A broken food system in the U.S. contributed significantly to environmental pollution, public health damage and community collapse. Therefore, there is a need for an alternative food system to expand access to fresh food and support sustainable local food production. Unfortunately, ventures needed to support an alternative food system simply do not fit into the traditional venture capital model due to high upfront costs and low-profit margins. One example, Common Market, Philadelphia-based venture, provides a distribution link between threatened Delaware Valley farms and urban communities that lack access to fresh foods. When the venture began turning away orders due to lack of storage and packaging capacity, it failed to qualify for $1.3 million mortgage loan as it is small in size. Such ventures need a combination of funding types from pure gifts to recoverable grants, loan guarantees, convertible notes, low-interest loans, revenue participation agreements, and impact investments. Impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.
According to the New Economics Foundation in London, every dollar spent locally generates twice as much income for the local economy4. Impact investments in sustainable food face challenges regarding the current agricultural policy and the agricultural credit system in the United States. The existing agricultural industry is dominated by a few companies with excessive political influence and leverage. In addition to that, most farms have a production loan secured against their land; it is used in the first months of the calendar year to prepare the soil and plant seeds, then repaid after the harvest.