to bringing this show to you because we believe that knowledge and information is the foundation of successful regenerative systems. At aea, we believe that growing better quality food and making more money from your crops is possible. And since 2006, we've worked with leading professional growers to help them do just that. At aea, we don't guess. We test, we analyze and we provide recommendations based on scientific data, knowledge and experience. We've developed products that are uniquely positioned to help growers make more money with regenerative agriculture. If you are a professional grower who believes in testing instead of guessing, someone who believes in a better, more regenerative way to grow, visit advancingecoag.com and contact us to see if AEA is right for you. Thank you for listening, and we look.

Forward to working with you.