Black farmers seem to have received the rough end of every stick this past century.
In 1910, they represented around 14% of U.S. farmers and owned over 16 million acres of land. Today, one in 100 farmers are Black, owning less than 5 million acres and losing $326 billion in land value. Farmers are suing the USDA for alleged discrimination.
VC investment in the agtech space has been booming these past few years, and many farmers also receive some type of subsidized funding, whether from the government or nonprofit organizations. These opportunities do not appear to be trickling down to Black founders, however. Crunchbase found that since 2018, $98.6 million out of $39.4 billion have gone to just five Black-owned agtech companies. This, alongside the government’s alleged discrimination, means that Black farmers have been marginalized from accessing the right financial resources they need to survive in this particular market.
It was for these reasons that in 2017, Karen Washington and Olivia Watkins created the Black Farmer Fund. The fund provides economic and social opportunity to Black farmers and agricultural and food businesses in the Northeast with the goal of helping build community wealth for Black agricultural businesses throughout the region. There are around 703 Black-owned farms across the Northeast out of 196,000 total, Watkins said, adding that in New York alone, the average Black farmer makes –$906, while white farmers make around $42,000. “There is a massive racial wealth gap in agriculture and across industries,” Watkins said.
The fund is technically a nonprofit with a debt fund attached. It raised an oversubscribed $1.1 million pilot fund in 2021 from investors and institutions, which it then invested into eight businesses. It is raising its second fund with a target of $20 million and has hit about half that amount so far, Watkins said. As a debt fund, it offers low-interest community notes and grants, writing checks ranging from $1,000 to $3 million.
“The term we like to use for our fund is integrated capital,” she said. “It’s combining different forms of capital to not only make a risky investment but decrease the cost to borrow.”
It works with accredited and non-accredited investors, which is important when it comes to giving investment opportunities to those who do not qualify for investor accreditation and are typically shut out of working with traditional funds. Watkins said this decision was made to ensure that the Black community could be involved in building its own community’s wealth.
She knows the hardships that come with specifically being a Black farmer. While she worked in the industry, she kept seeing her farmer friends struggle to access capital to grow their businesses. She met Washington, who is also a Black farmer, and chatted about the persistent systemic discrimination they faced. They knew that there were financial vehicles out there that could be combined to help Black farmers.
“We decided to go on a journey to figure out what that looks like,” she said, “and ultimately, it came down to being able to create a financial institution that our community could trust and offer types of capital that were not extractive.”
Olivia Watkins is the co-founder of the Black Farmer Fund. Image Credits: Olivia Watkins
However, it only works in the Northeast now, with no plans to expand nationwide. “We are open to other replicas of our model,” Watkins said. TechCrunch+ spoke with Watkins about the investment strategy behind BFF and the importance of economics in the fight for social progress.
This interview has been edited and condensed for clarity.
What is the investment strategy of the Black Farmer Fund?
BFF’s investment committee comprises 10 farmers, food business owners, and food activists throughout the Northeast. Our community-led investment committee is essential to our way of shifting decision-making power into the hands of the Black agricultural and food system. This is crucial to our work because the community being served is in a position of power over the investments being made by BFF Fund 2.0. Community-based businesses and projects that empower and have a healthy impact on their community, ecology and local food web are prioritized for investment. We are looking to fund at least 30 companies with BFF Fund 2.0 and make our first decisions in Q4 2023.
We also have a smaller emergency fund called Rapid Response, which is governed by community members. We have one person who was on our previous pilot investment committee and then another person from the broader agricultural community who’s on that committee. They have basically presented deals and are evaluating them based on the nuanced experience they have working on the ground.
Why did you make this a nonprofit rather than follow a typical fund structure?
The basis of our mission is building community wealth. The premise of a for-profit is that there is a group of people or board members who would be benefiting exclusively from the profits that come out of the fund. We didn’t want a small number of people continuing to extract wealth from the businesses and profiting off of the businesses as a result. We’re really committed to the mission of making sure that we’re providing non-extractive capital and that we’re creating a vehicle that the community could trust, which essentially means making sure a small number of people are not benefiting financially, but rather, the whole community is benefiting.
The nonprofit structure was appealing in that way, not only because it would allow more flexibility in how we can put money out into the community in ways that our community needs — our community needs a lot of flexible capital and patient capital — but it would also ensure that the governance is really reflective of the public. As a 501(c)(3), we have an obligation to the public to ensure that this mission is happening.
Is there a certain type of business that Black food entrepreneurs are starting?
From the farming side, a lot of people are trying to get into more climate-resilient ways of growing food. We’ve seen a lot of people investing in hoop houses and high tunnels, which is a way to not only extend your season but also control your climate. Frost days that usually kill the majority of crops have become more and more unpredictable as climate change continues to progress. Having things like high tunnels and hoop houses helps to mitigate something like that.
They’re [also] really looking to localize their supply chain. A lot of folks might be getting supplies that may be more affordable from farther away places, so we’re seeing a lot of folks have a desire to work not only within the portfolio we have but also across the North and Northeastern region to source supplies for what they need.
As a farmer, what technological innovations would you like to see in the agricultural sector to help make running a food and farming business easier?
The biggest challenge that I see is people being able to build out their administrative capacities. There’s not really an extensive platform where farmers can to tap into different types of administrative support in a low-cost way without having to hire a lot of people. Thinking about farmer-focused accounting software, or farmer-focused tax software; also even thinking about people — a lot of farmers have a desire to bring employees into their organizations, but it’s really challenging, especially when you think about the actual cost of that employee and the benefits that you like to apply to them.
Programs farmers can tap into to subsidize the costs of having a full-time employee or even part-time employee would just be tremendous. So, more innovation is needed in farmers being able to maintain the back office; a lot of farmers are already great at what they do and how they do it in terms of growing food and sustaining communities in that way. But there’s not a lot of farmer focus, back office, administrative support or subsidization.
Black farmers are suing the USDA for persistently being left out of its loan system. Do you have hope that the USDA will be able to solve this, or is this an issue that private entities like yourself must solve?
It’s definitely going to be a group effort in order to solve the issues. Private entities, private foundations can do a lot of work to move the needle and create alternative realities, and at the same time, the USDA does offer a lot of programs and benefits that private entities might not be able to support. It’s the combination of being able to make sure that the programs and the financial assistance that the USDA can offer are accessible to communities that it has not been accessible to while also leveraging private capital in order to create more creative solutions alongside that.