This story combines two fairly obscure topics I like reporting about – serious crowdfunding and meat processing.
A Northwood farm is looking to build a badly needed meat processing plant and is taking an unusual route for raising money: sharing revenue through crowdsourcing.
“It’s not our only source of finance; it’s a little bit of a bridge to cover a gap,” said Dave Viola, one of two owners of Short Creek Farm on Winding Hill Road. “We are attracted to it because the terms were flexible.”
Viola, a sausage-maker, and Jeff Backer, an experienced farmer, started Short Creek in 2015 on a former farm that had been unused for years. Their niche product is specialty meats from their pasture-raised pigs and cattle, such as sausage, smoked meat and dried salami.
They’ve been processing the meat at the Washington Street Mill in Dover and in a kitchen in the Boston area where Viola once worked, but their business is outgrowing that facility, Viola said. The idea is by early next year to turn a 6,000-square foot warehouse into a processing facility certified by the U.S. Department of Agriculture that could handle their business and, if all goes well, product from other farms.
If so, it will be welcome by the agriculture community. New Hampshire has long suffered from a shortage of meat-processing plants, which has made it difficult for some small farms to expand.
The farm’s plan is to do everything except the actual slaughtering, Viola said.
“There is ample slaughter capacity. What they have is a bottleneck on the cutting floor, going from animal carcass to steaks, chops and the other stuff,” he said. “We could book kill-only slaughter a couple weeks in advance. If we need them to do the butchering, it would be a year in advance.”
Viola said the renovation would cost close to $1.2 million, plus up to $400,000 more for equipment. They have pursued traditional financing but decided to also try an option called Regulation Crowdfunding that was made legal in 2016 through the JOBS Act.
People can invest as little as $100 in Short Creek Farm’s expansion via a company called Mainvest and will be paid back over time.
“It’s a revenue share note – they share a percentage of their revenue quarterly until investors are repaid,” said Lauren Berestecky, business manager for the Salem, Mass.-based Mainvest. “When they’re having a tough quarter, they don’t have to repay as much because their revenue is lower.”
The system is different than equity crowdfunding, which was also created under the JOBS Act, because the owners keep full ownership of the business. This makes it more attractive to small businesses, Berestecky said. The company says some 150 companies have used the service including at least two New Hampshire companies, a Seacoast brewery and a doughnut shop expanding south from Maine.
Short Creek Farm is looking to raise $200,000 in increments of at least $100. They agree to share a portion of revenue until investors have been repaid with a 35% dividend – that is, a $100 investment would eventually return $135. They also agree to pay that amount by 2030, “regardless of revenue.” If it doesn’t get investments totaling at least $200,000 by Sept. 17, the round will be closed and all investments returned.
The system is similar to crowdsourced donation sites like GoFundMe, but as a for-profit business, Short Creek Farm didn’t have that option.
The revenue share system is a legal investment that falls under Securities and Exchange Commission oversight.
“That’s why we used Mainvest. They handle a lot of the red tape,” said Viola.