The banks may be shutting down on lending to farmers, but as Nicola Dennis writes there are other means out there to raise necessary finance for your great ideas.
I want to preface this article by stating that I am not fit to give financial advice. This probably reads like your bog-standard, arse-covering statement required by the Financial Advisors Act. But it is true.
First, I have developed what PETA and SAFE would describe as “learned helplessness” in regard to the New Zealand taxation laws. With strong encouragement from my partner, Dave, I can collect the bulk of my receipts (and the wad of unopened letters from the bank) in a semi-squashed file box. But should I be asked to do anything with it, I will contemplate the best options for faking my own death.
Secondly, I am also a recovering academic. Which means I volunteered to give up seven years of good earning potential to learn, and then forget, abstract machinations of molecular biology. Had I studied commerce, like Dave, then I might have some powerful insights into why the banks are suddenly giving farmers the side-eye. But I didn’t, so I don’t.
The good people of the internet were offered a wide range of ways to relieve themselves of their money. For only $10 investors received a thankyou email and a promise of further updates on progress. A further $150 was earned by selling the right to challenge the butcher to a feat of strength.
I am hearing some alarming stories about the rural lending scene at the moment, particularly where overdrafts are concerned. Even without financial expertise, it is obvious that this is not the ideal time to pitch your “out of the box”, “pie in the sky” farming venture to your bank manager.
But, there are other options. The world is a big place filled with all kinds of people who believe all sorts of things. Some of these people think a ferret milking plant or effluent spa treatments are the “next big thing” and they want to give you money to get it up and running. You can find these people using a crowdfunding website.
If you have stepped anywhere near the internet in the past few years you are already familiar with the donation-based type of crowdfunding.
Givealittle and GoFundMe pages for deceased relatives and decrepit pets spring eternal on Facebook. These are the equivalent of passing the hat around at the community hall where the giftee expects nothing for their donation other than an outlet for sympathy or guilt. But, there is another side to crowdfunding.
The rewards-based crowdfunding for business ventures is where the money is at.
This comes in two broad categories; selling something (i.e. pre-selling products) and equity-based crowdfunding (i.e. selling company shares or peer-to-peer lending).
The selling-something option is fairly straightforward. Basically, this involves listing your future product or service on a platform such as Kickstarter. You set the minimum number of total orders and a timeframe for presales. If the sales threshold is reached during the campaign, then you are in business. If not, then the website cancels the transactions from any sales that were made so that you can slink graciously into the night and forget the whole ordeal.
Looking over successful Kickstarter campaigns, an NZ company successfully pre-sold $70 pocket saxophones. “Saxmonica” were aiming to raise $8000, but were delighted to find they had pre-sold close to $180,000 of stock to more than 2000 wannabe blues players.
“Diaspo” presold US$60k of organic Indian turmeric and cardamom to 1178 customers. Yes, there are people out there that are prepared to wait three months for a $31 order of turmeric (140g) and a turmeric-based cookbook. These people exist and they want to give you money.
Perhaps you have a banger recipe for sausages? The Meat Hook butcher shop in New York raised $US54,000 to create a new sausage line. Did they pre-sell millions of sausages over the internet? No, they took a more creative approach to their fundraising.
The good people of the internet were offered a wide range of ways to relieve themselves of their money. For only $10 investors received a thankyou email and a promise of further updates on progress. A further $150 was earned by selling the right to challenge the butcher to a feat of strength.
The product line worked its way up from a “lifetime of high fives”, past the $300 rights to try the first sausages all the way to $5000 high-brow party at the butcher’s shop.
You’ll note here that very little in the way of product delivery commitments were made by “Meat hook” which is pretty clever. Plenty of Kickstarter campaigns find themselves unable to fulfil orders when an unexpectedly high number of sales come in. It’s a good problem to have, but a mob of angry customers is still a problem, nonetheless.
If you are looking to sell company shares or source some peer-to-peer lending, then this is a fresh option. The Financial Markets Conduct Act 2013, the one that bred all the KiwiSaver disclosure statements, introduced the ability for entrepreneurs to raise up to $2 million in loans or shares via crowdfunding and peer-to-peer lending platforms. If you plan on raising more than $2 million then you will need to produce a formal prospectus for investors which sounds like a pain in the arse.
Puro, a 35-hectare plantation planning to produce “naturally farmed, pesticide-free, sustainably produced” medical cannabis in Marlborough raised $4 million during two recent PledgeMe campaigns. While “Happy cow 2.0” sold $400,000 of shares in mere hours to 557 new shareholders who were excited about the prospects of a new wave of milk processing and dispensing equipment.
I have listed some hot success stories in the space of crowdfunding, but I want to make it clear that nothing on the internet is that simple. These companies put the hard yards into tracking down “their” people. The kind of people that are not only begging to order the $200/kg turmeric powder or invest in the buzzword chocka medical marijuana, but they also sprinted to their friends and family to broadcast the good news.
It sounds pathological, but just about every single person is capable of reaching that level of enthusiasm for something. Over the Christmas break, most of my family got very excited about Dad’s purchase of a pocket hole jig (not a dance).
“But, it is my turn to use the jig,” family members grizzled, cordless drill in hand and desperate to put precise holes in wood. It is a delicious feeling when you are connecting with people who are operating within your personal brand of crazy.
Careful branding and marketing needs to take place to make sure your offer is placed in front of the people who are begging to receive it. This means forking out money to people who know how to make this happen. This could very well amount to more money than you would have spent engaging with the bank by conventional means. But, instead of loan repayments, your money might elevate you to leader of your crazy clan.
