A couple of years ago, a new online lending platform – Steward, was launched as the “world’s first CrowdFarming platform.”
Steward was founded by Dan Miller, the co-founder of Fundrise, a prominent real estate investment platform. Miller had exited his leadership role at Fundrise and soon engaged in this new Fintech venture focused on online capital formation. When Steward launched, CI spoke to Miller to learn about his vision.
Today, Steward is more akin to a peer-to-peer lending platform, as investors, including sophisticated individuals, provide funding for loans to farms or other agriculture projects. These are typically short-term loans that are secured by property. These loans usually range from 48 to 72 months with an interest rate from 5% to 9%. Investors may participate for as little as $100.
According to the Steward website, loans listed on the platform are secured private commercial loans directed to a specific lending community and are not securities and, thus, not regulated by the SEC.
CI connected with Dan Miller for an update on the platform. Our discussion is shared here below.
It has been quite some time since we connected. How is Steward performing since we last spoke?
Dan Miller– Steward’s mission is to expand access to capital for regenerative agriculture. The last time we spoke, the pandemic had just begun, and demand from consumers for directly sourced agricultural products was suddenly booming. The growth has continued apace, led by further cultural and policy shifts towards regenerative agriculture.
By regenerative agriculture, we mean practices that focus on soil health, biodiversity, nutrition, fair wages, symbiotic uses, circular systems, and regional supply chains. This is counter to conventional agriculture, which focuses on large-scale monoculture (i.e. soy, corn, wheat) using synthetic chemicals with sales to multinationals through global supply chains which results in end-products with little to no nutritional value and detrimental effects to the ecosystems in which they were grown.
2022 was Steward’s largest year to date, with $10m in lending to 19 agricultural projects, ranging from small farms to diversified regional enterprises. For 2023, we are on track for 70%+ growth. With traditional capital markets closed and credit markets tightening, we are happy to report increased demand from our network of values-aligned farms and funders.
How is the deal flow? How are Agriculture Projects finding Steward?
Dan Miller: Deal flow is strong, and we’re working with top-tier operators, exemplified by a $1.2m senior secured loan offering to White Oak Pastures, a national leader in regenerative agriculture with over $20m in sales last year.
In general, over 75% of our projects are referrals, which has allowed us to build credibility and trust within the traditionally skeptical farming community. Each year brings more successful projects, more capital, and a wider audience. As an example, a recent loan to Studio Hill Farm financed the purchase of adjacent land to expand rotational grazing and add farmstay units, which improves margins and cash flow. Some upcoming industry-leading projects in our pipeline include Old Salt (livestock), Cairnspring Mills (flour), and Riffle Farms (bison).
What about investors? How many active investors are on the Steward platform? Are they largely mission-driven? Performance focused? Both?
Dan Miller: To date, we have over 3,000 funders on the Steward platform. We call them lenders as they purchase pro-rata, pari-passu loan participations, as opposed to making equity investments into the businesses. Steward provides both short-term and long-term credit options, both of which are made available to our funding network.
Our lenders are values-aligned but still return-oriented. Most of our loans are made around the Prime borrowing rate (currently 8.5%) plus or minus 100 basis points. Lenders earn solid yields on secured loans, collateralized by real estate, equipment, and other business assets, while also providing capital at a reasonable cost to enable borrowers to thrive. We strive for symbiotic, mutually beneficial economic relationships.
Is the rising interest rate environment helping or undermining Steward’s mission? Are farms viewing Steward as a bank replacement platform?
Dan Miller: Surprisingly, rising interest rates have helped Steward’s platform. Previously, Steward’s value proposition was dynamic, flexible, values-aligned capital in an otherwise slow and bureaucratic market. But we could not compete on cost, since traditional bank lending rates were in the low single digits, and Steward’s lending rates were more on an absolute basis between 6-10%.
Now that base lending rates have skyrocketed, Steward’s capital is now often cheaper than bank alternatives if bank lending is even available. Our distributed capital base of values-aligned lenders has not demanded fundamentally higher rates, so we are still lending between 7.5% and 10%.
With a market-based solution that is competitive in terms of cost, speed, and values, I expect Steward’s growth to further increase as the network effect takes hold. Every day, our borrower and capital pool expands through word of mouth and referrals.
Is Steward planning to branch out into other verticals? How will Steward scale over time?
Dan Miller: Steward is solely focused on expanding access to capital for regenerative agriculture, but within that remit, there is a remarkable opportunity. We currently offer funding opportunities for individual farms, via Direct Loans, or a diversified portfolio of farms via Steward Regenerative Capital. We have also added a grant writing service, which has secured millions of grant dollars for Steward borrowers, which further improves our security position and the likelihood of success.
Speaking broadly, regenerative agriculture is much more than just food production. For example, we are working with a hemp fiber processor on low-carbon building materials, as well as a woolen mill that manufactures domestically sourced and produced apparel.
Agricultural products are the raw ingredients for our whole economy, from food to building materials to clothing, and as supply chains are redesigned with a focus on energy utilization and emission reductions, regional regenerative agriculture will come out on top as a key climate and health solution. We are witnessing the rebuilding of regional-scale agricultural infrastructure that was consolidated in the post-WWII drive towards globalization. That trend is finally reversing, leading to a capital need in the tens of billions of dollars, of which I expect Steward to be a key provider.
I began this business believing it may be niche; every day I am blown away by the scale of the opportunity and how poorly served the existing market is.
Are you accepting institutional money? Or will you in the future?
Dan Miller: Steward has over 3,000 funders on its platform and over 100 equity investors in its cap table — ranging from retail, to HNW, to family offices.
We are seeing multi-million dollar allocations from family offices who want to move capital towards climate solutions such as regenerative agriculture. So while the crowd is at the heart of our business and community, we expect more and more values-aligned institutional funders on our platform as they get comfortable with regenerative agriculture as an emerging asset class.
Steward’s board also consists of institutional investors who are allocating large sums towards the transition of our economic and ecological systems. Those include The Grantham Foundation, Ponderosa Ventures, and Tripple. These investors have been critical in supporting Steward and encouraging its adoption by other like-minded institutional investors.
Since launch, what are some of the lessons you have learned?
Dan Miller: My background was in commercial real estate development through my family’s company, Western Development Corp, and then as co-founder of Fundrise. Commercial real estate capital markets are dynamic, with myriad forms of capital. Part of the impetus of Fundrise was to bring a new source of capital to the market — online individual investors — but that effort built upon an already functioning real estate capital market.
Financing regenerative agriculture has been a lesson in the underserved. Since WWII, government policy has incentivized large-scale production of commodity crops for national and global markets through subsidized capital and crop insurance. Those policies crowded out private capital and created a scenario with impacts felt generations later.
Today, there is a plethora of capital available for conventional commodity agriculture, but little capital available to non-traditional agricultural producers — those who focus on soil and human health, regional markets, and non-commodity crops.
Our goal at Steward was to bring a new form of capital to the market — individuals online — to better align with the needs of regenerative farm businesses. What I soon discovered was that even basic credit products — secured loans to purchase land and equipment — were unavailable, so we started at square one in developing core credit products.
With Steward, we are creating a capital market for regenerative agriculture from the ground up. I find the work rewarding and challenging, especially working with entrepreneurs to achieve positive economic outcomes that have simultaneous, tangible, positive impact on health, climate, and ecology. That has shown me that triple-bottom line principles can fit within dynamic private capital markets.
Expectations for 2024?
Dan Miller: For 2024, I expect a step-change in growth as Steward is in a position to scale. In particular, we’ve recently developed a new business line financing regional-scale, value-added agricultural processing infrastructure. These deals closely resemble commercial real estate development at a scale of $10m+ per facility.
In 2024, I expect we will close financing on a $30m processing facility in the Pacific Northwest, which will provide the blueprint to scale our lending towards agricultural infrastructure. I expect the product line to expand our volume and impact into the hundreds of millions and later billions of dollars.
Even in a challenging climate and uncertain market, I am sanguine about the future, as Steward touches upon multiple generational growth drivers: (1) greater demand for healthy, nutritious foods, (2) interest in allocating capital in alignment with values, (3) expanding access to capital through direct, online distribution and (4) a cultural shift towards land stewardship with people from non-farming background getting into agriculture. Combine all those, and Steward is a business that will grow for decades.
