A financial burden worth sharing
Has your dream of becoming a farmer been dashed by the reality of the huge cost of land?
You are certainly not the first.
The cost of setting up a farming business has daunted many a young person, so much so, that regional and rural communities are really struggling to keep young people in some of these areas.
I recently had a chat with Victorian Sam Marwood, who has teamed up with New South Wales farmers Tim and Tegan Hicks to found Cultivate Farms, an equity crowd-funding program that pairs investors with young farmers.
He wants to change the way people look at farm finance and the barriers in place to getting on farms.
“We’ve realised that there weren’t many capital options for young people to buy farms,” he says. “There weren’t that many alternative succession options either. We also know that communities are really hungry for ideas for attracting young people to regional areas.”
The idea sparked when Tim and Tegan were dreaming of owning a farm and couldn’t come up with the necessary $5million (to be fair, who can?) and wished there was something like a Crowdfunding model for people wanting to get into farming.
“My mind went crazy - I loved the idea.”
Sam then spent the next 18 months pulling apart the concept to make sure it hadn’t been done before.
“It works as a matchmaking or brokering business. We bring new, young farmers to the table with retiring farmers, investors and a local community and involve them all in the conversation about how the transition would best work.
“It can also work with young people who want to feel connected to a regional or rural area they grew up in, but don’t necessarily want to manage the farm themselves."
Right across the World, farming increasingly has many barriers, particularly financial, if you aren’t born into it. Similar business models have been trialled in France, New Zealand and America, but for Sam, Tim and Tegan, the most important emphasis was on the farmer having an ownership stake as well.
“It could be equity on stock or machinery, but we feel there’s something really powerful about whoever is running the farm having a stake in owning the land as well.
“We also like the idea of their stake being able to be increased over time.”
While they are still workshopping exactly how it will work, Sam, Tim and Tegan see Cultivate Farms taking on a management and facilitation role throughout the process, charging a fee for the initial ‘matchmaking’ and then later on as a type of facilitator.
“There are so many legal and financial hoops to jump through. We want to streamline the process for the farmer and keep the investors confident that it is being managed well and returns for them will come,” says Sam.
“The risks for investors have to be mitigated. We don’t want to set them up to fail and so provide agronomy, marketing, legal, accounting, and administrative advice to make sure they are ticking all the boxes and getting the job done.”
While the ultimate aim is that the farms will be sustainable well into the future, the reality is that investors will want their money in and out at different times. There will be an initial time period of between five and 10 years where the money will have to stay in to get the business developed and settled in, but Sam said the key to their long term success is the idea of liquidity.
He also makes the point that investors from different backgrounds can be stronger together, for example, investment bankers, marketing professionals, and administration experts could all pool ideas and experience together to better benefit the business.
“People know the value of living in regional Australia, but it comes down to the jobs that are available. We feel like farming as a career choice and the pathways to doing so haven’t been fostered. We like the idea of putting farming at the top of career options for young people. And then they would be drawn to communities and that way rejuvenate communities,” he said.
“We love the idea of involving and keeping retiring families involved in the businesses and by keeping around 40 percent equity in their farm and they can be a vital part of the mentoring group.”
In terms of investors, Cultivate Farms hope to open it up to any Australian who can make an investment for a few thousand dollars, but right now they are looking at high net worth individuals.
They are ready to purchase their first farm around the Wondonga area. Tim and Tegan will manage the prototype farm to iron out any issues that come up and then use the template to expand across the country.
To listen my full conversation with Sam, check out the podcast here.